Commissioner of Income Tax, Cochin vs Herbal Isolates (P.) Ltd.

C.N. Ramachandran Nair, J.—Heard standing counsel appearing for the appellant-revenue and Sri. P. Balakrishnan appearing for the respondent-assessee. The question raised in the connected cases is with regard to computation of export profit u/s 80HHC(3) of the IT Act. The issue involved is with regard to treatment of processing charges received by the assessee for the processing of goods for others. The Tribunal held that 90 per cent of profit on processing charges cannot be excluded in the computation of profit as held by the assessing officer. This decision stands reversed by the decision of the Supreme Court in CIT v. K. Ravindranathan Nair, [2007] 295 ITR 228 1. Apparently the issue is squarely covered by the decision of the Supreme Court and therefore we have to reverse the order of the Tribunal. However, counsel for the assessee submitted that full processing charges received happened to be included in the total turnover and if 90 per cent of profit on processing charges is excluded by applying the Supreme Court decision, exclusion has to be made from turnover also. If any mistake has occurred in the adoption of total turnover, it is for the assessee to point out the same to the Assessing Officer to correct it. However, following the decision of the Supreme Court above referred, we reverse the order of the Tribunal and hold that 90 per cent of profit on processing charges has to be excluded to arrive at the business profit in the computation of eligible deduction. We therefore set aside the order of the Tribunal and back to the assessing officer for computation of export benefit on basis of Supreme Court judgment. Income Tax Appeals are allowed as above.