1994 (12) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Computation of deduction u/s 80HHC.
2. Exclusion of octroi, sales-tax, and excise duty from total turnover.
3. Disallowance of surtax liability.

Summary:

1. Computation of deduction u/s 80HHC:
The assessee, a public limited company engaged in the manufacture and export of automobile batteries, is entitled to a deduction u/s 80HHC of the Income-tax Act. The dispute pertains to the manner of computing this deduction as per section 80HHC(3)(b) as it stood at the relevant time. The profit derived from the export of goods is to be computed in proportion to the export turnover relative to the total turnover of the business. The definition of 'export turnover' excludes freight or insurance attributable to the transport of goods beyond the customs station. However, there was no definition of 'total turnover' for the assessment year 1986-87.

2. Exclusion of octroi, sales-tax, and excise duty from total turnover:
The primary contention is whether octroi, sales-tax, and excise duty should be excluded from the total turnover while computing the deduction. The assessee argues for their exclusion, aligning the total turnover with the export turnover, which does not include these items. The department contends that these items should be included in the total turnover, as there is no express provision excluding them. The Tribunal upheld the assessee's interpretation, emphasizing that the numerator (export turnover) and the denominator (total turnover) should be uniform to avoid a distorted computation of export profit. The Tribunal referenced the Supreme Court's rulings in Bajaj Tempo Ltd. v. CIT and CIT v. Strawboard Manufacturing Co. Ltd., advocating for a liberal interpretation to advance the objectives of section 80HHC.

3. Disallowance of surtax liability:
The assessee's appeal against the disallowance of the surtax liability was decided against them, following the judgment of the Calcutta High Court in Molins of India Ltd. v. CIT.

Conclusion:
The appeal was partly allowed. The Assessing Officer is directed to rework the deduction u/s 80HHC by excluding octroi, sales-tax, and excise duty from the total turnover. The disallowance of the surtax liability stands as per the precedent set by the Calcutta High Court.