Court rules excise duty and sales tax not part of turnover for deduction under section 80HHC.

The High Court of Madras dismissed the appeal regarding the disallowance of a deduction under section 80HHC due to the exclusion of excise duty and sales tax receipts from turnover. Relying on established precedents, the court held that excise duty and sales tax should not be considered part of turnover for calculating the deduction under section 80HHC, as they are indirect taxes collected for the government without any profit element. Consequently, the appeal was dismissed as no substantial question of law was found to merit consideration.

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Issues:
- Disallowance of deduction under section 80HHC by not considering excise duty and sales tax receipts as part of turnover.

Analysis:
The High Court of Madras heard an appeal against the order of the Income-tax Appellate Tribunal regarding the disallowance of a deduction under section 80HHC due to the exclusion of excise duty and sales tax receipts from turnover. The Commissioner of Income-tax (Appeals) had allowed the appeal, directing the exclusion of these receipts from the total turnover. However, the Income-tax Appellate Tribunal, upon the Revenue's appeal, upheld the Commissioner's decision. The Revenue then raised the question of law on whether excise duty and sales tax receipts should be considered part of turnover for calculating the deduction under section 80HHC.

The court referred to previous judgments, including CIT v. Wheels India Ltd., CIT v. Sundaram Fasteners Ltd., and CIT v. India Pistons Ltd., which established that excise duty and sales tax should not be included in turnover for section 80HHC deduction calculation. The court emphasized that these components are indirect taxes collected by the assessee for the government, devoid of any profit element. Therefore, sales tax and excise duty are not to be factored into the total turnover when computing the deduction under section 80HHC.

Based on the precedents and legal reasoning provided, the court concluded that sales tax collections should not be part of the turnover for section 80HHC deduction calculation. As no substantial question of law was found to merit consideration, the appeal was dismissed by the court.

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