TMI Blog2004 (3) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... its derived from export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. The said provision is given effect by adopting the following formula : Profit of export = Profits of business x Export Turnover --------------- Total Turnover Explanations (baa), (b) and (ba) to Section 80HHC define these three terms, profits of business, export turnover and total turnover, for purposes of Section 80HHC. Explanation (ba) to Section 80HHC provides that for the purpose of Section 80HHC, total turnover shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station. The proviso thereto provides that the expression 'total turnover' shall have effect as if it also excluded any sum referred to in Clauses (iiia), (iiib) and (iiic) of Section 28. While 'total turnover' is defined by an 'excluding' definition, the term 'export turnover' is defined in Clause (b) of Explanation by an extensive definition as meaning the sales proceeds received in, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom). The said order is challenged by the Revenue contending that sales-tax collected during the assessment year by the assessee should form part of the 'total turnover' for purposes of calculating the deduction under Section 80HHC. 6. Reliance is placed by the Revenue on the decisions of the Supreme Court in George Oakes (P) Ltd. v. State Of Madras and State of Kerala v. N. Ramaswamy Iyer and Sons (1966) 61 ITR 187 (SC) to contend that sales-tax collected on sales should be included in the 'total turnover'. 6.1 In George Oakes (supra) the Supreme Court was considering the question whether additional sales-tax levied under Section 3(2) of Madras General Sales-tax Act, 1939 can be included in the turnover relating to the special goods and resultant sum taxed at 6 pies for every rupee. The answer depended on the definition of 'turnover' under the Madras General Sales-tax Act, 1939 and Section 2 of the Madras General Sales-tax (Definition of Turnover and Validation of Assessments) Act, 1954. Section 2 of the 1954 Validation Act provided that in the case of sales made by a dealer before 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not necessarily throw any light on the manner in which the term should be understood generally. On the other hand it is a sound, and, indeed, a well-known principle of construction that meaning of words and expressions used in an Act must take their colour from the context in which they appear. (emphasis, italicized in print, supplied) In Muslim Wakfs Board v. Radha Kishan AIR 1979 SC 289, the Supreme Court observed : ...decisions rendered with reference to construction of one Act cannot apply with reference to the provisions of another Act, unless the two Acts are in pari materia, Therefore, the term total turnover used in Section 80HHC of IT Act, should be understood and interpreted vis-a-vis the definition of export turnover , with reference to their definitions in Explns. (b) and (ba) to Section 80HHC. The interpretation should be contextual and not with reference to the definition under sales-tax law, particularly when the total turnover is defined under the sales-tax law in contradistinction from the term turnover and 'taxable turnover in a totally different context. 8. In fact, the question whether the words 'total turnover' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted into Section 80HHC of the IT Act . 8.2 In Chloride India (supra), a Division Bench of the Calcutta High Court reiterated the principle thus : On a combined reading of Clause (b) and Clause (ba) of the Explanation to Section 80HHC we find that both the export turnover and total turnover include anything which has a nexus with the sale proceeds and they excluded everything which has no nexus with the sale proceeds. It is the intention of the legislature that under Section 80HHC the profits from export should not be taxed and for that purpose a formula was introduced whereby, in case the business is of composite nature, the proportionate profit relatable to the export business would be found out by multiplying the profits of a business by the export turnover and dividing the product by the total turnover...... if the denominator was to include octroi, sales-tax and excise duty and if the numerator excluded those items the formula would certainly become unworkable. In our view octroi, excise duty and sales-tax cannot have any element of profit and as such those items cannot be included in the total turnover. If contrary view is taken that will make the object sought to be ach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, to include excise duty and sales-tax for arriving at the total turnover, when sales-tax and excise duty do not form part of the export turnover, would be illogical and arbitrary. 10. The word 'total' is affixed to the word 'turnover', not with the intention of adding sales-tax, entry tax, excise duty etc., to the 'turnover', but in contradistinction from 'export turnover'. When we keep in mind that the 'total turnover' is used in the formula to determine the percentage of export turnover so that the same percentage can be applied to the export profits, it becomes clear that both should have same components. Therefore, if sales-tax does not form part of one, it has to be excluded from the other. Any attempt by the assessee to increase the export profit, or any attempt by the Revenue to decrease the export profit, should be resisted, having regard to the clear words of Sub-section (3) and the Explanations to Section 80HHC. While logic need not always be the basis for a taxing provision, it does not follow that a taxing provision logically made, should be interpreted illogically or asymmetrically, merely because it is a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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