Export-profit relief computation: excise duty stays in total turnover because it forms part of sale realisation.

For export-profit relief computed under a turnover-based formula, excise duty paid by the assessee could not be excluded from the total turnover denominator. The HC held that section 2(5) of the Finance Act, 1963 and rule 2(3) of the Income-tax (Determination of Export Profits) Rules, 1962 required the qualifying income to be worked out by reference to total sale realisation, and excise duty formed part of that realisation as part of the sale price. As the governing formula did not expressly permit its exclusion, no basis existed to carve it out; the question was answered against the assessee.

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Issues: Whether, for computing the qualifying income for export profit relief, the excise duty paid by the assessee was deductible from the total turnover of the business.

Analysis: The relevant computation was governed by section 2(5) of the Finance Act, 1963 and rule 2(3) of the Income-tax (Determination of Export Profits) Rules, 1962, which required the qualifying income to be determined as a fraction of the profits of the whole business in proportion to export turnover to total turnover. The formula did not provide for excluding excise duty from total turnover. The Court held that turnover represents the total sale realisation, and excise duty, being part of the sale price, forms part of that realisation even if it is later passed on to the Government. No basis existed for isolating that single item from the denominator.

Conclusion: The excise duty paid by the assessee was not deductible from total turnover while computing qualifying income; the question was answered in the negative, against the assessee.

Ratio Decidendi: In computing export-profit relief under a turnover-based formula, an item forming part of the sale price cannot be carved out of total turnover unless the governing provision expressly so provides.

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