TaxTMI 
TaxTMI 
2014 (5) TMI 238
X X X X Extracts X X X X
X X X X Extracts X X X X
....n from the income, which is derived from the profits from export of goods, while computing taxable income. 3. For the purpose of calculating the deduction, according to the provisions of Section 80HHC of the Act, one has to take into account the profits from the business of the assessee, export turnover and total turnover. The deduction, subject to several other conditions, incorporated in the Section, is determined as under: Profits of the Business X Export Turnover Total Turnover 4. Thus, to determine the amount of deduction, the assessee and the Revenue must be aware of the following three ingredients: (i) Profits of the business (ii) Export turnover (iii) Total turnover 5. In the instant case, the issue is with regard to the term "Total turnover". 6. The assessee is a manufacturer and exporter of stainless steel utensils. In the process of manufacturing stainless steel utensils, some portion of the steel, which can not be used or reused for manufacturing utensils, remains unuse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt is incorrect because that would exclude substantial receipt of the respondent assessee from the total turnover and therefore, according to him, the appeal should be allowed and the amount deductible should be re-assessed after inclusion of the amount received from the sale of scrap into the 'total turnover'. 13. On the other hand, the learned counsel appearing for the respondent-assessee had submitted that the proceeds of sale of scrap can never be included in the 'total turnover' because the respondent-assessee is not dealing in scrap. According to him, scrap is generated in the process of manufacturing and the scrap is nothing but the raw material which could not be used in the process of manufacturing and therefore, sale proceeds of such scrap would merely bring down the cost of raw material. Thus, the sale proceeds of the scrap can either be deducted from the cost of raw material or can be shown in the profit and loss account but the said amount can never be treated as a part of 'sales' or 'turnover'. 14. The learned counsel had also relied upon the judgment delivered in the case of COMMISSIONER, INCOME TAX THIRUVANANTHAPURAM v. K RAVINDRANATHAN NAIR [(2007) 15 SCC 1],....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s approved by all accountants and auditors, the term 'sales', when reflected in the Profit and Loss Account, would indicate sale proceeds from sale of the articles or things in which the business unit is dealing. When some other things like old furniture or a capital asset, in which the business unit is not dealing are sold, the sale proceeds therefrom would not be included in 'sales' but it would be shown separately. 21. In simple words, the word "turnover" would mean only the amount of sale proceeds received in respect of the goods in which an assessee is dealing in. For example- If a manufacturer and seller of air-conditioners is asked to declare his 'turnover', the answer given by him would show the sale proceeds of air-conditioners during a particular accounting year. He would not include the amount received, if any, from the sale of scrap of metal pieces or sale proceeds of old or useless things sold during that accounting year. This clearly denotes that ordinarily a businessman by word "turnover" would mean the sale proceeds of the goods (the things in which he is dealing) sold by him. 22. So far as the scrap is concerned, the sale proceeds from the scrap may either be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the term "turnover". "5.2 In the "Guidance Note on Terms Used in Financial Statements" published by the ICAI, the expression "Sales Turnover" (Item 15.01) has been defined as under:- "The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover' and `net turnover' (or `gross sales' and `net sales') are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts". 5.3 The Guide to Company Audit issued by the ICAI in the year 1980, while discussing "sales", stated as follows: "Total turnover, that is, the aggregate amount for which sales are effected by the company, giving the amount of sales in respect of each class of goods dealt with by the company and indicating the quantities of such sales for each class separately. Note (i) The term 'turnover' would mean the total sales after deducting therefrom goods returned, price adjustments, trade discount and cancellation of bills for the period of audit, if any. Adjustments which do not relate to turnover should not be made e.g. writing off bad debts, royalty etc. Where excise duty is included ....