2004 (7) TMI 691 - AT - Income Tax

Summary

Issues:
1. Inclusion of sales tax and excise duty in total turnover for computing deduction under section 80HHC.
2. Treatment of interest income and miscellaneous receipts under Explanation (baa) for computing deduction under section 80HHC.

Issue 1: Inclusion of Sales Tax and Excise Duty in Total Turnover:
The appeal involved a dispute regarding the inclusion of sales tax and excise duty in the total turnover for computing deduction under section 80HHC of the Income-tax Act. The Tribunal referenced previous cases and held that excise duty and sales tax should not form part of the total turnover. Citing precedents and decisions of High Courts, the Tribunal ruled in favor of the assessee, stating that excise duty and sales tax should not be considered in the total turnover for the purpose of computing the deduction under section 80HHC.

Issue 2: Treatment of Interest Income and Miscellaneous Receipts under Explanation (baa):
The second issue pertained to the treatment of interest income and miscellaneous receipts under Explanation (baa) for computing the deduction under section 80HHC. The Tribunal noted that the interest income earned by the assessee had an inextricable link with the export activity and should be considered for deduction. However, the Tribunal found that the lower authorities did not properly assess the direct nexus between the interest earned and the export activity. Therefore, the Tribunal directed the Assessing Officer to reevaluate the interest income in light of the decision of a Special Bench. Regarding the miscellaneous receipts, the Tribunal held that certain items, such as freight recovery and insurance claims, were excludable under Explanation (baa) as they were not directly related to the export business. The Tribunal directed the Assessing Officer to recompute the deduction under section 80HHC considering the exclusions under Explanation (baa) for the miscellaneous receipts.

In conclusion, the Tribunal ruled in favor of the assessee on the issue of including sales tax and excise duty in the total turnover. However, regarding the treatment of interest income and miscellaneous receipts under Explanation (baa), the Tribunal directed the Assessing Officer to reassess and compute the deduction under section 80HHC in accordance with the Tribunal's findings.