TaxTMI 
TaxTMI 
2009 (3) TMI 243
X X X X Extracts X X X X
X X X X Extracts X X X X
..... For the asst. yr. 2002-03 it filed a return of income admitting income of Rs. 34,18,214 after claiming exemption of Rs. 3,07,77,341 under s. 10B of the IT Act. The return was first accepted under s. 143(1) but was later taken up for scrutiny under s. 143(2). In the course of the assessment proceedings, the AO noticed that while claiming deduction under s. 10B, the assessee has declared export turnover of Rs. 8,33,64,528. The details furnished by the assessee showed that it had incurred the following expenditure in foreign currency: 1. Employer's NIC contribution Rs. 2,19,672 2. Salary at London office Rs. 20,92,763 3. Lodging expenses at London Rs. 6,263 4. Travelling expenditure Rs. 5,62,896 5. Professional charges at London office Rs. 25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion in the present appeal is whether the AO should have taken the figure of total turnover which is the denominator in the above formula at Rs. 8,97,16,160 i.e., after deducting the expenditure of Rs. 29,07,056 from the total turnover of Rs. 9,26,23,216. The assessee's contention is that there should be parity between the figures of export turnover and total turnover, and the figure of Rs. 29,07,056 should be excluded from both the export turnover and the total turnover, which are the numerator and the denominator respectively in the formula. In respect of the asst. yr. 2003-04 also the contention of the assessee is the same, though the figures are different. 4. Sec. 10B makes special provisions in respect of newly established 100 per cent EOUs. Sub-s. (1) provides that a deduction of such profits and gains as are derived by a 100 per cent EOU from the export of articles or things or computer software for a period of ten years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. Sub-s. (4) provide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owever, the same and both sides have addressed us on the question in its broader aspect also. It may be clarified that the case of Sak Soft Ltd., on facts relates to the exclusion of certain expenses incurred in foreign exchange in providing technical services outside India. The question referred to the Special Bench however, refers to expenses incurred in foreign currency treated as attributable to the delivery of computer software outside India. It was common ground before us that so far as freight, telecommunication charges or insurance is concerned, the expenses may be incurred even in Indian currency and that the requirement that the expenses should be incurred in foreign exchange was limited only to the expenses in providing the technical services outside India. The definition of the term 'export turnover' also supports this interpretation. Therefore, even though the question placed before the Special Bench seems to assume that expenses attributable to the delivery of computer software outside India was incurred in foreign currency, statutorily there seems to be no requirement that such expenses should only be incurred in foreign currency. Subject to this clarification or mod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollowing judgments were also cited on behalf of the assessee: (i) CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596 : (2000) 245 ITR 769 (Bom); (ii) CIT vs. Chloride India Ltd. (2002) 178 CTR (Cal) 432 : (2002) 256 ITR 625 (Cal); (iii) CIT vs. Bharat Earth Movers Ltd. (2004) 188 CTR (Kar) 488 : (2004) 268 ITR 232 (Kar); (iv) K.R.M. Marine Exports Ltd. vs. Asstt. CIT (2006) 201 CTR (Mad) 1 : (2007) 288ITR 151 (Mad); (v) IFB Agro Industries Ltd. vs. Dy. CIT (2003) 78 TTJ (Cal)(SB) 177 : (2002) 83 ITD 96 (Cal)(SB); (vi) Tata Elxsi Ltd. vs. Asstt. CIT (2008) 115 TTJ (Bang) 423. It was next argued on behalf of the assessee that the meaning of total turnover in s. 80HHC, as judicially interpreted should be incorporated in s. 10B in order to effectuate the object of the section. Our attention was drawn to Circular No. 528, dt. 16th Dec., 1988 [(1989) 76 CTR (St) 69] issued by the CBDT which stated in para 18.2 that s. 10B was inserted with a view to providing further incentive for earning foreign exchange and to secure that the income of a hundred per cent EOU shall be exempt from tax for a period of five consecutive assessment years. Reliance was also placed on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Government AIR 1967 SC 465 that it is a well-settled rule of construction that where the legislature uses the same expression in the same statute at two places or more, the same interpretation should be given to that expression unless the context otherwise requires. 