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TMI Blog2019 (5) TMI 1391X X X X Extracts X X X X X X X X Extracts X X X X ..... Turnover' of the Assessee of the Assessee during the year. Therefore, the entire Turnover of the business of the Assessee including the Export Turnover of the Appellant has to be included in the denominator of the formula stipulated in sub-section (3) of Section 80HHC of the Act viz., Export Profit x Export Turnover (of all Export Units)/Total Turnover (of Entire Business of Assessee including Export and other Turnover). Case of the Assessee not acceptable that the Turnover of the Assessee should be restricted to the Turnover of the Units engaged for export only. - Decided against assessee Deduction of expenditure u/s 35(I)(ii) - whether it is to be charged from the profits first and then only deduction u/s 80 HHC is to be computed? - HELD THAT:- No merit in the contention of Assessee so long as the Assessee carries on business and has business profits as declared by him and the expenditure incurred by way of contribution made to some approved institution for Scientific Research is concerned, the Assessee cannot claim it as a donation covered by the provisions of Section 80GGA so as to take it out from the scope of computation of business profits under Chapter IV Part D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1),- (a) where the export out of India is of goods or merchandise manufactured (or processed) by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee; 80AB: Where any deduction is required to be made or allowed under any section (***) included in this Chapter under the heading C. -Deductions in respect of certain incomes in respect of an income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income. During the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (3)(c)(i) and (ii). The opening works profit derived from such exports together with the word and clearly indicate that the profits have to be calculated by counting both the exports. It is clear from a reading of section (1) of section 80HC(3) that a deduction can be permitted only if there is a positive profit in the exports of both self manufacture goods as well as trading goods. If there is a loss in either of the two then that loss has to be taken into account for the purposes of computing profits. Under section 80HHC(1), the deduction is to be given in computing the total income of the assessee. In computing the total income of the assessee both profits as well as losses will have to be taken into consideration. Section 80AB is relevant. It reads as follows: 80AB: Where any deduction is required to be made or allowed under any section included in this Chapter under the heading C-Deductions in respect of certain incomes in respect of an income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific research and it should have been allowed while comparing the income from the business. The assessee has claimed that first, deduction under section 80HHC should have allowed and then, the expenditure under section 35(I)(ii) has to be charged. The C.I.T.(Appeals) has given a finding that this expenditure could not apportioned to various units of business of the assessee. According to him, this expenditure has been incurred out of the income that has been earned by the various units and therefore, it should be apportioned on the basis of the profits of the various units earned during the years as reflected in the individual profits and loss account of the units. In the Income-tax Act, the deductions under Chapter VIA has to be computed and section 80AB of the Act provides that as to how it is to be computed in accordance with the provisions of this Act and that income alone shall be deemed to be the amount of income of that nature which is received by the assessee which is to be included in its gross total income. In view of the provisions of section 80AB, we feel that first the expenditure under section 35(I)(ii) is to be charged and then deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at by dividing Export Turnover by the Total Turnover of the Assessee, and only such proportion of Export Profit will be eligible for deduction under Section 80HHC of the Act. 6. The issue on commission business from the sale of the fuel or oil on behalf of the Government Oil Marketing Company, the learned Senior Standing Counsel submitted that such issue was not raised before the Authorities below and therefore, cannot be permitted to be raised before this court for the first time under Section 260A of the Act. On the other hand, the second question for allowing deduction under section 35(I)(ii) of the Act he submitted that the Assessee has claimed itself the said Expenditure as Expenditure on Scientific Research by way of payment made to the approved institution and therefore, the same also cannot be treated as donation under Section 80GGA of the Act as claimed by the Assessee. 7. Having heard the learned counsel for the Appellant, we are of the considered opinion that both the questions framed for consideration deserve to be answered against the Assessee and in favour of the Revenue and the Appeals filed by the Assessee deserve to be dismissed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The very purpose of reducing the 'Export Profit' proportionately which may be from one or four units as in the present case is to give the average effect by arriving at the 'Export Turnover' as divided by the 'Total Turnover' of the Assessee of the Assessee during the year. Therefore, the entire Turnover of the business of the Assessee including the Export Turnover of the Appellant has to be included in the denominator of the formula stipulated in sub-section (3) of Section 80HHC of the Act viz., Export Profit x Export Turnover (of all Export Units)/Total Turnover (of Entire Business of Assessee including Export and other Turnover). 11. The contention of the learned counsel for the Assessee that in view of the judgment of Hon'ble Supreme Court in CIT v. Lakshmi Machine Works ((2007) 290 ITR 667 (SC)), the receipts, which do not partake the character of turnover, have to be excluded from the computation of turnover, is misconceived. The said observation of Hon'ble Supreme Court in the case of Lakshmi Machine Works (supra) was made in the context of Explanation (baa) and in that context, the Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 element of turnover which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80HHC from time to time. 12. These observations, with great respect, cannot help the case of the Assessee to support his contention that the Turnover of the Assessee should be restricted to the Turnover of the Units engaged for export only. The contention that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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