2004 (10) TMI 33 - HC - Income Tax

Excise duty not part of turnover for deduction under Income-tax Act

Commissioner of Income-Tax Versus Sundaram Fasteners Ltd.

The High Court dismissed the appeal, affirming the Tribunal's decision that excise duty does not form part of the total turnover for calculating ... Deduction under section 80HHC – excise duty - '(i) Whether Tribunal was right in holding that excise duty does not form part of the total turnover for the purpose of calculation of deduction under section 80HHC? - It is a settled law that though the 'total turnover' may include the receipts of excise duty and sales tax, etc., in its general parlance and under specific statutes, because of its wider coverage in the definitions given thereunder, it has to be given a restrictive meaning while computing the 'export profit' for the purposes of section 80HHC, namely, only that part of the receipt for sale consideration is to be taken as part of the total turnover which has an element of profit therein, and, accordingly, the receipts of excise duty and sales tax which do not include an element of profit should be excluded from the 'total turnover'. – no infirmity in tribunal’s order Issues:1. Whether excise duty forms part of the total turnover for calculating deduction under section 80HHC of the Income-tax Act.2. Whether the Income-tax Tribunal erred in not considering certain judgments of the Supreme Court.Issue 1: Excise Duty and Total Turnover:The appeal raised the question of whether excise duty should be included in the total turnover for calculating deductions under section 80HHC of the Income-tax Act. The Bombay High Court in CIT v. Sudarshan Chemical Industries Ltd. held that excise duty and sales tax should not be included in the total turnover, as they do not have an element of profit. This interpretation was followed by the Calcutta High Court and the Kerala High Court in subsequent cases. The Madras High Court, in CIT v. Madras Motors Ltd./M. M. Forgings Ltd., further emphasized that the total turnover should be limited to the turnover of the product exported by the assessee. Based on these precedents, the High Court concluded that excise duty does not form part of the total turnover for calculating deductions under section 80HHC of the Act.Issue 2: Consideration of Supreme Court Judgments:The second issue pertained to whether the Income-tax Tribunal erred in not considering judgments of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT and Sinclair Murray and Co. P. Ltd. v. CIT. In the former case, the Supreme Court held that sales tax collected by an auctioneer forms part of its trading or business receipts. However, the High Court noted that these decisions were rendered under the Sales Tax Act, where the definition of turnover differs significantly from that under the Income-tax Act. Therefore, the High Court held that the Tribunal was correct in not relying on these judgments as they were not applicable to the case at hand.In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision that excise duty should not be included in the total turnover for calculating deductions under section 80HHC of the Income-tax Act. The court also affirmed that the Tribunal was justified in not considering certain Supreme Court judgments related to sales tax, as they were not directly relevant to the current case.