1982 (4) TMI 19 - HC - Income Tax

Summary

Issues:
Calculation of qualifying income for relief under the Finance Act, 1963 based on export profits and total turnover deduction of excise duty.

Analysis:
The judgment pertains to a reference under section 256(1) of the Income Tax Act, 1961 concerning the assessment year 1963-64. The case involves the calculation of qualifying income for relief under the Finance Act, 1963, in relation to export profits and total turnover deduction of excise duty. The assessee, engaged in the business of processing crude oil into petroleum products, claimed a rebate based on export sales. The dispute arose when the assessee sought to deduct excise duty from the total turnover to calculate qualifying income for the rebate. The Income Tax Officer (ITO) rejected this approach, leading to appeals and ultimately a reference to the High Court.

The key issue revolved around whether the excise duty paid by the assessee should be deducted from the total turnover to determine the qualifying income for relief under the Finance Act, 1963. The assessee argued that since excise duty did not contribute to the assessee's revenue and was paid to the government, it should be excluded from the total turnover. However, the Tribunal rejected this argument, emphasizing that various elements contribute to total turnover, including excise duty, which is inherently part of the sale price. The Tribunal's decision was based on the understanding that excise duty, though not directly adding to the assessee's income, forms an integral part of the sale price and, therefore, should not be selectively deducted from the total turnover.

The High Court upheld the Tribunal's decision, ruling against the assessee's contention. The Court emphasized that excise duty, being part of the sale price, naturally contributes to the total turnover and cannot be isolated for deduction purposes. Citing the Supreme Court's observations in a relevant case, the Court reiterated that excise duty, though not directly adding to the dealer's coffers, forms a component of the consideration paid by the purchaser and is, therefore, integral to the sale price. Consequently, the Court concluded that the excise duty paid by the assessee should not be deducted from the total turnover to calculate the qualifying income for relief under the Finance Act, 1963.

In conclusion, the High Court answered the referred question in the negative, ruling against the assessee. The Court directed the assessee to bear the costs of the reference. The judgment provides clarity on the treatment of excise duty in calculating qualifying income for relief under the Finance Act, 1963, emphasizing that excise duty forms part of the sale price and, therefore, should not be selectively deducted from the total turnover for rebate calculations.