JUDGMENT

KAPADIA, J.

Processing

Civil Appeal No. 5173 of 2007 arising out of S.L.P.(C) No.24617 of 2003,

Civil Appeal No. 5174 of 2007 arising out of S.L.P.(C) No.5647 of 2004,

Civil Appeal No. 5175 of 2007 arising out of S.L.P.(C) No.6267 of 2004,

Civil Appeal No. 5181 of 2007 arising out of S.L.P.(C) No.12325 of 2004.

Leave granted.

2.This is a batch of civil appeals filed by the Department. For the sake of convenience we state the facts occurring in Civil Appeal No. of 2007 arising out of S.L.P.(C) No.24617 of 2003 - Commissioner, Income Tax, Thiruvananthapuram v. K. Ravindranathan Nair. Assessee-respondent has a factory in which he processes cashew nuts which are grown in his farm. Thereafter he exports the cashew nuts as an exporter. For processing, the assessee has complete infrastructure. He has plant and machinery in his factory. At the same time, the assessee processes cashew nuts which are supplied to him by the exporters on job-work basis. After processing, the assessee returns the processed cashew nuts to the exporters. He earns processing charges. Therefore, the assessee is an exporter and a job worker.

3.Computation of Export Incentive under Section 80HHC(3) of the Income Tax Act, 1961 ("I.T. Act", for short), is the issue for determination in this batch of civil appeals.

4.The assessee made a claim for Export Incentive under Section 80HHC(3) in his returns filed for the assessment year 1993-94. The assessee did not include processing charges (receipts) in his total turnover. In his return, he indicated his business profits at Rs.1,94,08,220. The figure of Rs.1,94,08,220 included the processing charges (receipts) amounting to Rs.1,54,68,811. However, the assessee did not include the processing charges amounting to Rs.1,54,68,811 in his total turnover. He contended that although the processing charges(receipts) amounting to Rs.1,54,68,811 constituted part of business profits as computed under Section 28 of the I.T. Act, since Section 80HHC (3) was the formula to work out export incentive, the said figure of Rs.1,54,68,811 was not includible in the total turnover in the formula under the said Section 80HHC(3) of the I.T. Act. According to assessee, Section 80HHC(3) provided for computation of export incentive/concession to be computed by allocating business profits in the ratio of export turnover w by total turnover. This argument was not accepted by the Department.

5.The narrow dispute which arises for determination is: whether the Department was right in including processing charges, amounting to Rs.1,54,68,811, in the total turnover while arriving at export profits under Section 80HHC(3) of the Act, as it stood at the material time.

6.According to A.O., the gross total income of the assessee was Rs.1,94,08,220 from which an amount of Rs.1,74,13,200 (90%) was deducted in terms of clause (baa) to the Explanation to Section 80HHC to arrive at the Business Profits (See: page 52 of the S.L.P. paper book).

7.Shri T.L.V. Iyer, learned senior counsel appearing on behalf of respondent-assessee, submitted that Section 80HHC(3) of the I.T. Act provided for export incentives. According to learned counsel, the object behind enactment of the said sub-section was to encourage exports. He, therefore, submitted that the above formula should be read to exclude processing charges from the total turnover in the above formula even though such charges constituted part of the business profits required to be calculated in terms of the provisions of Section 28 to 44D of the I.T. Act. According to learned counsel, the word "turnover" includes all receipts from sale of goods and not from sale of services. According to learned counsel, the assessee had two independent businesses, in one case he processed and exported his own products and in the other he processed the raw material (cashew nuts) supplied by third parties which he processed for earning process charges. According to learned counsel, income