Dalveer Bhandari, J. - (1.) THE controversy involved in these appeals revolves around a short but important question of law - whether the export house premium received by the assessee is includible in the "profits of the business" of the assessee while computing the deduction under Section 80HHC of the Income Tax Act, 1961? Since a common question of law arises for consideration in these appeals, therefore, they are being disposed of by this common judgment. However, for the sake of reference, the essential facts of Civil Appeal No. 6146 of 2005 are reproduced as under.
(2.) THE respondent-assessee, M/s Baby Marine Exports, Kollam is engaged in the business of selling marine products both in domestic market and also exporting it. THE assessee is exporting directly to the buyers and also through export houses. The assessee in the instant case has entered into contracts with the export houses, whereby, as and when the assessee sells the goods or merchandise to an export house, as consideration for the sale, receives the entire F.O.B. value of the exports plus the export house premium of 2.25% of the F.O.B. value. The relevant clause dealing with F.O.B. value and incentive commission of the contract entered into between the assessee and the export house in this case is reproduced as under: "Clause (12): The Export House agrees to pay the manufacturer/shipper an incentive of 2.25% on the F.O.B. value (net of overseas commission) of the said Frozen Marine products shipped by the manufacturer/shipper." The assessee has been filing its income tax returns showing the export house premium as part of its total turnover and, thereby seeking deductions available to an exporter and/or a supporting manufacturer under Section 80-HHC (1A) of the Income Tax Act.
(3.) THE assessee has shown the export premium as part of sale consideration having an element of turnover and not commission or service charges. The Income-tax Officer, Ward-I, Quilon rejected the claim of the assessee by his order dated 30.3.1995. In this connection, the assessing officer referred to the relevant clause 12 of the agreement entered into between the assessee and the export house and observed that the narration of the clause shows the nature of the payment. According to the assessing officer, this is clearly a "commission or service charge" for routing the exports through the export houses who receive import licenses required by them. The assessing officer in support of his findings referred to and relied upon the decision of ITAT, Cochin Bench in ITA No.610 (Coch)/1994) dated 21.12.1994 in G. Gangadharan Nair v. ITO Ward-1, Mattanchery.;