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TMI Blog2016 (6) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... x and excise duty from the total turnover for the purpose of deduction u/s 80HHC of the Act, despite insertion of Section 145A of the Act?" 3. Learned Counsel for the appellant has submitted that the issue No.(B) as raised in this Appeal is covered by the decision of this Court rendered in Tax Appeal No.884/2006 and allied matters dated 03.12.1994 wherein in Paragraph 3 of the order, this Court had observed as under :- "[3.0] Having heard Shri Manish Bhatt, learned counsel appearing on behalf of the Revenue and Shri Soparkar, learned counsel appearing for assessee in respective appeals and the substantial question of law raised, referred to hereinabove, and the decisions of the Honble Supreme Court in the cases of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra), we are of the opinion that the substantial question of law raised in the present tax appeals is now not res integra and the same is squarely covered against the Revenue by the decisions of the Honble Supreme Court in the cases of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra). In paras 16 to 18 in the case of Lakshmi Machine Works (Supra), the Honble Supreme Court has observed and held as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is connection, he pointed out that the legislature had expressly excluded items of freight and insurance and not sales tax and excise duty from the said definition. It was urged that while construing a taxing statute strict interpretation should be given by the Courts. It was urged that the definition of the words "total turnover" did not include freight/insurance. He urged that since the legislature had excluded only insurance and freight, it was not open to the courts to exclude excise duty and sales tax from the concept of "total turnover" in the said formula. He contended that the word "turnover" referred to the aggregate amount for which the goods were sold and since sales tax and excise duty formed part of the value of the goods, the said two items were includible in the definition of the words "total turnover". In this connection, learned counsel placed reliance on the judgment of the Supreme Court in the case of M/s. Chowringhee Sales Bureau (supra). Reliance was also placed on "The Law and Practice of Income Tax" by Kanga and Palkhivala (eighth edition) at page 123. In support of the contention that a tax or duty is part of the dealer's trading/business receipts, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts and, therefore, such receipts did not constitute an element of turnover. 18. We do not find any merit in the above contentions advanced on behalf of the Department. It is important to note that tax under the Act is upon income, profits and gains. It is not a tax on gross receipts. Under Section 2(24) of the Act the word "income" includes profits and gains. The charge is not on gross receipts but on profits and gains. The charge is not on gross receipts but on profits and gains properly so-called. Gross receipts or sale proceeds, however, include profits. According to "The Law and Practice of Income Tax" by Kanga and Palkhivala, the word "profits" in Section 28 should be understood in normal and proper sense. However, subject to special requirements of the income tax, profits have got to be assessed provided they are real profits. Such profits have to be got to be ascertained on ordinary principles of commercial trading and accounting. However, the income tax has laid down certain rules to be applied in deciding how the tax should be assessed and even if the result is to tax as profits what cannot be construed as profits, still the requirements of the income tax must be comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot involve any element of turnover. Further, in all other provisions of the income tax, profits and gains were required to be computed with reference to the books of accounts of the assessee. However, as can be seen from the Income Tax Rules and from the above Form No.10CCAC in the case of deduction under Section 80HHC a report of the auditor certifying deduction based on export turnover was sufficient. This is because the very basis for computing Section 80HHC deduction was "business profits" as computed under Section 28, a portion of which had to be apportioned in terms of 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 exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time." Even in the subsequent decision in the case of Shiva Tex Yarn Ltd. (Supra), the Honble Supreme Court even with respect to assessment order after section 145A, has followed the decision of the Honble Supreme Court in the case of Lakshmi Machine Works (Supra)." In that view of the matter, it is submitted that the above issue is to be answered in favour of the assessee. 4. Regarding Issue No.(A) learned Counsel for the appellant has taken this Court to the reasoning of the CIT (Appeals) which reads as under :- "7.3. In the grounds of Appeal, it has been mentioned that the Lab Sample Test income has not been included by the appellant company in the profit of unit-II and unit-III and therefore, the A.O. was not justified in reducing such income while making the computation for deduction u/s. 80IA. I have considered the grounds of appeal. The appellant company has apparently disclosed the Lab Sample Test income only I unit-I whereas the deduction u/s.80IA has been allowed on Unit-II and Unit-III. While computing the business profit in these units, the A.O. has adopted the net profit as per the P&L account of that unit and has reduced 'other income' being Lab Sample ..... X X X X Extracts X X X X X X X X Extracts X X X X
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