2016 (9) TMI 61 - HC - Income Tax

Computation of total turnover for the purposes of reduction u/s 80HHC - whether will not include Sales Tax and Excise Duty even after insertion of Section 145A? - Held that - Applying the ratio of law laid down by the Honble Supreme Court in the case of Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court ) to the facts of the cases on hand, the question raised is held against the Revenue and it is held that the learned Tribunal has not committed any error in holding that the excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC. - Decided in favour of the assessee. Also see Commissioner of Income Tax Versus Pogagen Amp Nagarsheth Powertronics Ltd. 2014 (3) TMI 934 - GUJARAT HIGH COURT

Summary

Issues:
1. Interpretation of Section 80HHC for deduction calculation.
2. Inclusion of sales tax and excise duty in total turnover.

Analysis:
1. The case involved a dispute regarding the interpretation of Section 80HHC for calculating deductions. The appellant, the revenue, challenged the order of the Income Tax Appellate Tribunal, Ahmedabad Bench, which had excluded sales tax and excise duty from the total turnover for the purpose of deduction under Section 80HHC. The substantial question of law raised was whether these items should be included in the turnover post the insertion of Section 145A.

2. The assessing officer initially calculated the turnover by including sales tax and excise duty, resulting in a higher total turnover. However, the CIT (Appeals) directed the exclusion of these amounts from the turnover. On appeal before the Tribunal, the decision was upheld, leading to the revenue filing the present Tax Appeal challenging the exclusion of sales tax and excise duty from the total turnover.

3. The advocate for the revenue argued that sales tax and excise duty, being trading receipts, should be included in the turnover. The court referred to a previous decision where it was held that excise duty should be excluded for the purpose of deduction under Section 80HHC. The court agreed with this precedent and upheld the exclusion of sales tax and excise duty from the total turnover, as they lacked an element of profit.

4. Ultimately, the court ruled in favor of the assessee, dismissing the appeal by answering the raised question against the revenue and in favor of the assessee. The decision was based on the interpretation of relevant laws and previous judgments, leading to the exclusion of sales tax and excise duty from the total turnover for the purpose of calculating deductions under Section 80HHC.