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TMI Blog2010 (9) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... o total turnover. Section 80HHC(3) was a beneficial section – Held that: - Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under Excess Profits Tax Act, it existed in the Business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to exports and yet it cannot form part of "turnover", excise duty and sales tax also cannot form part of the "turnover" – Case is in favour of assessee. - 485 of 2005 - - - Dated:- 3-9-2010 - Sunil Ambwani, Kashi Nath Pandey,JJ. We have heard Shri A.N. Mahajan, learned counsel for the department. Shri Shakeel Ahmad appears for the assessee. This income tax appeal under Section 260A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Vs. Lakshmi Machine Works, (2007) 290 ITR 667 (SC). The Supreme Court in CIT V. Lakshmi Machine Works (Supra) held as follows:- "The principal reason for enacting a formula in section 80HHC of the Income-tax Act, 1961, is to disallow a part of the concession thereunder when the entire deduction claimed cannot be regarded as relating to exports. Therefore, while interpreting the words "total turnover" in the formula in section 80HHC one has to give a schematic interpretation. The various amendments made therein show that receipts by way of brokerage, commission, interest, rent, etc., do not form part of business profits as they have no nexus with the activity of export. The amendment made from time to time indicate that they became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act. The Supreme Court further held:- "We have to read the words "total turnover" in Section 80HHC as part of the formula which sought to segregate the "export profits" from the "business profits". Therefore, we have to read the formula in entirety. In that formula the entire business profits is not given deduction. It is the business profit which is proportionately reduced by the above fraction/ratio of export turnover? total turnover which constitute 80HHC concession (deduction). Income in the nature of "business profits" was, therefore, apportioned. The above formula fixed a ratio in which "business profits" under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above ratio of export turnover to total turnover. Section 80HHC(3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under Excess Profits Tax Act, it existed in the Business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to exports and yet it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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