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2004 (3) TMI 761 - HC - Income TaxDeduction u/s 80HHC - Whether sales-tax collected by the assessee should be treated as part of total turnover for the purpose of computing profits derived from export for claiming deduction u/s 80HHC - HELD THAT - The word 'total' is affixed to the word 'turnover', not with the intention of adding sales-tax, entry tax, excise duty etc., to the 'turnover', but in contradistinction from 'export turnover'. When we keep in mind that the 'total turnover' is used in the formula to determine the percentage of export turnover so that the same percentage can be applied to the export profits, it becomes clear that both should have same components. Therefore, if sales-tax does not form part of one, it has to be excluded from the other. Any attempt by the assessee to increase the export profit, or any attempt by the Revenue to decrease the export profit, should be resisted, having regard to the clear words of Sub-section (3) and the Explanations to Section 80HHC. While logic need not always be the basis for a taxing provision, it does not follow that a taxing provision logically made, should be interpreted illogically or asymmetrically, merely because it is a taxing statute. We therefore respectfully agree with the consistent and logical interpretation adopted by the Bombay and Calcutta High Courts and reject the interpretation put forth by the Revenue. As a consequence, we find that the order of the Tribunal is in order and does not call for interference. The appeal is, therefore, rejected.
Issues Involved:
1. Whether sales-tax collected by the assessee should be treated as part of "total turnover" for the purpose of computing profits derived from export for claiming deduction u/s 80HHC of the Income-tax Act, 1961. Summary: Issue 1: Inclusion of Sales-Tax in Total Turnover for Section 80HHC Deduction The primary issue in this appeal is whether sales-tax collected by the assessee should be included in the "total turnover" for computing the profits derived from export, for claiming deduction u/s 80HHC of the Income-tax Act, 1961. The assessee, a Government Company, contends that total turnover refers to total sales turnover excluding sales-tax and excise duty, whereas the Revenue argues that total turnover should include sales-tax and excise duty, similar to the definition in sales-tax laws. Relevant Legal Provisions and Interpretations: - Section 80HHC(1) and (3)(a): These sections provide the formula for calculating profits derived from export, which involves the ratio of export turnover to total turnover. - Explanations (baa), (b), and (ba) to Section 80HHC: Define "profits of business," "export turnover," and "total turnover." Notably, "total turnover" excludes freight or insurance attributable to the transport of goods beyond the customs station. Tribunal and High Court Decisions: - The Tribunal ruled in favor of the assessee, excluding sales-tax from total turnover for calculating the deduction u/s 80HHC, following the Bombay High Court decision in CIT v. Sudarshan Chemicals Industries Ltd. - The Revenue's reliance on Supreme Court decisions in George Oakes (P) Ltd. v. State Of Madras and State of Kerala v. N. Ramaswamy Iyer and Sons was deemed inapplicable as those decisions pertained to sales-tax laws, not the Income-tax Act. Principles of Interpretation: - The Supreme Court in S. Mohan Lal v. R. Kondiah emphasized that terms in one statute should not be interpreted with reference to their use in another statute unless the statutes are in pari materia. - The term "total turnover" in Section 80HHC should be interpreted contextually, considering the definitions of "export turnover" and "total turnover" within the same section. Supporting High Court Decisions: - Bombay High Court in Sudarshan Chemicals Industries Ltd.: Held that "total turnover" should exclude sales-tax and excise duty as these do not have an element of profit. - Calcutta High Court in CIT v. Chloride India Ltd.: Reiterated that "total turnover" should include only receipts with a nexus to sale proceeds, excluding items like sales-tax and excise duty. Conclusion: The Karnataka High Court agreed with the consistent and logical interpretation of the Bombay and Calcutta High Courts, rejecting the Revenue's interpretation. The Court held that including sales-tax in total turnover, when it does not form part of export turnover, would be illogical and arbitrary. Consequently, the Tribunal's order was upheld, and the appeal by the Revenue was rejected.
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