AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (3) TMI 468
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....n 80HHC ? 4. Having heard Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue, it appears that the aforesaid substantial question of law framed is now not res integra and the aforesaid substantial question of law is held against the Revenue by the Hon'ble Supreme Court in the case of CIT v. Lakshmi Machine Works 290 ITR 667 [paras 16 to 18] and the decision of the Hon'ble Supreme Court in the case of CIT v. Shiva Tex Yarn Ltd. [2012] 25 taxmann.Com 302 (SC). 5. It is required to be noted that initially Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue tried to distinguish the aforesaid two decisions by submitting that in the said decisions section 145A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") has not been considered and dealt with. However, considering the fact that as such there is no amendment in section 80HHC of the Act and considering the observations made by the Hon'ble Supreme Court in paras 16 to 18 in the case of Lakshmi Machine Works (supra), Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue is not in a position to satisfy the Court as to how the decisions of the Hon'ble Supreme....
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....on etc. which did not have the element of turnover got included in the profit and loss account and consequently became entitled to deduction. This was clarified by the above amendment to Section 80HHC commencing from 1.4.92. The said amendment made it clear that though commission and interest emanated from exports, they did not involve any element of turnover and merely for the reason that commission, interest, rent etc. were included in the profit and loss account, they did not become eligible to deduction. We have to give purposeful interpretation to the above section. The said section is entirely based on the formula. The amendments from time to time indicate that they became necessary in order to make the formula workable. Hence, we have to give schematic interpretation to Section 80HHC of the Act. 17.Shri P.P. Malhotra, leaned senior counsel appearing for the Department (appellant), submitted that one has to give plain and unambiguous meaning to the word "turnover" in the above formula; that there was no need to call for any rule of interpretation or external aid to interpret the said word; that having regard to the plain words of the section, excise ....
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.... strict interpretation to the word "turnover". It was urged that there was no question of giving purposeful interpretation to the word "turnover" in the said Section 80HHC of the Act. It was urged that the legislature had used the expression "total turnover" from which it became clear that the said expression referred to the aggregate amount for which the goods were sold and since the above two items formed part of the value of the goods, they were includible in the "total turnover". Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that excise duty was the liability of the assessee to the Government and, therefore, it was not includible in the total turnover. Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that the components of "export turnover" and "total turnover" should be the same in the above formula. Learned counsel submitted that the formula would become unworkable if the components in the "export turnover" and the components in the "total turnover" are the same. Learned counsel submitted that there was no merit in the argument advanced on behalf of the assessee that excise ....
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....e to read the words "total turnover" in Section 80HHC as part of the formula which sought to segregate the "export profits" from the "business profits". Therefore, we have to read the formula in entirety. In that formula the entire business profits is not given deduction. It is the business profit which is proportionately reduced by the above fraction/ratio of export turnover w total turnover which constitute 80HHC concession (deduction). Income in the nature of "business profits" was, therefore, apportioned. The above formula fixed a ratio in which "business profits" under Section 28 of the Act had to be apportioned. Therefore, one has to give weightage not only to the words "total turnover" but also to the words "export turnover", "total export turnover" and "business profits". That is the reason why we have quoted hereinabove extensively the illustration from the Direct Taxes (Income tax) Ready Reckoner of the relevant word. In the circumstances, we cannot interpret the words "total turnover" in the above formula with reference to the definition of the word "turnover" in other laws like Central Sales Tax or as defined in accounting principles. Goods for export do not incur excis....
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.... assessee was an exclusive dealer in exports, the said commission was not includible as it did not spring from the "turnover". Just as interest, commission etc. did not emanate from the "turnover", so also excise duty and sales tax did not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent etc. do yield profits, but they do not partake of the character of turnover and, therefore, they were not includible in the "total turnover". The above discussion shows that income from rent, commission etc. cannot be considered as part of business profits and, therefore, they cannot be held as part of the turnover also. In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the A.O. [See: page no.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the "total turnover" under Section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise dut....