TMI Blog2013 (12) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... urt) and in the case of Shiva Tex Yarn Limited (2012 (9) TMI 658 - SUPREME COURT), wherein held 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.Income from rent, commission etc. cannot be considered as part of business profits and, therefore, they cannot be held as part of the turnover also.Tribunal was right in holding that the excise duty and sales will not be included in the total turnover while calculating the deduction u/s. 80HHC of the even after insertion of Section 145 A - Decided against the revenue. - TAX APPEAL NO. 785 of 2008 - - - Dated:- 26-12-2013 - MR. M.R. SHAH MR. R.P.DHOLARIA JJ. MR SUDHIR M MEHTA, ADVOCATE for the Appellant MR KH KAJI, ADVOCATE for the Respondent JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. As common question of law and facts arise in both these Tax Appeals and are as such with respect to same assessee but different assessment year, both these app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of this Court in Tax Appeal No.637 of 2013 and other allied matters. In the said decision it has been held that if the assessee has not deposited employees contribution towards PF and ESIC Act, the assessee shall not be entitled to the deductions in the same year. Applying the ratio and law laid down by the Division Bench of this Court in Tax Appeal No. 637 of 2013, question no. A is held in favour of the revenue and against the assessee. 6.0. Now, so far as question no B i.e. Whether on the facts and circumstances of the case and in law, was the Tribunal right in holding that the excise duty and sales will not be included in the total turnover while calculating the deduction u/s. 80HHC of the even after insertion of Section 145 A is concerned, the said question is squarely covered by the decision of the Hon ble Supreme Court in the case of Lakshmi Machine Works (supra) and in the case of Shiva Tex Yarn Limited (supra), against the revenue. The aforesaid decision of the Hon ble Supreme Court has been subsequently followed by this Court in Tax Appeal No. 884 of 2006 and other allied matters. In paras 16 to 18 in the case of Lakshmi Machine Works (Supra), the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contended that the word turnover referred to the aggregate amount for which the goods were sold and since sales tax and excise duty formed part of the value of the goods, the said two items were includible in the definition of the words total turnover . In this connection, learned counsel placed reliance on the judgment of the Supreme Court in the case of M/s. Chowringhee Sales Bureau (supra). Reliance was also placed on The Law and Practice of Income Tax by Kanga and Palkhivala (eighth edition) at page 123. In support of the contention that a tax or duty is part of the dealer& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts 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 socalled. Gross receipts or sale proceeds, however, include profits. According to The Law and Practice of Income Tax by Kanga and Palkhivala, the word profits in Section 28 should be understood in normal and proper sense. However, subject to special requirements of the income tax, profits have got to be assessed provided they are real profits. Such profits have to be got to be ascertained on ordinary principles of commercial trading and accounting. However, the income tax has laid down certain rules to be applied in deciding how the tax should be assessed and even if the result is to tax as profits what cannot be construed as profits, still the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 the above ratio of export turnover to total turnover. Section 80HHC(3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existe ..... 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