9. A further argument was advanced on behalf of Sak Soft Ltd., based on guidance note issued by the ICAI relating to tax audit under s. 44AB of the Act. In the guidance note, the ICAI has referred to its guide to company audit where the term 'total turnover' has been defined as the aggregate amount for which sales are effected by the company after deducting therefrom goods returned, price adjustments, trade discount and cancellation of bills. It has also been stated by the ICAI that adjustments which do not relate to turnover should not be made, for example writing off bad debts, royalty etc. Our attention was also drawn to the dictionary meanings of the words "turnover" and "total turnover" appearing in the Oxford Dictionary of Accounting and New Webster's Dictionary of the English language. Extracts from these dictionaries have been placed between pp. 70 to 73 of the case law paper book. On the basis of these, it is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n behalf of Sak Soft Ltd., that even the legislature wanted to ensure parity between the export turnover and the total turnover in s. 80HHC. It was submitted that there is no reason why the parity principle should not be incorporated in s. 10B also. 10. It was further submitted, referring to the judgment of the Supreme Court in LMW, that in the penultimate para of the judgment the Supreme Court itself recognized, while interpreting s. 80HHC that subsequently amendments have been made to the section excluding certain receipts such as commission, interest etc., from the "profits of the business" and this has given rise to three types of profits, namely, book profits, actual profits and statutory profits. Having noticed this position, the Supreme Court clarified that their reasoning in the judgment holding that what is excludible from export turnover should also be excluded from the total turnover should be confined to the workability of the formula in the section as it stood at the material time, namely, before the amendments. On the basis of this clarification in the penultimate para of the judgment, it is contended that if the statute does not provide for a definition of 'total tu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... recognized the parity principle. (d) The Supreme Court in the case of CIT vs. Ravindranathan Nair has actually blessed the theory of parity and there are observations to this effect at p. 239 of the judgment. (c) The benefit given by the section should not be artificially whittled down in the absence of clear provisions of law giving authority to do so. (f) In a number of orders the various Benches of the Tribunal, including those in Chennai and Bangalore, have expressed the view that parity should be maintained between export turnover and total turnover. In the case of Synco Industries Ltd. vs. AO (2008) 215 CTR (SC) 385 : (2008) 299 ITR 444 (SC), it has been observed by the Supreme Court at p. 454 that it is a well-settled rule that where the predominant majority of the High Courts have taken a certain view on the interpretation of certain provisions, the Supreme Court would lean in favour of the predominant view. Applying the same rule of interpretation, it is submitted that this Special Bench should also lean in favour of the majority view of the Tribunals which is that the rule of parity is applicable to the interpretation of s. 10B. (g) In para 9 of Circular No. 564, dt.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Chemicals Industries Ltd., where it was observed that excise duty and sales-tax cannot form part of the total turnover as they did not have any element of profit. (c) Explanation 2(iii) below s. 10B which defines 'export turnover' refers to "consideration" received for the export of software. Logically therefore, the expression 'total turnover' should also be understood as referring only to any "consideration" received for the sales made locally as well as export sales. The freight, telecommunication charges or insurance attributable to the delivery of the software outside India or other expenses incurred in foreign exchange in providing technical services outside India are merely in the nature of reimbursement of the expenses incurred by the assessee and do nut represent consideration for the sale or export of the software. Therefore, they should not be included in the total turnover. Reliance is placed on the judgment of the Karnataka High Court in CIT vs. Bharat Earth Movers Ltd. (2004) 188 CTR (Kar) 188 : (2004) 268 ITR 232 (Kar) where it was held that while logic need not always be the basis for taxing provision, it does not follow that a taxing provision logically made shoul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s case, the Supreme Court was concerned with the question whether any additions have to be made to the profits of the business and the total turnover. The formula consists of three parts, namely, the profits of the business, the export turnover and the total turnover. In LMW's case, the comparison was between the numerator and denominator i.e., the export turnover and the total turnover. However, in Nair's case, only the denominator was being compared with the profits of the business. Both the judgments thus compare different components of the formula and therefore they stand independently. If a case concerns the comparison between the export turnover and the total turnover it can be pigeon-holed