TMI Blog2013 (12) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel appearing on behalf of the Revenue, it appears that the aforesaid substantial question of law framed is now not res integra and the aforesaid substantial question of law is held against the Revenue by the Hon ble Supreme Court in the case of Commissioner of IncomeTax vs. Lakshmi Machine Works reported in 290 ITR 667 [paras 16 to 18] and the decision of the Hon ble Supreme Court in the case of Commissioner of Income Tax vs. Shiva Tex Yarn Ltd. reported in (2012) 25 Taxmann.Com 302 (SC). 3.1. It is required to be noted that initially Shri K.M. Parikh, learned counsel appearing on behalf of the Revenue tried to distinguish the aforesaid two decisions by submitting that in the said decisions section 145A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) has not been considered and dealt with. However, considering the fact that as such there is no amendment in section 80HHC of the Act and considering the observations made by the Hon ble Supreme Court in paras 16 to 18 in the case of Lakshmi Machine Works (Supra), Shri K.M. Parikh, learned counsel appearing on behalf of the Revenue is not in a position to satisfy the Court as to how the decisions of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id section is entirely based on the formula. The amendments from time to time indicate that they became necessary in order to make the formula workable. Hence, we have to give schematic interpretation to Section 80HHC of the Act. 17. Shri P.P. Malhotra, leaned senior counsel appearing for the Department (appellant), submitted that one has to give plain and unambiguous meaning to the word turnover in the above formula; that there was no need to call for any rule of interpretation or external aid to interpret the said word; that having regard to the plain words of the section, excise duty and sales tax ought to have been included in the total turnover . Learned counsel submitted that the word turnover even in the ordinary sense would include the above two items. Learned counsel urged that the formula should be read strictly. In this connection, he pointed out that the legislature had expressly excluded items of freight and insurance and not sales tax and excise duty from the said definition. It was urged that while construing a taxing statute strict interpretation should be given by the Courts. It was urged that the definition of the words total turnover did not include f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was the liability of the assessee to the Government and, therefore, it was not includible in the total turnover. Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that the components of export turnover and total turnover should be the same in the above formula. Learned counsel submitted that the formula would become unworkable if the components in the export turnover and the components in the total turnover are the same. Learned counsel submitted that there was no merit in the argument advanced on behalf of the assessee that excise duty and sales tax did not form part of trading receipts. Learned counsel submitted that there was no merit in the contention of the assessee that the expression business profits in Section 80HHC did not include receipts which did not emanate for exports and, therefore, such receipts did not constitute an element of turnover. 18. We do not find any merit in the above contentions advanced on behalf of the Department. It is important to note that tax under the Act is upon income, profits and gains. It is not a tax on gross receipts. Under Section 2(24) of the Act the word income includes p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e weightage not only to the words total turnover but also to the words export turnover , total export turnover and business profits . That is the reason why we have quoted hereinabove extensively the illustration from the Direct Taxes (Income tax) Ready Reckoner of the relevant word. In the circumstances, we cannot interpret the words total turnover in the above formula with reference to the definition of the word turnover in other laws like Central Sales Tax or as defined in accounting principles. Goods for export do not incur excise duty liability. As stated above, even commission and interest formed a part of the profit and loss account, however, they were not eligible for deduction under Section 80HHC. They were not eligible even without the clarification introduced by the legislature by various amendments because they did not involve any element of turnover. Further, in all other provisions of the income tax, profits and gains were required to be computed with reference to the books of accounts of the assessee. However, as can be seen from the Income Tax Rules and from the above Form No.10CCAC in the case of deduction under Section 80HHC a report of the auditor certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, they cannot be held as part of the turnover also. In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the A.O. [See: page no.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the total turnover under Section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of turnover which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80HHC from time to time. 3.3. Even in the subsequent decision in the case of Shiva Tex Yarn Ltd. (Supra), the Hon ble Supreme Court even with respect to assessment order after section 145A, has followed the decision of the Hon ble Supreme Court in the case of Lakshmi Machine Works (Supra). 4.0. Applying the ratio of law laid down by the Hon ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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