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2014 (3) TMI 934 - HC - Income TaxComputation of deduction 80HHC of the Act Exclusion of Excises duty - Whether the Tribunal is right in holding that excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC of the Act Held that - The decision in Commissioner of Income-Tax Versus Lakshmi Machine Works 2007 (4) TMI 202 - SUPREME Court followed - The tax under the Act is upon income, profits and gains. It is not a tax on gross receipts - Under Section 2(24) of the Act the word income includes profits and gains - The charge is not on gross receipts but on profits and gains - Where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed - Profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act. Sales tax and excise duty also do not have any element of turnover which is the position even in the case of rent, commission, interest etc. - excise duty and sales tax are indirect taxes - They are recovered by the assessee on behalf of the Government - if they are made relatable to exports, the formula under Section 80HHC would become unworkable thus, the Tribunal has not committed any error in holding that the excise duty is excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC Decided against Revenue.
Issues Involved:
1. Whether the Appellate Tribunal is right in law and on facts in holding that excise duty is to be excluded for the purpose of computation of deduction under Section 80HHC of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Exclusion of Excise Duty for Computation of Deduction under Section 80HHC [1.0] The judgment addresses a common substantial question of law across multiple tax appeals, focusing on whether excise duty should be excluded from the computation of deduction under Section 80HHC of the Income Tax Act, 1961. [2.0] The court considered arguments from both the Revenue and the respective assessees. The substantial question of law has been previously settled by the Supreme Court in "Commissioner of Income Tax vs. Lakshmi Machine Works" and "Commissioner of Income Tax vs. Shiva Tex Yarn Ltd." The Supreme Court held against the Revenue in these cases, establishing that excise duty should be excluded from the total turnover for the purpose of Section 80HHC deductions. [2.1] The Revenue's counsel attempted to distinguish these decisions by arguing that Section 145A of the Act had not been considered in those cases. However, the court noted that there was no amendment in Section 80HHC and that the Supreme Court's observations in the Lakshmi Machine Works case remained applicable. [3.0] The court reiterated that the substantial question of law is no longer res integra, meaning it has been definitively settled by the Supreme Court. The Supreme Court's interpretation in Lakshmi Machine Works emphasized that excise duty and sales tax do not form part of "total turnover" because they do not involve any element of turnover and are merely indirect taxes recovered on behalf of the government. [4.0] Applying the Supreme Court's ratio decidendi (reasoning for the decision) to the present cases, the court held that the Tribunal had not erred in excluding excise duty from the computation of deduction under Section 80HHC. The court emphasized that including excise duty and sales tax in the total turnover would render the formula under Section 80HHC unworkable. [5.0] Consequently, all the tax appeals were dismissed, affirming that the Tribunal's decision to exclude excise duty for the purpose of Section 80HHC deduction was correct. The appeals were dismissed with no order as to costs.
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