TaxTMI 
TaxTMI 
2002 (7) TMI 222
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....le on exportable goods ?" Though a reference to clause (a) of sub-section (3) of section 80HHC is made in the question which is applicable where the export out of India is of goods and merchandise manufactured or processed by the assessee, the real controversy in this case arises under clause (c) of section 80HHC(3) which applies where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods because in assessee's case the export is both of manufactured and trading goods. Secondly, the question of exclusion of octroi from the figure of total turnover is not in issue in this appeal. We, therefore, reframe the question as under: "Whether, for the purposes of computation of the amount of deduction under section 80HHC by applying the formula as provided in sub clause (i) of clause (c) of sub-section (3) of the said section, it is necessary to exclude the amounts of excise duty and sales-tax from the figure of "total turnover" of the business of the assessee for the purpose of bringing in parity between the numerator viz. 'export turnover' and the denominator 'total turnover' in the said formula, ina....
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....ision of the Supreme Court in the case of Chowringhee Sales Bureau, Excise duty and sales-tax forms part of turnover. In view of the aforesaid fact, claim of the assessee for deduction under section 80HHC at Rs. 1,70,56,997 is rejected. Deduction under section 80HHC is worked out at Rs. 1,05,12,956 as discussed above." 4. The CIT (Appeals) agreed with the Assessing Officer and rejected the assessee's claim to for reduction of excise duty and sales tax from the total turnover shown in P & L Account. 5. We have heard the learned counsel of the assessee Shri Rahul Mitra and the learned Departmental Representatives Ms. Banani Ghosh, CIT, DR and Shri D.K. Ghosh, Sr. DR, considered the rival submissions and gone through the record and various judgments cited at the Bar. 6. Section 80HHC provides for incentives for exports by granting deduction of the export profit earned by the assessee. It reads as under: "80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) 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....
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....il; and (ii) minerals and ores (other than processed minerals and ores specified in the Twelfth Schedule). Explanation 1. The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Explanation 2. For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof. (3) For the purposes of sub-section (1) (a) where the export out of India is of goods or ....
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....ods; (e) "indirect cost" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover; (f) "trading goods" means goods which are not manufactured or processed by the assessee. (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be, (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the business; (b) in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise to one or more Export House or Trading Houses, the amount which bears to the profits of the business the same proportion as the turnover in respect of sale to the respective Export House or Trading House 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 in....
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....se 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 1-4-1991, 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; (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by (1) 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; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India; (c) "Export House Certificate" or "Trading House Certificate" means a valid Export House Certificate or Trading House Certificate, as the case may be, issued by the Chief Controller of Imports and Exports, Government of India; (d) "supporting manufacturer" means a person being an Indian company or a person (other than a ....
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.... assessee in convertible foreign exchange on the export of goods outside India but does not include freight or insurance attributable to the transport of goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (hereinafter referred to as "Customs Act"). Under Explanation (ba) "total turnover" is defined not to include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962. The expression "total turnover" also excluded any sum of export incentives referred to in clauses (iiia), (iiib) and (iiic) of section 28. It is thus evident that though 'export turnover' is stated to be the sales proceeds received in convertible foreign exchange without inclusion of freight and insurance, 'total turnover' is not given any meaning but negatively stated to be not including freight and insurance and also receipts of export benefits. The Legislature while specifically excluding freight or insurance attributable to foreign transport of goods did not consciously exclude excise duty and sales tax received by the assessee from the customers. In other words, the total turnove....
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....held to form part of its trading or business receipts." 11. In Sinclair Murray & Co. (P.) Ltd. v. CIT[1974] 97 ITR 615 (SC) again the dispute was that the sales-tax collected by a trader was liable to be included in the total income of the assessee and it was held that the matter stood concluded by the decision in the case of Chowringhee Sales Bureau (P.) Ltd. A reference to the Constitution Bench of the Supreme Court in the case of George Oakes (P.) Ltd. v. State of Madras AIR 1962 SC 1037 was made wherein the vires of the Madras General (Definition of Turnover and Validation of Assessment) Act, 1954 was upheld and in this context the Supreme Court held in that case that when the seller passed on the tax and the buyer agrees to pay sales-tax in addition to the price, the tax is really part of the entire consideration and the distinction between two amounts - tax and price - loses all significance. The aforesaid proposition of law was taken after relying upon observation of King's Bench decision in the case of Paprika Ltd. v. Board of Trade [1944] 1 All E.R. 372, 374,- "wherever a sale attracts purchase tax, that tax presumably affects the price which the seller who....