into LMW's case and if it concerns the relationship between the profits of the business and the total turnover it can be put under the category of Nair's case. However, export turnover and total turnover belong to the same family in the sense that both are species of turnover. But, the relationship between the profits of the business and the total turnover is somewhat different in the sense that the turnover contributes to the profits and in that sense it can be said that both do not belo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....10B. In the former, the expression 'total turnover' was defined by an amendment made by the Finance (No. 2) Act, 1991 to remove the anomaly (as recognized in Circular No. 621, dt. 19th Dec., 1991) but no such amendment was made in s. 10B. Parliament in its wisdom has not thought it fit to make any amendment in s. 10B to remove the alleged anomaly. (c) The Explanations below ss. 80HHC, 80HHE and 80HHF, all of which contain definitions of both 'export turnover' and 'total turnover' and exclude from both expressions the freight, telecom charges or insurance and expenses incurred in foreign exchange in providing technical services outside India, are expressly stated to be for the purposes of those sections only. They cannot be incorporated by implication into s. 10B. (d) As is clear from para 17 of the judgment of the Supreme Court in the case of LMW, the judgment is confined to the facts of that case and the ratio laid down therein cannot be lifted and incorporated into s. 10B. (e) In Ravindranathan Nair's judgment, the Supreme Court rejected the parity theory and this will be further clear on a reference to para 18 of the judgment of the Kerala High Court reported in (2004) 187 CT....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that has arisen in the present case. (k) As held by the Supreme Court in Keshavji Ravji & Co. Etc. vs. CIT (1990) 82 CTR (SC) 123 : (1990) 183 ITR 1 (SC), an artificial construction cannot be placed on an unambiguous statutory provision, whittling down the language used therein, merely to benefit the assessee. (1) The orders of the Chennai Benches of the Tribunal in California Software Co. Ltd., Isoft R&D (P) Ltd. and in the case of Changepond Technologies (P) Ltd. vs. Asstt. CIT (2008) 6 DTR (Chennai) 344 : (2008) 22 SOT 220 (Chennai) have laid down the correct interpretation of the expression 'total turnover' appearing in s. 10B. (m) The AO has taken the total turnover in accordance with the books of account of the assessee Sak Soft Ltd. and, therefore, no disturbance is called for. 17. On the basis of the above contentions, it was submitted by the Revenue that the total turnover was rightly taken by the AO without excluding the items excluded in the definition of export turnover in cl. (iii) of Expln. 2 below s. 10B. 18. In their brief reply to the arguments of the Department, the assessee and the interveners have made the following submissions: (a) In CIT vs. Catapharma ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ous result which could not have been intended by the legislature. (e) It was pointed out on behalf of the intervener M/s Adventnet Development Centre that the decision of the Chennai Bench of the Tribunal in the case of ISoft R&D (P) Ltd., proceeded on an erroneous understanding of the judgment of the Supreme Court in Nair's case. It was pointed out that in para 21 of the order, the Tribunal has stated that "for the first time the Supreme Court has held that it is possible in law to disturb the composition of export turnover and at the same time without making any such corresponding change in the total turnover. It means, the principle of parity does not apply in all cases in the light of the above judgment of the Supreme Court in the case of CIT vs. K. Ravindranathan Nair (2007) 213 CTR (SC) 227 : (2007) 295 ITR 228 (SC)". The contention of the intervener is that in Nair's case, the Supreme Court was not concerned with the composition of export turnover but was concerned with the composition of the "profits of the business". The order of the Tribunal thus proceeds on a basic error and, therefore, should not be approved. Consideration and decision: 19. We have carefully consider....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1st April, 2001, i.e., from the asst. yr. 2001-02. The Finance Act, 2000 is reported in (2000) 160 CTR (St) 58 : (2000) 243 ITR (St) 65. Sec. 10B was substantially changed by substitution. It is by this amendment that a definition of the term 'export turnover' was inserted in cl. (iii) of Expln. 