TMI Blog2003 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment year 1991-92. In all these cases common questions of law arise for consideration and therefore we are disposing of all these appeals by a common judgment. In all the appeals the following two questions of law arise for consideration: "1. Whether, on the facts and in the circumstances of the case, while computing the relief under section 80HHC of the Income-tax Act, 1961, the processing charges could be excluded from the turnover of the business? 2. Whether, on the facts and in the circumstances of the case and in view of Explanation (ba) to section 80HHC and clauses (iiia), (iiib) and (iiic) of section 28, will not turnover take into account all other receipts other than the excluded items of receipts?" In I.T.A. Nos. 30 and 72 of 2000 these are the only two questions raised whereas in I.T.A. Nos. 86 and 105 of 2000 the first two questions raised are the same as extracted earlier. However, in those two cases the following two questions also arise: "3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that interest on the deposit accounts made not for the purpose of the business alone would be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver while working out the deduction under section 80HHC. The Assessing Officer did not accept this as he was of the view that the processing charges should be included in the turnover when the same was includible in the business profit. This was confirmed in appeal by the Commissioner of Income-tax (Appeals). However, in further appeal by the assessee the Income-tax Appellate Tribunal accepted the contention of the assessee and directed the Assessing Officer to exclude the processing charges from the total turnover. Hence, the Department is in appeal before this court. We have heard Sri P.K.R. Menon, Senior Central Government Standing Counsel for Taxes appearing for the applicant and Sri P. Balachandran, learned counsel for the respondents-assessees. In order to appreciate the rival contentions it is necessary to refer to the relevant provisions of section 80HHc. Section 80HHC as it stood at the relevant time reads as follows: "80HHC. Deduction in respect of profits retained for export business.--(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India of any goods or merchandise to which this section applies, a deduction of the profits derived by the assessee from the export of such goods or merchandise will be allowed subject to the provisions of section 80HHC. Sub-section (3) provides that for the purposes of sub-section (1)(a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such 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. It also provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee and, of trading goods, the profits derived from such export, shall, in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee, and in respect of trading goods, be the export turnover in respect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word "turnover" occurring in P. Ramanatha Aiyar's the Law Lexicon at page 1300--edn., which reads thus: "Turnover" is the amount of money turned over or drawn in a business, as in a retail shop, in a given time. He also took us to the meaning of the word "turned out" (in commerce) equipage; amount of goods turned out. However, we notice that in P. Ramanatha Aiyar's the Law Lexicon Law Dictionary, 1997 edn., the meaning of the word "turnover" with reference to the decisions of the court rendered in the context of the General Sales Tax Act is given as follows: "Turnover" of the dealer includes the entire sum paid by the purchaser as consideration for the sale of goods though part of it might be styled price and another part as sales tax in the bill or invoice issued to the purchaser. Going by the above definition of the word "turnover" one thing is clear that the consideration received must be for the sale of goods and it must be available with the assessee for being turned over, or in other words it must come to the assessee's till as the money belonging to him. It has got relation to the capital employed in the business; turnover has also got relationship with profits of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the goods which are the subject matter of the business but will take in charges incurred in connection with the transport of the goods or merchandise including freight, insurance, etc. On a consideration of the provisions of section 80HHC we are of the view that in order that an amount must be included in the total turnover it must either be the purchase price or the sale price or something incidental to the transfer of the goods dealt with by the assessee. In other words, the turnover must relate to the purchase or the sale of the goods made by the assessee. In the present case admittedly the assessee has processed raw cashew nuts belonging to third parties in his factory and had only collected the processing charges. As already noticed, the contention of the Department is that the processing charges received by the assessee must be treated as turnover of the business of the assessee and is liable to be included in the total turnover. We are unable to accept the said contention for the reason that what is includible in the total turnover is only the consideration for the transfer of goods effected by the assessee and the expenses incurred in connection with the said trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on export sales. Moreover, the business income is only reckoned for the purpose of computation of eligible deduction and the business income in the context of total turnover is only the income generated on purchases and sales. Therefore the total turnover in the context of section 80HHC is only sales turnover and purchase turnover and not the receipts in the nature of income, which is not attributable to sales." The aforesaid decision also is to the effect that in order to bring a particular amount within the definition of "turnover" and for that matter within the meaning of total "turnover" there must be transaction either by way. of purchase or by way of sale of goods. This decision, according to us, will also apply to the facts of the case on hand. Counsel for the assessee also took us to the circulars issued by the Central Board of Direct Taxes. Central Board of Direct Taxes Circular No. 564 dated 5th July, 1990, is a clarification regarding deduction under section 80HHC of the Income-tax Act, 1961. With reference to the definition of "total turnover" occurring in the Explanation to section 80HHC, in paragraph 9 of the said circular, it is stated that in order to arrive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02] 257 ITR 60, respectively. We find that the Bombay High Court in CIT v. K.K. Doshi and Co; [2000] 245 ITR 849 was concerned with the question as to whether service charges received by the assessee for offering its services on job work basis to outsiders to polish rough diamonds can be considered as part of the business profits while working out deduction under section 80HHC It was held that profits earned by the assessee on account of service charges cannot be said to have a direct nexus with the export activities of the assessee and hence to that extent the assessee was not entitled to claim deduction under section 80HHC Another Division Bench of the Bombay High Court in (CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769) held that excise duty and sales tax are not includible in total turnover for the purpose of computation of special deduction under section 80HHC It was observed that turnover should be restricted to such receipts which have an element of profit in it and that it is only the actual sale price which is relevant. Again the Bombay High Court in CIT v. Kantilal Chhotalal [2000] 246 ITR 439 considered the question whether reassortment charges (commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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