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2007 (10) TMI 543 - HC - Income TaxWhether in the facts and circumstances of the case, the Tribunal was right in holding that depreciation and other allowances to be carried forward in a case where book profits had been subject to tax is to be separately determined taking into account the profit assessed under Section 115J of the Act? Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that Sales Tax and Excise Duty should not be included in the total turnover for the purpose of computation of deduction under Section 80HHC of the Income-tax Act? Held that:- The fact that a part of the income, which was set off against the carried forward loss and depreciation even when, as a result of such set off, was not available for being taxed, was nevertheless deemed to be available for taxation to the extent of thirty per cent, of the book profit, could not therefore result in the assessee becoming entitled to carry forward the extent of the loss which could not be utilised for reducing the burden of taxation by setting off the same against the profits being carried forward to a succeeding assessment year or years. Section 115J allows only the unabsorbed losses, depreciation, investment allowance, etc., which could otherwise have been carried forward, to be carried forward. The allowances need not have been quantified under sub-section (1) of Section 115J to be carried forward under sub-section (2). Therefore the first question of law is answered in favour of the revenue. The second question of law has been decided against the revenue in the case of Commissioner of Income-tax v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] by saying that Section 80HHC of the Income-tax Act, 1961 is a beneficial section. Just as interest, commission, etc., do not emanate from the “turnover” so also excise duty and sales tax do not emanate from such “turnover”. Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent, etc., do yield profits, but they do not partake of the character of turnover and therefore they are not includible in the “total turnover”. If so, excise duty and sales tax also cannot form part of the “total turnover” under Section 80 HHC(3).
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