2002 (7) TMI 722 - AT - Income Tax

Summary

Issues Involved:
1. Exclusion of excise duty and sales tax from total turnover for Section 80HHC deduction computation.

Detailed Analysis:

Issue 1: Exclusion of Excise Duty and Sales Tax from Total Turnover for Section 80HHC Deduction Computation

Background:
The primary issue before the Special Bench was to determine whether, for the purpose of computing the deduction under Section 80HHC, excise duty and sales tax should be excluded from the "total turnover" to bring parity between "export turnover" and "total turnover."

Assessee's Position:
The assessee, a public limited company engaged in various businesses including export of marine food, claimed that excise duty and sales tax should be excluded from the total turnover. This was based on the argument that these taxes are not included in the export turnover, and thus, for parity, should also be excluded from the total turnover.

Assessing Officer's Position:
The Assessing Officer rejected the assessee's claim, citing that the definition of "total turnover" in the Act does not exclude excise duty and sales tax. The officer relied on the Supreme Court decision in Chowringhee Sales Bureau P. Ltd. v. CIT, which held that excise duty and sales tax form part of turnover.

Tribunal's Analysis:
The Tribunal examined various judicial interpretations and statutory definitions. It noted that while "export turnover" is defined to exclude freight and insurance, "total turnover" is not explicitly defined to exclude excise duty and sales tax. The Tribunal referred to multiple dictionary definitions and judicial interpretations to conclude that in general commercial parlance, turnover includes excise duty and sales tax.

Relevant Judicial Precedents:
1. Chowringhee Sales Bureau P. Ltd. v. CIT: Held that sales tax collected forms part of trading or business receipts.
2. Sinclair Murray and Co. P. Ltd. v. CIT: Reiterated that sales tax collected by a trader is included in the total income.
3. George Oakes (Private) Ltd. v. State of Madras: Held that the aggregate amount for which goods are sold includes tax as part of the price paid by the buyer.
4. McDowell and Co. Ltd. v. CTO: Initially held that excise duty paid directly by buyers to excise authorities should not be included in turnover, but later reversed to include it in turnover.

High Court Decisions:
1. CIT v. Sudarshan Chemicals Industries Ltd. (Bombay High Court): Held that excise duty and sales tax should be excluded from total turnover for Section 80HHC purposes.
2. CIT v. Chloride India Ltd. (Calcutta High Court): Similar to the Bombay High Court, held that excise duty and sales tax should not be included in total turnover.

Tribunal's Conclusion:
The Tribunal concluded that although "total turnover" generally includes excise duty and sales tax, for the specific purpose of computing export profits under Section 80HHC, these should be excluded. This is because excise duty and sales tax do not have an element of profit and including them would distort the computation of export profits.

Directive:
The Assessing Officer was directed to compute the deduction under Section 80HHC by excluding excise duty and sales tax from the total turnover.

Summary:
The Tribunal held that for the purpose of computing the deduction under Section 80HHC, excise duty and sales tax should be excluded from the "total turnover" to ensure parity with "export turnover," which does not include these taxes. This decision aligns with the principles that only the portion of receipts that includes an element of profit should be considered in the total turnover for Section 80HHC computations.