TaxTMI 
TaxTMI 
2003 (3) TMI 66
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....r of spices in South India. In the assessment under the Income-tax Act, 1961 (for short "the Act"), for the years 1989-90 and 1991-92, the assessee claimed deduction under section 80HHC of the Act in respect of interest received on fixed deposits. The assessee had also excluded the agency despatches from the total turnover for the computation of the deduction under section 80HHC. Both the claims were rejected by the Assessing Officer. The assessments were completed treating the interest on fixed deposit as income under other sources. The Assessing Officer also included the agency despatches in the "total turnover" relying on the decision of the Supreme Court in Cardamom Planters Association v. Deputy CST (Law), Board of Revenue (Taxes) [1989] 75 STC 118. In appeal by the assessee the Commissioner of Income-tax (Appeals) allowed both the claims. The Tribunal dismissed the appeal filed by the Revenue and confirmed the order of the first appellate authority on these issues. Hence, these appeals by the Revenue. The Revenue has raised the following questions of law on which notices were issued in both the appeals. "1. Whether, on the facts and in the circumstances of the case, the....
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....he view of the first appellate authority. The question as to whether interest income from bank deposits would constitute "business income" for the purpose of computation of the deduction under section 80HHC came up for consideration before this court in CIT v. Jose Thomas [2002] 253 ITR 553. The Division Bench, relying on its earlier decision in CIT v. Parekh Brothers [2002] 253 ITR 43, and other decisions of this court in Traco Cable Company Ltd. v. CIT [1969] 72 ITR 503 and Collis Line (P.) Ltd. v. ITO [1982] 135 ITR 390 held that interest income on bank deposits is only income from "other sources" and does not constitute business income for the purpose of computation of relief under section 80HHC of the Act. The decision of this court in CIT v. Parekh Brothers [2002] 253 ITR 43 relied on by the Division Bench in lose Thomas' case [2002] 253 ITR 553 (Ker) appears to be a mistake. Probably the Division Bench had in mind their decision in Abad Enterprises v. CIT [2002] 253 ITR 319 where the Division Bench held in the context of prima facie adjustment under section 143(1)(a) of the Act, relying on the decision of this court in CIT v. Cochin Refineries Ltd. [1982] 135 ITR 278, tha....
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....e excluded. The contention of learned counsel for the assessee is that the expression "total turnover" of the business carried on by the assessee used in section 80HHC(3)(b) in the absence of any definition of "turnover" must be confined to the turnover of the product which the assessee was exporting and that at any rate, only the turnover of own goods can be included in the total turnover. Section 80HHC of the Act for and from the assessment year 1989-90 provided for deduction in respect of the profit derived by the eligible assessee from the export of eligible goods or merchandise. In a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which the provisions of section 80HHC apply, the profits derived from the export of goods or merchandise for the purposes of the deduction shall be the profits of the business as computed under the head "Profits and gains of business or profession". In a case where the business carried on by the assessee does not consist exclusively of the export out of India of the goods or merchandise to which the provisions of this section apply, the profits derived from the expor....
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.... to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962); (ba) 'total turnover' 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, 1962 (52 of 1962): Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression 'total turnover' shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28." The word "turnover" is not defined in the Act though total turnover is defined. The definition of total turnover does not state what are all the items that will form part of the total turnover; Explanation (bb) added with effect from April 1, 1991, and later omitted with effect from the said date specifically excluded certain receipts specified in clauses (iiia), (iiib) and (iiic) of section 28. Clause (ba) of the Explanation to section 80HHC only says that the total turnover shall not include freig....
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....e Societies Registration Act, 1860, sold the produce of its members who were cardamom growers, under a statutory licence under which it could not charge more than one per cent. of the sale price as commission. Though the appellant had not claimed for purposes of the primary sales tax, that the turnover of the goods dealt with by it on behalf of the principals should be dissected and tax imposed or the basis of the liability of the principal, for the purpose of the surcharge under the Kerala Surcharge on Taxes Act, 1957, it made such a claim, The Supreme Court held that the appellant was clearly a "dealer" within the meaning of the statute, particularly in view of the inclusive definition of dealer in section 2(viii) of the K.G.S.T. Act and the appellant's taxable turnover has to be determined by taking the aggregate price of all the goods sold by it. The Supreme Court further observed that the provisions of the K.G.S.T. Act and the Kerala Surcharge on Taxes Act clearly treat a commission agent as a dealer and make him liable to sales tax as well as surcharge in respect of the entire turnover and that they do not contemplate dissection of his turnover into transactions on behalf of ....
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....on (1) clearly provides that where an assessee, being an Indian company or a person resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise. Thus in the case of a person who satisfies tie conditions of section 80HHC(1) what is required to get the relief under this section is to ascertain the profit derived by the assessee from the export of the goods or merchandise specified in the section. The computation of the profit of the export business is provided in sub-section (3). In a case where the provisions of clause (a) of sub-section (3) apply there is no difficulty in the computation. However, in a case where clause (b) of sub-section (3) applies the formula of Profits of the business ------------------....
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.... where it is clearly stated that the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by ninety per cent. of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits. The scope and effect of all the amendments have been elaborated in Circular No. 621 dated December 19, 1991. Paras 32.10 and 32.11 of the said circular read thus: "32.10. The existing formula often gives a distorted figure of export profits when receipts like interest, commission, etc., which do not have element of turnover are included in the profit and loss account. 32.11. It has, therefore, been clarified that 'profits of the business' for the purpose of section 80HHC will not include receipts by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature. As some expenditure might be incurred in earning these incomes, which in the generality of cases is part of common expenses, ad hoc 10 per cent. deduction from such incomes is provided to account for these exp....
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....e meaning of export turnover in clause (b) of the Explanation to section 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." The court further observed as follows: "We prefer this interpretation as it advances the object sought to be achieved by the Legislature. Lastly, we are of the view that sales tax and excise duties are levied under the separate enactments which have different objects. We are concerned with section 80HHC which is a separate code by itself. Hence, the general definition of the word turnover or the case law dealing with the said definition under the Sales Tax Act which is a State levy, cannot be imported into section 80HHC of the Income-tax Act. Hence, we do not fin....
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....r cycles, spare parts thereof and television sets. The contention of the assessee was that the "total turnover" must be confined to the turnover of the product which the assessee was exporting. This was accepted by the Tribunal. The Madras High Court held that the business contemplated in the section would be restricted only to the goods to which the section applies and, therefore, by necessary implication even the total turnover of the business would be the total turnover of the business of the goods to which the section applies. If one includes the turnover of the goods to which the section does not apply, according to the High Court, it would amount to doing violence to the language of the sub-section itself. It is observed that the sub-section has been created only to see the ratio of the income out of the export to the total income out of the business in respect of those goods because of the obvious difficulty of segregating the profits earned out of export alone vis-a-vis the profits earned otherwise than by export. We are of the view that it is unnecessary for us to deliberate much on this issue so far as this case is concerned. There is no dispute that so far as agency t....