COMMISSIONER OF INCOME-TAX THIRUVANANTHAPURAM versus M/S BABY MARINE EXPORTS, KOLLAM

Citation: [2007] 4 S.C.R. 628 · Decided: 30-03-2007 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Disposed off

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
COMMISSIONER OF INCOME-TAX THIRUV ANANTHAPURAM 
v. 
MIS BABY MARINE EXPORTS, KOLLAM 
MARCH 30, 2007 
B 
[ASH OK BHAN AND DAL VEER BHANDARI, JJ.] 
Income Tax Act, 1961: 
, Section BOHHC (JA)-Export house premium:_beduction while 
c computing total income-Held, permissible. 
The short question oflaw involved in the instant appeals was-whether 
the export house premium received by the assessee is includible in the "profits 
of the ~usiness" of the assessee while computing tlie deduction under Section 
D 80HHC of the. Income '.fax Act, 1961. 
Answering the question in the affirmative and disposing of the appeals, 
the Court 
't· 
HELD 1.1 The Export House premium is an integral part of the sale 
E price realized by the assessee from the a;xport house and can be included in 
the business profit. The assessee thus is entitled to claim deduction of the 
premium amount in computing the total income. 
[Paras 26 and 29) (639-A-B, F) 
CST v. Bangalore Clothing Company, 260 ITR 371; KRN Marine 
F Exports Ltd. ACIT, (2006) 153 Taxman 437; Sea Pearl Industries v. CIT 
,,_ 
.... 
Cochin, (2001) 2 SCC 33; IPCA Laboratory Ltd v. Dy. Commissioner of 
"' 
Income Tax, Mumbai, (2004) 12 SCC 742 and Bajaj Tempo Ltd. v. 
Commissioner of Income Tax, Bombay, [1992) 3 SCC 78, referred to. 
Berger Paints India Ltd v. Commissioner of Income Tax, Calcutta, [2004) 
G 12 sec 42, relied upon. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6146 of2005. 
From the Final Judgment and Order dated 22.08.2003 of the High Court 
of Kerala at Ernakularn in ITA No. 45 of2003. 
H 
. 
628 
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\ t 
COMMNR. OF INCOME-TAXTHIRUVANANTHAPURAM v. BABY MARINE EXPORTS, KOLLAM (DALVEER BHANDARI. J.J 629 
~ 
WITH 
A 
~ 
C.A. Nos. 281-284, 286 of2006. 
Vikas Singh. ASG., T. L. V. Iyer., Ranvir Chandra, Gaurav Dhingra (for 
B. V. Balaram Das), Gopalakrishnan, R. and Jai Kishore Singh (for Subramonium 
Prasad) for the Appellant. 
B 
S. Ganesh, C. N. Sree Kumar, Anil B. Nair and K. Gireesh Kumar for the 
Respondent. 
.. 
The Judgment of the Court was delivered by 
c 
DALVEER BHANDARI, J. 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? 
D 
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 ofreference, the essential facts of Civil Appeal No. 6146 of2005 are 
reproduced as under. 
:. 
The respondent-assessee, Mis Baby Marine Exports, Kollam is engaged E 
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 F 
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 of2.25% 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: 
G 
"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." 
H 
/ +-
\ 
630 
SUPREME COURT REPORTS 
[2007] 4 S.C.R. 
A 
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 (IA) of the Income Tax Act. 
B 
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 
·, 
c the nature of the payment. According to the assessing officer, this is clearly 
a "commission or ser

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