2007 (8) TMI 308 - HC - Income Tax

Whether the Tribunal was right in holding that excise duty and sales tax do not form part of the total turnover for the purpose of calculation of deduction under section 80HHC Held yes - Whether the Tribunal was right in remanding the issue as to whether the scrap sale receipt should form part of the total turnover to the assessing officer Held yes tribunal has power to remand the case

Summary

Issues:
1. Inclusion of excise duty and sales tax in turnover for deduction under section 80HHC.
2. Remand of scrap sale receipt issue for determining inclusion in total turnover.

Analysis:

Issue 1:
The appeal pertains to the assessment year 1993-94 under the Income Tax Act, 1961, where the assessing officer included excise duty, sales tax, and scrap sales receipts in the total turnover for calculating the deduction under section 80HHC. The Commissioner of Income Tax (Appeals) upheld this assessment, but the Income Tax Appellate Tribunal allowed the appeal. The main contention was whether excise duty and sales tax should be considered part of the turnover for section 80HHC deduction. The court referred to the decision in CIT v. Lakshmi Machine Works (2007) 290 ITR 667, emphasizing that section 80HHC aims to promote exports by exempting profits related to exports. The court held that excise duty and sales tax, similar to commission and interest, do not form part of turnover as they do not emanate from the turnover. Therefore, excise duty and sales tax should not be included in the total turnover for section 80HHC calculation. The court's decision favored the assessee based on this interpretation.

Issue 2:
Regarding the remand of the scrap sale receipt issue, the court noted that the Tribunal remitted the matter to the assessing officer due to a lack of factual clarity on whether the scrap sales should be included in the total turnover for section 80HHC deduction. The Tribunal directed the assessing officer to determine if the scrap sales were derived from the exported products. The court found this remand appropriate as it was necessary to establish the source of the scrap sold during the assessment year to decide its inclusion in the total turnover accurately. The court supported the Tribunal's decision to remand the issue for further examination by the assessing officer to ensure compliance with relevant provisions and precedents. Consequently, the court dismissed the appeal, upholding the Tribunal's decision to remand the scrap sale receipt issue for detailed scrutiny.

In conclusion, the court's judgment clarified the exclusion of excise duty and sales tax from the total turnover for section 80HHC deduction and supported the remand of the scrap sale receipt issue for thorough assessment by the assessing officer.