M/S. Aspinwall and CO. (Travancore) Ltd., Cochin vs Commissioner of Income Tax, Cochin

K. Vinod Chandran, J

The assessee is in appeal, challenging the orders of the Tribunal for the assessment years 1990-91 and 1992-93. In both the years, the assessee had claimed deduction of interest income received from the sister company as also from two banks and godown rent as export profit for computation of deduction u/s 80HHC of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). Though the said claims were rejected by the assessing officer, the first appellate authority allowed it, against which the Revenue was in appeal before the Tribunal. Before the Tribunal, for both the years, the assessee conceded that interest income could not be included in the computation of income u/s 80HHC and confined the arguments to the rent on godown. The appellate Tribunal found the said issue also against the assessee. While admitting the above appeals, this Court has raised the following two questions of law in both the appeals, which are identical:

i) Whether on the facts and circumstances of the case was the Income tax tribunal justified in confirming the exclusion of interest income referred above for computation of eligible relief u/s 80HHC of the Income Tax Act?

ii) Whether on the facts and circumstances of the case was the Income tax Tribunal justified in confirming the exclusion of rent referred above in the computation of eligible deduction u/s 80HHC of the Income Tax Act?

The first question regarding the exclusion of interest income for computation of eligible income u/s 80HHC, as has been noticed above, was not an issue before the Tribunal, the assessee having conceded to it specifically. Since the same was not an issue before the Tribunal, we refuse to answer question No.(i). The only issue argued before the Tribunal was with respect to the eligibility of the godown rent received by the assessee to be treated as export profit for computing the relief u/s 80HHC. The assessee relied upon the decision of this Court in Mercantile and Marine Services Vs. Commissioner of Income Tax, , to contend that godown rent paid by the assessee has to be held to be income eligible for deduction u/s 80HHC. The Tribunal rightly found that the said case was one in which the godown rent paid by the assessee therein for storage of goods pending despatch by a clearing and forwarding agent handling exports and imports of Government Bodies is business income; and it was not a case in which computation of relief u/s 80HHC, meaning export profit, arose. Section 80HHC is a deduction in respect of profits derived from export business. Where an assessee, being an Indian company or a person, is engaged in the business of export out of India of any goods or merchandise to which the section applies, a deduction was allowed to the extent of profits referred thereunder for computing the total income of the assessee. The computation provided thereunder though subject to certain amendments, essentially it stood as, being that proportion; the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee as applied to the total business profits of the assessee disclosed under the head "profits and gains of business or profession". The export profit to be taken into account is that derived by the assessee from the export of such goods or merchandise. The assessee''s claim relates to the use of its godown by other exporters for storing goods till despatch. This cannot at all be termed to be a profit derived by the assessee from the export of such goods or merchandise coming within Section 80HHC. We are of the opinion that the Tribunal has correctly decided the issue and the 2nd question of law raised by the assessee is answered against the assessee and in favour of the Revenue.

Accordingly, both the appeals are rejected.