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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 ..... Section 80 HHC and not the turnover of the only export unit to be taken into consideration? ii) Whether the Tribunal is right in holding that first expenditure under Section 35(I)(ii) is to be charged from the profits and then only deduction under Section 80 HHC of the Act is to be computed?" 2. The relevant portion of the order passed by the Tribunal is quoted below for ready reference:- "8. We have heard the rival submissions and gone through the case records and the provisions of Section 80HHC and Section 80AB of the Act. We reproduce the provisions of Section 80HHC(3)(a) and Section 80AB as under:- "80HHC(3) For the purposes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is of both self manufactured goods as well as trading goods. The opening part of sub-section (3)(c) states "profits derived from such export shall". Then follow (i) and (ii) the word "and" appears. A plain reading of subsection (3)(c) shows that "profits from such exports" has to be profits of exports of self manufactured goods plus profits of exports of trading goods. The profit is to be calculated in the manner laid down in sub-sections (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is decided against the assessee and in favour of the Revenue.... 11. We have heard the rival submissions and perused the case records. It is seen that the donation made by the assessee as claimed by it, is an expenditure on scientific 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 recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in subsection (3) of Section 80HHC of the Act which is very clear in its terms of Export Profits earned by the Assessee. Therefore, the deduction could be arrived 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onately 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 Supreme Court held that the receipts like Excise Duty and Sales Tax, which are Indirect Taxes and do not have any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 the Commission income from the sale of fuel at the Fuel Station in one of the units of the Assessee has to be excluded from the ambit and scope of Turnover cannot be accepted since the said issue has not been raised before the Authorities below and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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