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TMI Blog2014 (5) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from the business of the assessee, export turnover and total turnover. The deduction, subject to several other conditions, incorporated in the Section, is determined as under: Profits of the Business X Export Turnover Total Turnover 4. Thus, to determine the amount of deduction, the assessee and the Revenue must be aware of the following three ingredients: (i) Profits of the business (ii) Export turnover (iii) Total turnover 5. In the instant case, the issue is with regard to the term "Total turnover". 6. The assessee is a manufacturer and exporter of stainless steel utensils. In the process of manufacturing stainless steel utensils, some portion of the steel, which can not be used or reused for manufacturing utensils, remains unused, which is treated as scrap and the respondent-assessee disposes of the said scrap in the local market and the income arising from the said sale is also reflected in the profit and loss account. The respondent-assessee not only sells utensils in the local market but also exports the utensils. 7. For the purpose of availing deduction under Section 80HHC of the Act for the relevant Assessment Year, the assessee was not including the sale proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded in the 'total turnover' because the respondent-assessee is not dealing in scrap. According to him, scrap is generated in the process of manufacturing and the scrap is nothing but the raw material which could not be used in the process of manufacturing and therefore, sale proceeds of such scrap would merely bring down the cost of raw material. Thus, the sale proceeds of the scrap can either be deducted from the cost of raw material or can be shown in the profit and loss account but the said amount can never be treated as a part of 'sales' or 'turnover'. 14. The learned counsel had also relied upon the judgment delivered in the case of COMMISSIONER, INCOME TAX THIRUVANANTHAPURAM v. K RAVINDRANATHAN NAIR [(2007) 15 SCC 1], which deals with the term 'turnover'. According to him, though the said issue has not been directly discussed in the said judgment, from the meaning of the word 'turnover' given in the said judgment, it is very clear that the term 'turnover' would include only the sale proceeds of the articles manufactured and sold and not other things which are sold by a business unit. He had also referred to the definition of term 'business' given in the Act. 15. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the amount of sale proceeds received in respect of the goods in which an assessee is dealing in. For example- If a manufacturer and seller of air-conditioners is asked to declare his 'turnover', the answer given by him would show the sale proceeds of air-conditioners during a particular accounting year. He would not include the amount received, if any, from the sale of scrap of metal pieces or sale proceeds of old or useless things sold during that accounting year. This clearly denotes that ordinarily a businessman by word "turnover" would mean the sale proceeds of the goods (the things in which he is dealing) sold by him. 22. So far as the scrap is concerned, the sale proceeds from the scrap may either be shown separately in the Profit and Loss Account or may be deducted from the amount spent by the manufacturing unit on the raw material, which is steel in the case of the respondent-assessee, as the respondentassessee is using stainless steel as raw material, from which utensils are manufactured. The raw material, which is not capable of being used for manufacturing utensils will have to be either sold as scrap or might have to be re-cycled in the form of sheets of stainless s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Audit issued by the ICAI in the year 1980, while discussing "sales", stated as follows: "Total turnover, that is, the aggregate amount for which sales are effected by the company, giving the amount of sales in respect of each class of goods dealt with by the company and indicating the quantities of such sales for each class separately. Note (i) The term 'turnover' would mean the total sales after deducting therefrom goods returned, price adjustments, trade discount and cancellation of bills for the period of audit, if any. Adjustments which do not relate to turnover should not be made e.g. writing off bad debts, royalty etc. Where excise duty is included in turnover, the corresponding amount should be distinctly shown as a debit item in the profit and loss account." (emphasis added) The aforestated meaning given by the ICAI clearly denotes that in normal accounting parlance the word "turnover" would mean "total sales" as explained hereinabove. The said sales would definitely not include the scrap material which is either to be deducted from the cost of raw material or is to be shown separately under a different head. We do not see any reason for not accepting the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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