2 below the section. The Circular No. 794, dt. 9th Aug., 2000, issued by the CBDT containing Explanatory Notes on the Provisions relating to Finance Act, 2000 is reproduced in (2000) 162 CTR (St) 9 : (2000) 245 ITR (St) 21. It is to be noted that the provisions of s. 10A which made special provisions in respect of newly established undertakings in free-trade zone, etc., were simultaneously amended and the section was substantially modified by the same Finance Act. The circular, in para 15 thereof explained the new provisions substituted for the existing ss. 10A and 10B. Para 15.2 says that the provisions have been substituted with a view to rationalize the concessions and to phase them out by the end of the asst. yr. 2009-10. Para 15.6 explains sub-s. (4) of s. 10B and the formula prescribed therein. The same is reproduced below: "15.6. For the computation of profits derived from the exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive effect from 1st April, 1987 defined the term 'total turnover' and stated that it shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act. The proviso to this clause, which took effect from 1st April, 1991 clarified that total turnover would also exclude the incentives referred to in the various clauses of s. 28. In Circular No. 621, dt. 19th Dec., 1991, the CBDT explained the rationale behind the insertion of the definition of 'total turnover' with retrospective effect. This is contained in paras 32.18, 32.19 and 32.20 of the circular. It would be better to reproduce these paras: "32.18 Whereas the definition of the term 'export turnover' excludes freight and insurance attributable to transport, no such exclusion has been specified in respect of the term 'total turnover'. As a result, in CIF transactions, while the export turnover is taken at FOB value, the total turnover includes the sale proceeds of exports at CIF value. 32.19 With a view to removing this anomaly, it has now been clarified that 'total turnover' will also not include such freight or insurance. 32.20 This amendm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. vs. Dy. CIT. The question before the Special Bench was whether the excise duty and sales-tax should be excluded from the total turnover "for the purpose of bringing parity between the numerator, viz., export turnover and the denominator "total turnover" in the said formula, inasmuch as export turnover does not include excise duty and the sales-tax which are not leviable on exportable goods". The contention of the Revenue before the Special Bench, which is alluded to in para 8 of the order was that "when particular items alone are excluded, the general meaning excluding only those specified enumerated receipts should be given to the term". The Special Bench proceeded to examine the general meaning of the expression 'total turnover' and apart from several authorities, reference was also made to Circular No. 621. On an examination of the relevant authorities, including Supreme Court judgments, the Special Bench held that excise duty and sales-tax constitute part of the turnover and trading receipts of the business and, therefore, the term 'total turnover' should be taken as inclusive of these levies. However, the Special Bench was unable to apply the general meaning of the term to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the formula. This would be clear from the following observations of the Court: "Further, the meaning of export turnover in cl. (b) of the Explanation to s. 80HHC therefore, clearly shows that export turnover did 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 entitled to." 22. We may now look at the judgment of the Calcutta High Court in CIT vs. Chloride India Ltd. A perusal of the observations of the Court at p. 629 of the report shows that the parity principle was accepted in that decision also: "This formula was intro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibutable to the transport of the goods beyond the customs station. In this case the following propositions were laid down by the Supreme Court: (i) While interpreting the words 'total turnover' in the formula, a schematic or purposeful interpretation to the words has to be given since the section is entirely based on the formula. (ii) The formula has to be read in entirety. (iii) The legislative changes made to the section indicate that the legislature intended to exclude certain items of receipts (like commission and interest) from the deduction as they did not possess any element of turnover, though they may have emanated from the exports. (iv) The words 'total turnover' in the formula cannot be interpreted with reference to the definition of the word 'turnover' in other laws like the Central Sales-tax Act or as defined in accounting principles. (v) Anything which does not involve "turnover" cannot be included in the expression 'total turnover'. That is why receipts such as commission, rent, interest etc., are excluded from the profits of the export. These receipts did not emanate from the export turnover, much less any turnover. (vi) Similarly excise duty and sales-tax do ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... also a component of the formula, whereas in LMW's case, the comparison was between the export turnover and the total turnover which were respectively the numerator and the denominator in the formula. This aspect which was highlighted before us by the learned representative for the interveners Max Health Scribe Ltd., and Crimson Logic India (P) Ltd. is important