TMI Blog2000 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... re, they constitute trading receipts. Accordingly, be recomputed the deduction under section 80HHC by including the above two items in the total turnover. Being aggrieved by the said order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who allowed the claim of the assessee relying on the earlier judgment of the Tribunal for the earlier years in the assessee's own case in which the Tribunal held that sales tax and excise duty should be excluded from the total turnover while working out the deduction under section 80HHC. Being aggrieved by the said order of the Commissioner of Income-tax (Appeals), the Department preferred an appeal. The Tribunal upheld the order of the Commissioner of Income-tax. Hence, the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 80HHC, it is clear that the said expression refers to the aggregate amount for which goods are bought or sold and since sales tax and excise duty form part of the value of the goods, the same are includible in the total turnover. He relied upon the judgment of the Supreme Court in that regard in the case of George Oakes (Private) Ltd. v. State of Madras [1962] 13 STC 98 ; AIR 1962 SC 1352. On the other hand, Mr. Inamdar, learned counsel for the assessee, contended that one has to keep in mind the object of section 80HHC. He contended that at the relevant time, i.e., for the assessment year 1986-87, for which the previous year ended on December 31, 1985, section 80HHC of the Act provided for deduction of an amount, not exceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, while the export turnover was taken as FOB value, the total turnover included sale proceeds of exports at CIF value. With a view to remove this anomaly, it was proposed to clarify that the total turnover will also not include freight or insurance (see Circular No. 621, dated December 19, 1991---Chaturvedi and Pithisaria, fifth edition, page 3535). He contended that the above position is also explained in the memorandum to the Finance (No. 2) Bill of 1999. He accordingly contended that the object of the amendment was to bring on par, the export turnover vis-a-vis the total turnover. He contended that section 80HHC provides for incentives to the assessee for promoting growth of export turnover and, therefore, the said section must be lib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the numerator and denominator of a formula, then both should bear the same meaning. In other words, the ingredients of export turnover should also constitute the ingredients of total turnover to enable working out the proportionate profit from exports, otherwise the formula cannot work out. He further contended that sales tax and excise duty are State levies which have no relevance to the object of section 80HHC. He contended that a small scale industry is exempt from excise duty. Therefore, if the Department's argument is accepted, it would lead to an anomalous position because two assessees situated in identical situations would be entitled to different amount of reliefs under the said section. He accordingly contended that such interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not include excise duty and sales tax. The export turnover is the numerator in the above formula whereas the total turnover is the denominator. The above formula has been prescribed to arrive at the profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty, cannot form part of the total turnover. In fact, if the denominator was to include the above two items and if the numerator excluded the above two items then the formula would become unworkable. In the circumstances, we are of the view that in order to ascertain the export profits, the above two items cannot be introduced to inflate the total turnover artificially in order to reduce the benefit which an assessee is entitled to. Ultimately, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is on the words "profits derived from the exports". Therefore, weightage must be given to such profits. Such profits cannot be reduced artificially by including statutory levies in the denominator, namely, total turnover. Therefore, the turnover should be restricted to such receipts which have an element of profit in it. It is only the actual sale price which is relevant. Anything charged by the assessee by way of excise duty and sales tax cannot be taken into account as they do not have any element of profit. Even according to the accounting principles, such levies do not form part of the profit and loss account. In fact, they are shown as liability in the balance-sheet. In the circumstances, the above two items cannot be included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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