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TMI Blog2016 (8) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Appellate Tribunal, Ahmedabad Bench A , Ahmedabad in ITA No.2705/Ahd/2002. 2. At the time of admitting present appeal, following question of law was framed:- Whether the Appellate Tribunal was justified in law and on facts in confirming the order passed by Commissioner (Appeals) directing to exclude Sales Tax and Excise duty from the total turnover for computing deduction under section 80HHC even after insertion of section 145A of the Act. 3. At the time of hearing of present appeal, learned advocate for the appellant submitted that the Tribunal has committed an error while passing the impugned order. It is submitted that while passing the impugned order, the Tribunal has committed an order in allowing exclusion of Sales Tax and Excise duty from the total turnover for computing deduction under section 80HHC even after insertion of section 145A of the Act. Therefore, it is prayed that this appeal may be allowed. 4. Mr.Hemani, learned advocate for the respondent submitted that the issue involved in this appeal is covered by various decisions. He has relied upon the decision in the case of Commissioner of Income Tax v. Meghmani Industries Ltd . report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the legislature as business profits, the question of treating the same as part of the total turnover in the above formula did not arise. In fact, Section 80 HHC had to be amended several times since the formula on several occasions gave a distorted figure of export profits when receipts like interest, rent, commission etc. which did not have the element of turnover got included in the profit and loss account and consequently became entitled to deduction. This was clarified by the above amendment to Section 80HHC commencing from 1.4.92. The said amendment made it clear that though commission and interest emanated from exports, they did not involve any element of turnover and merely for the reason that commission, interest, rent etc. were included in the profit and loss account, they did not become eligible to deduction. We have to give purposeful interpretation to the above section. The said section is entirely based on the formula. The amendments from time to time indicate that they became necessary in order to make the formula workable. Hence, we have to give schematic interpretation to Section 80HHC of the Act. 17.Shri P.P. Malhotra, leaned senior counsel appearing for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that if a seller quotes a price of x + purchase tax, the buyer has to pay the amount of the tax as part of the price and since the tax is charged on the wholesale value of the goods the tax element has to be taken into account. It was urged that one has to give strict interpretation to the word turnover. It was urged that there was no question of giving purposeful interpretation to the word turnover in the said Section 80HHC of the Act. It was urged that the legislature had used the expression total turnover from which it became clear that the said expression referred to the aggregate amount for which the goods were sold and since the above two items formed part of the value of the goods, they were includible in the total turnover. Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that excise duty was the liability of the assessee to the Government and, therefore, it was not includible in the total turnover. Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that the components of export turnover and total turnover should be the same in the above formula. Learned counsel submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclude items like commission and interest from deduction on the ground that they did not possess any element of turnover even though commission and interest emanated from exports. 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 w 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 Section 28 of the Act had to be apportioned. Therefore, one has to give weightage not only to the words total turnover but also to the words export turnover, total export turnover and business profits. That is the reason why we have quoted hereinabove extensively the illustration from the Direct Taxes (Income tax) Ready Reckoner of the relevant word. In the circumstances, we cannot interpret the words total turnover in the above formula wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm part of the formula in Section 80HHC(3) for the simple reason that it did not emanate from the export turnover, much less any turnover. Even if the assessee was an exclusive dealer in exports, the said commission was not includible as it did not spring from the turnover. Just as interest, commission etc. did not emanate from the turnover, so also excise duty and sales tax did not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent etc. do yield profits, but they do not partake of the character of turnover and, therefore, they were not includible in the total turnover. The above discussion shows that income from rent, commission etc. cannot be considered as part of business profits and, therefore, they cannot be held as part of the turnover also. In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the A.O. [See: page no.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the total turnover under Section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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