and has to be borne in mind while understanding the ratio of the judgment in Nair's case. According to the Supreme Court, the assessee's contention that the processing charges were includible in the profits of the business but excludible from the total turnover cannot be accepted because the processing charges which were part of the gross total income, were an independent income like rent, commission etc., and, therefore, 90 per cent of the said sum should be reduced from the gross total income to arrive at the business profits and since the processing charges were an important component of business profits, they were to be included in the total turnover in the formula prescribed to arrive at the business profits in terms of cl. (baa) of the Explanation. One other contention was raised before the Supreme Court on behalf of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of export turnover. Since the recovery of excise duty did not have the element of export turnover, it was held not includible in the total turnover in the case of LMW. It will be appreciated from these observations of the Supreme Court appearing in pp. 241 and 242 of 295 ITR, that the Court itself made a distinction between the ratio laid down in the case of LMW and that laid down in the case of Ravindranathan Nair. A receipt which does not have an element of turnover cannot find a place in the export turnover or the total turnover for applying the formula prescribed by s. 80HHC. even though it may be an income in the general sense. If it is an independent income having no nexus with the export business then such income has to be excluded also from the profits of the business to the extent of 90 per cent. Both the judgments stand independently. Whereas in the case of LMW the comparison was between export turnover and total turnover, in the case of Ravindranathan Nair the comparison was between profits of the business and total turnover. As rightly pointed out by the learned representative for the interveners Max Health Scribe Ltd., and Crimson Logic India (P) Ltd., there is an int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nover from the profits of the business if such incomes had been assessed under the head "Business". It may be recalled that the assessment year before the Supreme Court in Nair's case was 1993-94 for which year cl. (baa) of the Explanation was applicable. Since the assessee in that case did not dispute that processing charges received by him had no nexus with the export business and thus constituted independent income, 90 per cent thereof had to be statutorily excluded from the profits of the business which would not have been possible if the earlier definition of the export profits in cls. (a) and (b) of sub-s. (3) of s. 80HHC had continued. The said sub-section was simultaneously substituted by the Finance (No. 2) Act, 1991 w.e.f. 1st April, 1992. Therefore, the Supreme Court did not apply the parity principle in Nair's case between the profits of the business and the total turnover and held that though 90 per cent of the processing charges were to be reduced from the profits of the business, they cannot be excluded from the total turnover. At first reading it would certainly appear, as was contended before us by the Department, that in Nair's case the Supreme Court has given a g....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by him. Mere reimbursement of expenses cannot have an element of turnover and in this we agree with the learned representative for the assessee before us (Sak Soft Ltd.). It is only in recognition of this position that in the definition of 'export turnover' in s. 10B the aforesaid two items have been directed to be excluded. Secondly, as rightly pointed out on behalf of Adventnet Development Centre (India) by its learned representative, the definition of export turnover contemplates that the amount received by the assessee in convertible foreign exchange should represent "consideration" in respect of the export. This can only refer to the price of the computer software exported out of India. Any reimbursement of the two items of expenses mentioned in the definition can under no circumstances be considered to represent "consideration" for the export of the computer software or articles or things. Thus there is evidence inherent in the definition of 'export turnover' itself that it should represent "consideration" for export of the articles or things or computer software. It follows that the expression 'total turnover' which is not defined in s. 10B should also be interpreted in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvoice and are included in the total amount raised by the invoice. It was conceded on behalf of the assessee by its learned representative that in such a case, the AO will have the power to go behind the invoice and find out how much of the invoice amount pertains to the recovery of the aforesaid items. We are also of the view that in an appropriate case it would be open to the AO to exercise such a power in order to apply the formula in a meaningful manner. 