TMI Blog1996 (9) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... icer did not agree with the manner in which the computation was made by the assessee, inasmuch as, according to him, the total turnover should have included the amount of excise duty and sales-tax. He, therefore, recomputed the claim under section 80HHC by including the amount of sales-tax and excise duty in the total turnover. On appeal, the order of the Assessing Officer was confirmed. Aggrieved by the same, the present appeal has been preferred by the assessee. 3. The contention of the learned counsel for the assessee is that though generally, the sales-tax and excise duty are treated as part of the turnover, yet, the meaning of the word 'turnover' has to be seen in the context in which it has been used by the Legislature. Since the excise duty and sales-tax are not leviable on export, the same do not form part of the export turnover. According to him, if such levies are not includible in the export turnover, the same should also not be included in the total turnover. In support of this contention, he relied on the decision of the Tribunal, Calcutta Bench in the case of Chloride India Ltd v. Dy. CIT [1995] 53 ITD 180. 4. On the other hand, the contention of the learned depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xports goods out of India as well as sells within India. Sub-section 3(b) provides the manner in which the relief is to be computed. It reads as under : "(3) For the purpose of sub-section (1), profits derived from the export of goods or merchandise out of India shall be,-- (a) (b) in a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head 'Profits and gains of business or profession') the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." In this sub-section, following formula has been laid down to arrive at the profit derived from the export : Profits of business X export turnover/total turnover The question before us is what should be the meaning of the word 'turnover' used by the Legislature in the aforesaid sub-section. In this connection, it is pertinent to note that the meaning of the words has to be understood in the context in which it has been used by the Legislature. Reference may be made to the following o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, we decide this issue in favour of the assessee. 7. The next issue also relates to the computation of relief under section 80HHC. The question to be decided is whether the words 'profits of business' as specified in sub-section 3(b) could include the dividend earned by the assessee. The assessee while computing its claim under section 80HHC included the dividend income in the profits of the business. The Assessing Officer did not agree with the assessee and excluded the dividend income from the profits of the business and recomputed the claim of the assessee. This order of the Assessing Officer has been confirmed by the CIT(A). 8. The contention of the learned counsel for the assessee is that the dividend income has been earned out the business investments in securities at the instance of the Reserve Bank of India and, therefore, the same should have been treated as the business income. In this connection, he referred to the decision of the Calcutta High Court in the case of CIT v. East India Hotels Ltd. [1994] 207 ITR 881, Gujarat High Court decision in the case of CIT v. Cotton Fabrics Ltd. [1981] 131 ITR 99/6 Taxman 231. In this connection, he also invited our attentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature permitted the companies to take different previous year. Therefore, the assessee has continued to maintain its previous year ending as June of each year. However, for the purpose of income-tax, he has prepared profit and loss account for the previous year ending 31-3-1989. It was the practice of the assessee to provide depreciation in the books of account on straight-line method. Even after the assessment year 1989-90, the assessee is still taking the same method in respect of assets acquired before 2-4-1987. However, in respect of the assets acquired after 2-4-1987 it has changed the procedure, i.e., started providing depreciation on written down value method. However, while preparing the profit and loss account for the period 31-3-1989, the assessee provided depreciation in respect of all assets on written down value method. The auditors have pointed out that by this procedure, the profits have been lowered by Rs. 1,48,25,627. Thus, the assessee computed the book profit for the purpose of section 115J at Rs. 3,55,89,906. However, the Assessing Officer disagreed with the computation made by the assessee. According to him, the assessee was not permitted to change the method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as per P L a/c of the assessee, subject to the adjustments as described in Explanation to sub-section (1). There was therefore, no question of preparing a separate profit and loss account, inasmuch as accounting period was fixed as a financial year by way amending in both the Acts, i.e., Income-tax Act and the Companies Act, 1956. That is why, in the Explanation to sub-section, the words 'profits as shown in the P L a/c for the relevant previous year" were used. However, subsequently, the Legislature permitted the companies to adopt the accounting year different from the financial year in view of various representations made by the companies. Therefore, it became necessary to insert sub-section (1A) to section 115J in order to arrive at the correct book profit of the financial year, inasmuch as the previous year under the Act was the financial year. It is in this context that the word 'prepared' in sub-section (1A) has to be understood. 14. In the course of hearing, the Bench made a query from the learned counsel for the assessee whether the assessee could prepare the P L a/c by different method than prepared for corporate accounting, where the previous year of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the assessee cannot be accepted as it would frustrate the object of the Legislature in enacting such provision. This issue is, therefore, decided against the assessee. 16. The next issue also relates to the computation of book profit under section 115J. The question is whether the fluctuation loss in the foreign exchange can be excluded from the P L a/c prepared by the assessee in accordance with the provisions of Companies Act. 17. The assessee while preparing the P L a/c for the purpose of section 115J debited the fluctuation loss in the foreign exchange. However, the Assessing Officer excluded the same on the ground that it was capital in nature. The CIT(A) has confirmed the order of the Assessing Officer. 18. After hearing both the parties, we are of the view that there is a force in the contention of the assessee. The provision of section 115J defines book profits. According to this Explanation, book profit means the net profit as per P L a/c prepared in accordance with Part II and Part III of the Schedule VI to the Companies Act, 1956. This P L a/c subject to the adjustment specified in the Explanation. Except such adjustment, no other adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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