TaxTMI 
TaxTMI 
2014 (3) TMI 934
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....tation of deduction u/s. 80HHC?" [2.0] Having heard Shri Manish R. Bhatt, learned counsel appearing on behalf of the Revenue and Shri S.N. Soparkar, learned counsel appearing on behalf of the respective assessees, 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 Commissioner of IncomeTax vs. Lakshmi Machine Works reported in 290 ITR 667 [paras 16 to 18] and the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Shiva Tex Yarn Ltd. reported in (2012) 25 Taxmann.Com 302 (SC). [2.1] It is required to be noted that initially Shri 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 Mac....
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.... 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 duty and sales tax ought to have been included in the "total turnover". Learned counsel submitted that the word "turnover" even in the ordinary sense would include the above two items. Learned counsel urged that the formula should be read strictly. In this connection, he pointed out that the legislature had expressly excluded items of freight and insurance and ....
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....s 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 duty and sales tax did not form part of trading receipts. Learned counsel submitted that there was no merit in the contention of the assessee that the expression "business profits" in Section 80HHC did not include receipts which did not emanate for exports and, therefore, such receipts did not constitute an element of turnover. 18. We do not find any merit ....
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....ute 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 excise duty liability. As stated above, even commission and interest formed a part of the profit and loss account, however, they were not eligible for deduction under Section 80HHC. They were not eligible even without the clarification introduced by the legislature by various amendments because they did not involve any element of turnover. Further, in all other provisions of the income tax, profits and gains we....