TMI Blog2007 (7) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... livered by DR. ARIJIT PASAYAT J.- Leave granted. The challenge in this appeal is to the order passed by a Division Bench of the Bombay High Court relating to the question whether sales tax and excise duty form part of the total turnover. The dispute relates to the assessment year 1997-98. The background facts in a nutshell are as follows: While making assessment under section 143(3) of the Income-tax Act, 1961 (in short "the Act"), the Assessing Officer included excise duty and sales tax on the total turnover for computing the deduction under section 80HHC(3)(b) of the Act. The Commissioner of Income-tax (Appeals), Special Range-I, Nasik (in short the "CIT (A)"), held that while calculating the deduction under section 80HHC amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, one has to give weightage not only to the words 'total turnover' but also to the words 'export turnover', 'total export turnover' and 'business profits'. That is the reason why we have quoted hereinabove extensively the illustration from the Direct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty and sales tax also cannot form part of the 'turnover'. Similarly, 'interest' emanates from exports and yet 'interest' does not involve an element of turnover. The. object of the Legislature in enacting section 80HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, 'turnover' was the requirement. Commission, rent, interest etc. did not involve any turnover. Therefore, 90 per cent. of such commission, interest etc. was excluded from the profits derived from the export. Therefore, even without the clarification such items did not form part of the formula in section 80HHC(3) for the simple reason. that they did not emanate from the 'export turnover', much less any turnover. Even if the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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