2007 (6) TMI 150 - HC - Income Tax

Question arises (i) whether excise duty and sales tax form part of total turnover for the purpose of calculation of deduction u/s 80HHC and (ii) whether liability arises due to exchange fluctuation on purchase of plant and machinery is capital or revenue expenditure Held (i) no (ii) revenue expenditure

Summary

Issues:
1. Interpretation of turnover for deduction u/s 80HHC
2. Treatment of additional liability due to exchange fluctuation as revenue expenditure

Analysis:
1. The first issue pertains to the interpretation of turnover for the purpose of calculating deduction under Section 80HHC of the Income-tax Act. The assessee contended that excise duty, sales tax, and conversion charges should not be included in the turnover. The Commissioner of Income-tax (Appeals) supported this view, holding that these components are not part of the turnover for Section 80HHC. The Tribunal upheld the decision of the C.I.T.(A), leading to the Revenue's appeal. However, the Revenue conceded that the issue was settled by a Supreme Court judgment, and hence, no substantial question of law arose.

2. The second issue revolves around the treatment of an additional liability arising from exchange fluctuation as revenue expenditure. The Tribunal, consistent with its earlier decisions and relying on precedent, ruled in favor of the assessee. The Tribunal cited a judgment of the Madras High Court to support its decision. The Revenue failed to present any new evidence or compelling reasons to challenge the Tribunal's consistent stance. Consequently, the High Court found no legal infirmity in the Tribunal's orders and dismissed the appeals. As a result, no substantial questions of law were deemed to arise for consideration by the Court in this matter. The judgment was delivered by P.P.S. Janarthana Raja J., and the tax cases were ultimately dismissed, with no costs awarded.