28. Arguments were addressed by both the sides as to the advisability of incorporating the definition of 'total turnover' in ss. 80HHC, 80HHE and 80HHF into the provisions of s. 10B. Whereas the argument of the assessee and the interveners was that since all these provisions are of the same genre, the rules of interpretation require that the definitions in those sections be read into s. 10B, the objection of the Department was that the scheme of ss. 10A and 10B on the one hand and that of ss. 80HHC, 80HHE and 80HHF on the other was completely different and, therefore, it would be wrong to read into s. 10B the definition of 'total turnover' appearing in the other sections referred to above. It seems to us that the objection of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 80HHF prescribe the formula and it is contained in sub-s. (3) of these sections. The sub-section is identically worded in both sections and it is as under: "(3) For the purposes of sub-s. (1), profits derived from the business referred to in that section shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." 'Export turnover' is defined in Expln. (c) below these sections. The definition excludes freight, telecom charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. The expression 'total turnover' is defined in Expln. (e) below s. 80HHE and Expln. (e) below s. 80HHF. The definition excludes the freight, telecom charges etc., and expenses incurred in foreign exchange in providing technical services outside India. Thus statutorily parity is maintained between export turnover and total turnover in these sections. We do not see why such parity cannot be maintained between export turnover and total turnover in s. 10B just becaus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... when all the provisions referred to above Uniformly prescribe a formula in which the export turnover is the numerator and the total turnover is the denominator. Apart from this aspect, we should also bear in mind that ss. 10A, 10B, 80HHC, 80HHE, and 80HHF are all intended to give relief to the assessees in respect of profits of the exports and provide incentive to the earning of the foreign exchange. Thus they have a uniform object to serve and this is an important contextual aspect to be considered. Further, we have the advantage of the words 'total turnover' being defined in ss. 80HHC, 80HHE and 80HHF in the same manner as "export turnover" inasmuch as what has been excluded by definition from the export turnover is also excluded in the definition of the 'total turnover'. Therefore, the total turnover for the purpose of applying the formula prescribed by sub-s. (4) of s. 10B, though not defined, should be construed in the same manner in which the export turnover has been defined in that section, that is to say, by excluding the freight, telecom charges and insurance attributable to the delivery of goods outside India or expenses incurred in foreign exchange in providing technica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding the rule of casus omissus. We are faced with the situation where sub-s. (4) of s. 10B refers to 'total turnover' as part of the formula, though the same has not been defined in the section. There is thus an omission to define the words for the purpose of the section. It cannot be the contention of anybody that the words not having been defined should not be given any meaning at all obviously because the words have to be given a meaning in order to apply the formula. However, what the Department contends is that while giving a meaning to the words 'total turnover', one should not omit from their scope the two items of receipts mentioned in the definition of 'export turnover' in cl. (iii) of Expln. 2 to the section. We are not sure whether the rule of casus omissus has any role to play at all. The rule has been stated thus by the Privy Council in Hansraj Gupta vs. Dehra Dun Masoorie Electric Tramway Co. Ltd. AIR 1933 PC 63 at 65: "It is an application of the same principle that matter which should have been, but has not been provided for in a statute cannot be supplied by Courts, as to do so will be legislation and not construction". If this rule were to be applied to the presen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of these provisions namely, to provide incentive to exporters and to earn foreign exchange. The interpretation which the assessee and the interveners have canvassed before us, and accepted by us, is one which attempts to make a consistent enactment of the whole statute. The caution administered by the Department that logic cannot supply what is not supplied by law is an argument which has not been accepted by the Karnataka High Court in CIT vs. Bharat Earth Movers Ltd. while dealing with s. 80HHC. The Court had to interpret the words 'total turnover' and the precise question was whether sales-tax was includible therein when export turnover did not include sales-tax. After referring to the judgments of the Bombay, Calcutta, Madras and the Kerala High