TaxTMI 
TaxTMI 
2001 (11) TMI 73
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....x reference., I. T. R. No. III of 1997, the Tribunal has referred the following four questions for decision of this court: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that interest received by the assessee from fixed deposit and Magnum deposit with the bank is eligible for deduction under section 80HHC? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the words 'total turnover' for section 80HHC can only have reference -to the turnover by way of sales and cannot take in its stride the gross receipts received? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of deduction under section 80HHC the turnover of the construction division should be adopted at Rs.61,26,097 being the difference between gross amount of Rs.4,65,50,906 received from the owners of the flats and the corresponding expenses thereto as against Rs.4,65,50,906 being the gross amount received and adopted in the assessment? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in workin....
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....,88,720 ------------------ Total turnover adopted by the assessee without including the amount of Rs. 4,04,24,809 being the cost of flats constructed and given to customers for the purpose of computation of eligible export profit under section 80HHC(3) of the Income-tax Act = Rs. 2,66,50,238. ------------------------------------------------------------------------------------------------------------------------------- The assessee's manner of computation for deduction of export profit under section 80HHC Export turnover = --------------------------------------- X net income from business Total turnover (excluding cost of flats) 1,87,95,309 = ---------------------------------------- X 60,46,782 = Rs. 42,64,590 2,66,20,238 ------------------------------------------------------------------------------------------------------------------------------- Accordingly, the assessee has claimed deduction under section 80HHC for an amount of Rs.42,64,590 towards eligible deduction of export profit from the sea foods export as against gross profit from sea foods business computed by the assessee at Rs.23,88,067. The Assessing Officer was of the view that the asse....
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....ing Officer also in the course of computation of adjusted total income excluded a few items of income, including interest on fixed deposits and dividend from SBI Magnum. The assessee's appeal on the computation of relief under section 80HHC was not successful before the Commissioner Of Income-tax (Appeals). However, on second appeal filed by the assessee, the Tribunal reversed the order of the Commissioner of Income-tax (Appeals) and allowed the assessee's claim. While deciding the appeal by the Department, the Tribunal held as follows: "1. The Assessing Officer's manner of working out of relief under section 80HHC is incorrect because the Assessing Officer confined his working out only to the sea foods division of the assessee on the ground that the assessee has export only in sea foods. 2. The Assessing Officer's finding that the amount received from the owners of flats on construction and sale of flats by the assessee constitutes 'total turnover' is wrong and therefore the amount received by the assessee in the form of gross income from real estate business only can be treated as turnover. This has resulted in exclusion of turnover of Rs.4,04,24,809 received by the assessee to....
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....port turnover bears to the total turnover of the business carried on by the assessee ... (4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the amount of export turnover ... Explanation.-For the purposes of this section,- (a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (b) 'export turnover' means the sale proceeds receivable by the assessee in convertible foreign exchange in accordance with clause (a) of sub-section (2) of any goods or merchandise 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); (bb) 'total turn....
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....se items from business income made by the Assessing Officer, and affirmed by the Commissioner of Income-tax (Appeals). Following our decision in I. T. R. No. 29 of 1998-CIT v. Parekh Brothers [2002] 253 ITR 43, and the decisions of this court in Collis Line's case [1982] 135 ITR 390 and Traco Cable Company's case [1969] 72 ITR 503, we answer the sole question in 1. T. A. No. 60 of 2001 and the first question in I. T. R. No. 111 of 1997 in favour of the Revenue and against the assessee. Accordingly, we reverse the order of the Tribunal in both the cases on this point. With regard to computation of eligible deduction of export profit from business, we feel that the method adopted by the Assessing Officer is not correct, because it is not strictly in conformity with sub-section (3) of section 80HHC of the Act. The assessee is only engaged in export of sea foods, and the assessee's profit in sea foods, turnover of export sales, and total turnover of sea foods division are also available on record. After all the method of computation under section 80HHC(3) is only to find out the profit attributable to export business in a case where the assessee has local as well as export business. T....
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.... as turnover. The amount involved is Rs. 4,04,24,809, which is completely excluded by the assessee while adopting "total turnover" for the purpose of computation of eligible deduction on export profit. The assessee has only taken the gross profit of the construction division as "turnover" and the same is upheld by the Tribunal. We have no doubt in our mind that the income from the construction division is not the "turnover" and, therefore, the finding of the Tribunal is patently untenable. The question to be addressed is what turnover yielded this gross profit to the assessee. In that view of the matter, we feel that the turnover to be adopted is the entire receipt from the customers for the development of the land and construction and sale of flats. The assessee has also produced an agreement before the Tribunal, and the Tribunal has referred to the clauses in the agreement, which is part of a typical land development agreement whereunder the assessee as the owner of land agrees to sell an undivided right in the land and by separate agreement undertakes to construct and deliver the flats to the customers. The Assessing Officer and the Commissioner of Income-tax (Appeals) found, an....
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....he section is not helpful. Therefore, the reference to "turnover" as defined in the KGST Act pursuant to the Constitution (46th Amendment) Act has significance. The turnover on works contract defined in Explanation I(A)(i) to section 2(xxvii) is as follows : "turnover in respect of works contract shall be the aggregate amounts received or receivable by the dealer for the transfer of goods (whether as goods or in some other form) involved in the execution of such contract." Therefore, we are of the view that the Tribunal committed an error of law in holding that the total turnover for the purpose of computation of eligible deduction under section 80HHC(3) does not include the cost of flats constructed by the assessee. Accordingly, we reverse the order of the Tribunal. However, this does not mean that the computation as done by the Assessing Officer and as affirmed by the Commissioner of Income-tax (Appeals) is to be upheld as such. As already mentioned, the formula adopted by the Assessing Officer and confirmed in the first appeal is not strictly in conformity with the formula provided under section 80HHC of the Act. Therefore, we reverse the order of the Tribunal and that of the....