TMI Blog2014 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ted any error in holding that the excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC – Decided against Revenue. Setoff of MAT Credit before interest liability - Whether the Tribunal is justified in holding that interest u/s 234B of the Act is to be charged on the tax payable after reducing the credit available u/s 115JAA of the Act for A.Y. 2000-01 ignoring the fact that Explanation 1 below Section 234B of the Act has been introduced with effect from 01.04.2007 and therefore, cannot be applied retrospectively – Held that:- The decision in CIT v. Tulsyan Nec Ltd. [2010 (12) TMI 23 - Supreme Court of India] followed - There is no provision under Section 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the A.O. in the first assessment year - Entitlement/right to claim set off is different from the quantum/quantification of that right - Entitlement of MAT credit is not dependent upon any action taken by the Department - the right to set off arises as a result of the payment of tax under Section 115JA(1) although quantification of that right depends upon the ultimate determination of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Supreme Court in the case of CIT v. Lakshmi Machine Works 290 ITR 667 [paras 16 to 18] and the decision of the Hon'ble Supreme Court in the case of CIT v. Shiva Tex Yarn Ltd. [2012] 25 taxmann.Com 302 (SC). 2.2 It is required to be noted that initially Shri Bhatt, 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 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 Bhatt, 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 Supreme Court in the cases of Lakshmi Machine Works (supra) and Shiva Tex Yarn Ltd. (supra) would not be applicable to the facts of the case on hand. 2.3 Having heard Shri Manish Bhatt, learned counsel appearing on behalf of the Revenue and Shri Soparkar, learned counsel appearing for assessee in respective appeals and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 freight/insurance. He urged that since the legislature had excluded only insurance and freight, it was not open to the courts to exclude excise duty and sales tax from the concept of total turnover in the said formula. He conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 profits and gains. The charge is not on gross receipts but on profits and gains. The charge is not on gross receipts but on profits and gains properly so-called. Gross receipts or sale proceeds, however, include profits. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 certifying deduction based on export turnover was sufficient. This is because the very basis for computing Section 80HHC deduction was business profits as computed under Section 28, a portion of which had to be apportioned in terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'. 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). 2.4 Applying the ratio of law laid down by the Hon'ble Supreme Court in the case of Lakshmi Machine Works (supra) to the facts of the case on hand, the question No.1 raised is held against the Revenue and it is held that the learned Tribunal has not committed any error in holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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