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....s no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover." 13. In the case of McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), the dispute was whether sales-tax was payable by the assessee Andhra Pradesh General Sales-tax Act, 1957 on the basis of its turnover which excluded excise duty which was leviable on the manufacture of liquor and the manufacturer could not remove the same from the distillery unless the duty imposed under the Excise Duty Act has been paid. In that case, buyers of Indian liquor from assessee's distillery obtained distillery passes for release of liquor after making payment of excise duty and presenting the same at distillery whereupon the bill of sale or invoice was prepared by the distillery showing the price of liquor but excluding excise duty. The matter reached up to the Supreme Court and the Supreme Court in its earlier decision in McDowell & Co. Lid v. CTO [1977] 1 SCR 914 took the view that the intending purchaser of the Indian liquor, seek to obtain distillery passes were also responsible for payment of excise duty which was collected from them b....
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.... duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the 'sale price' because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill." 14. It is also expressed by the CBDT that the 'export turnover' is to be taken at its FOB as against 'total turnover' at CIF value while explaining the scope of the two terms in para 32.18 of its Circular No. 621 dated 19-12-1991 as under: "32.18. Whereas the definition of the term "export turnover" excludes freight and insurance attributable to tran....
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....iscal legislation in countries like England, America as well as India has to be held to include the taxes levied also. The reason for such inclusion is stated to be that the dealer who realised the tax does not hand it over forthwith to Government but keeps it with him and turns it over in his business before he parts with it. Thus the tax becomes, for the time being, an integral part of the circulating capital of the tradesman and his turnover in his hands. Therefore, in calculating the total turnover, taxes like sales tax and excise duty are treated as part of the turnover because "turnover" means the amount of money which is turned over in the business. 17. The two terms, namely, "export turnover" and "total turnover" should unless a contra intention appears be given their natural and general meaning as understood in commercial laws as interpreted by the judicial decisions and not the restricted meaning as claimed by the assessee on the ground that one has a particular kind of receipt and therefore the other should also be of similar nature or specie. The contention of the assessee that like should be compared with the like may give absurd results and it could never be applie....
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....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 find any merit in these appeals." 20. The aforesaid decisions of Bombay High Court had made no reference or discussion of the three Supreme Court decisions namely Chowringhee Sales Bureau (P.) Ltd.'s case, George Oakes (P.) Ltd.'s case and McDowell & Co. Ltd.'s case referred to above and the other decision of the Supreme Court in the case of Sinclair Murray & Co. (P.) Ltd. However, we find that the Calcutta High Court has considered one of these decisions namely; McDowell & Co. Ltd.'s case and distinguished the same by stating that the decision was rendered under the Sales-tax Act whereunder the definition given for turnover in section 2(s) of the Sales-tax Act included "the total amount set out in the bill of sale (or if there is bill of sale the total amount charged) as the consideration for the sale of or purchase of goods (whether such consideration be cash, deferred p....
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....tax, octroi and excise duties are levied under the separate enactments which have different objects and as such the general definition of the word 'turnover' or the case law dealing with the said definition under the Sales-tax Act can in no way be imported into section 80HHC of the Income-tax Act with which we are presently concerned. 23. It may be noted here that Calcutta High Court considered the McDowell& Co. Ltd.'s case decision of the Supreme Court only and not the other three decisions of the Supreme Court two of which are under the Income-tax Act and the distinction drawn for McDowell & Co. Ltd.'s case a case under the Sales-tax Act may not hold good for these two cases. In the cases of Chowringhee Sales Bureau (P.) Ltd. and Sinclair Murray & Co. (P.) Ltd., the issue was whether the receipt of sales tax was a trading receipt and not whether they form part of turnover or total turnover. The decision of George Oakes (P.) Ltd.'s case is also for sales-tax levy and as stated above the turnover there includes the total amount set out in the bill and collected by an assessee because of a specific definition given under the sales-tax law, the distinction draw....