Courts on this point, and while agreeing with them the Karnataka High Court observed that: "While logic need not always be the basis for a taxing provision, it does not follow that a taxing provision logically made, should be interpreted illogically or asymmetrically, merely because it is a taxing statute. We, therefore, respectfully agree with the consistent and logical interpretation adopted by the Bombay and Calcutta High Courts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The Department however, pointed out that the Parliament could have amended s. 10B also on the same lines but did not do so. We are unable to appreciate how the omission to introduce, simultaneously, a definition of 'total turnover' in s. 10B can be made the basis of the argument that it should be interpreted as including the freight, telecom charges etc., and the expenses incurred in foreign exchange in providing the technical services outside India. On the contrary, there was always the possibility of the total turnover in s. 10B being interpreted in the manner canvassed before us on behalf of the assessee and the interveners, consistent with the definition of those words in the other sections. It was, therefore necessary, if the intention of the Parliament was otherwise, that there should have been a definition of the words 'total turnover' inserted in s. 10B which included the receipts by way of reimbursement of the freight, telecom charges or the insurance attributable to the delivery of the goods outside India or the expenses in foreign exchange in providing technical services outside India. Since it has not been done, a consistent and uniform construction of the words, havi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atter of decision by the Supreme Court. In para 23 the Tribunal observed that certain expenses incurred in foreign exchange are deducted from the export turnover by definition, the object of which "apparently" was netting in relation to the foreign exchange inflow and outflow and not because such expenses were part of the export turnover. The Bench further observed that there can be no logical reason to exclude from the total turnover what was never part of it in the first instance. The concept of net inflow of foreign exchange, with respect, seems inappropriate to the definition of 'export turnover' in s. 10B because, as pointed out on behalf of the intervener, this concept cannot in the very nature of things apply to freight, telecom charges and insurance attributable to the delivery of the goods outside India because these expenses were not required to be incurred in foreign exchange; the assessee could incur them in Indian currency in which case there is no question of net inflow of foreign exchange so far as these expenses are concerned. It cannot possibly be argued that the concept is limited to that part of the definition which requires the expenses to be incurred in foreign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on this issue. We have already referred to the order of the Bangalore Bench in the case of Tata Elxsi. In para 10 of this order it has been held as under: "10. The term 'total turnover' no doubt is not defined in s. 10A. However, the term 'total turnover' would be an enlargement of the term 'export turnover'. In other words, the sum total export turnover and domestic turnover would constitute 'total turnover'. The formula for computation of the deduction under s. 10A, when restated in the above manner, would be as under: Export turnover Profits of the business x ------------------------------------- (Export turnover + domestic turnover) The term 'export turnover' would then be a component or part of the denominator; the other component being the domestic turnover. In other words, to the extent of 'export turnover' there w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be included in the total turnover. We have also, inter alia, adopted a similar line of reasoning in the sense that mere reimbursement or recovery of such expenses can in no sense be considered to have an element of turnover. To the extent our view accords with the view taken by the Chennai Bench in para 23 of its order, the same is approved. 36. We may now refer to another order of Chennai Bench in 150ft R&D (P) Ltd. We have already expressed our view vis-a-vis this order and the manner in which the judgment of the Supreme Court in Nair's case was understood therein. With respect, it appears to us that the Bench was of the view that in Nair's case the comparison was between the export turnover and the total turnover for the purpose of s. 10A, whereas actually the comparison was between the profits of the business and the total turnover. It seems to us, again with respect, that this inaccurate appreciation of the controversy in Nair's case might have led the Bench to hold that the principle of parity has been discarded by the Supreme Court. We have, elsewhere in this order, endeavoured to show that the question of applying the principle of parity could not have arisen in Nair's ....