Separate accounting of excise duty and service tax can exclude them from turnover, supporting a lower corporate tax rate.

Excise duty and service tax recovered by the assessee were credited to separate ledger accounts, with corresponding payments debited in those accounts; on that accounting treatment, the levies were excluded from turnover for the lower corporate tax rate. Relying on the guidance note under section 44AB, the turnover fell below the threshold for the higher rate, making rectification under section 154 maintainable on that basis. The assessing officer was directed to apply the 25% tax rate instead of 30%.

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Issues: Whether, for the purpose of applying the lower corporate tax rate, excise duty and service tax recovered and credited to separate accounts were to be excluded from turnover, and whether the rectification application under section 154 was maintainable on that basis.

Analysis: The assessee's accounts showed that excise duty and service tax collected were credited separately to the respective ledger accounts and payments to the authorities were debited in those same accounts. Reliance was placed on the guidance note on tax audit under section 44AB, which states that where such levies are maintained in separate accounts, they are not to be included in turnover. On that basis, the turnover for the relevant year was below the threshold for the higher tax rate.

Conclusion: The request for rectification succeeded, and the assessing officer was directed to apply the 25% tax rate instead of 30%.

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