2011 (6) TMI 156 - HC - Income Tax

Benefit u/s 80HHC of the Act - As per the decision of the Supreme Court in the case of CIT Vs. Lakshmi Machine Works, (2007 -TMI - 6557 - SUPREME Court),the appeal is decided in favour of assessee - Held that - The Tribunal was right in law and on facts in directing the Assessing Officer to exclude the sums relatable to Sales Tax and Excise duty as they do not form part of the total turnover for the purposes of computing profits derived from export, for claiming benefit under section 80HHC of the Act.

Summary

Issues:
Challenge to order under section 260A of the Income Tax Act 1961 regarding exclusion of sums related to Sales Tax and Excise duty from total turnover for claiming benefit under section 80HHC.

Analysis:

1. Challenge to Tribunal Order:
The appellant-revenue challenged the order made by the Income Tax Appellate Tribunal, Ahmedabad Bench 'D' regarding the exclusion of sums related to Sales Tax and Excise duty from the total turnover for claiming benefits under section 80HHC of the Income Tax Act 1961 for the assessment year 1997-98.

2. Substantial Question of Law:
The Court admitted the appeal and formulated the substantial question of law as to whether the ITAT was correct in directing the Assessing Officer to exclude the sums related to Sales Tax and Excise duty as they do not form part of the total turnover for the purpose of computing profits derived from export for claiming benefits under section 80HHC of the Act.

3. Precedent and Conclusion:
The respondent-assessee cited a decision by a Division Bench of the High Court in a previous case, which concluded that the controversy involved in the present case was in favor of the assessee. The Court referred to a decision by the Supreme Court in the case of CIT Vs. Lakshmi Machine Works, emphasizing that certain items like commission, interest, excise duty, and sales tax do not form part of the turnover for the purpose of calculating profits derived from export under section 80HHC of the Act.

4. Judicial Interpretation:
The Supreme Court's decision highlighted that the legislative intent behind section 80HHC was to provide incentives to promote exports by exempting profits related to exports. It clarified that items like commission, interest, excise duty, and sales tax, while yielding profits, do not involve turnover and should be excluded from the formula for calculating export profits. The Court emphasized that even if an assessee exclusively deals in exports, certain items like commission and taxes should not be included in the total turnover for the purpose of claiming benefits under section 80HHC.

5. Final Decision:
Based on the cited Supreme Court decision and the precedent set by the High Court, the Court concluded that the controversy in the present case was settled in favor of the assessee. Therefore, the Tribunal was correct in directing the Assessing Officer to exclude the sums related to Sales Tax and Excise duty as they do not form part of the total turnover for computing profits derived from export under section 80HHC of the Income Tax Act 1961. The appeal was dismissed with no order as to costs.