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TMI Blog2000 (2) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... Misc. Receipts :--- Sale of Rep licence - Rs. 42,041 Cash Discount from Metal Box - Rs. 3,59,650 Sale of Raw Materials - Rs. 4,155 Sale of By Products - Rs. 2,98,171 Octroi Recoveries - Rs. 4,81,768 Claims Received - Rs. 1,42,086 Drawback received - Rs. 16,47,091 Provision written back - Rs. 9,63,439 Other Sundries - Rs. 7,561 Rs. 39,45,962 ------------- ------------- Rs. 56,65,969 ------------- In the assessment, the Assessing Officer has considered the abovementioned two items to be includible within total turnover of the business carried on by the assessee. His action has been upheld by the CIT(A). 2. At the stage of hearing of the appeal filed by the assessee before us, the ld. c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The definition merely excludes freight and insurance with effect from 1-4-1987 and the sums referred to in clauses (iiia), (iiib) and (iiic) of section 28 w.e.f. 1-4-1991. He argues that as such the expression "turnover" should mean the sale proceeds alone and not other items of receipts. So far as this particular definition given under clause (ba) of the Explanation to section 80HHC is concerned, the ld. counsel for the assessee strongly argues that although the exclusion of the sums as referred to in clauses (iiia), (iiib) and (iiic) of section 28 is specifically provided w.e.f. 1-4-1991, the said provisions, should, however, be considered to be having retrospective effect, inasmuch as, the provision should be considered as merely clarificatory or directory in nature. He argues that if the above-mentioned items be considered to be includible within "total turnover", the same would be unjust and would lead to absurd results. In this connection, he refers to the Memorandum explaining the provisions in Finance (No. 2) Bill, 1991. It may be mentioned in this connection that the aforesaid Finance (No. 2) Act, 1991 also inserted another clause (baa) to the aforesaid Explanation to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must supplement the written word so as to give 'force and life' to the intention of the Legislature ............... a judge should ask himself the question how, if the makers of the act had themselves, come across this ruck in the texture of it, they would have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the act is woven, but he can and should iron out the creases." 6. The ld. counsel for the assessee thereafter argues that the Supreme Court has held in the following two cases that amendments which appear to be prospective but at the same time are clarificatory or explanatory in nature, should be construed retrospectively even though such retrospective operation was not specifically mentioned by the Legislature :--- (i) Allied Motors (P,) Ltd v. CIT [1997] 224 ITR 677 (SC) at page 686--- In this particular case, the Supreme Court field as below :--- "The Supreme Court held that the first proviso inserted to section 43B by Finance Act, 1988 with effect from the assessment year 1989-90, should be construed as having been inserted retrospectively from the date on which the section itself came into existence i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Punjab Tin Supply Co. v. Central Government AIR 1984 SC 87 at page 94. The Supreme Court held in this case as below :--- "All laws which affect substantive rights generally operate prospectively and there is a presumption against the retrospectivity if they affect vested rights and obligations unless the Legislative intent is clear and compulsive." On the other hand, the ld. counsel for the assessee relied on a judgment of the Calcutta High Court in the case of CWT v. India Exchange Traders' Association [1992] 197 ITR 3561 at page 382. In this particular case, the Calcutta High Court upheld the declaratory validity of Rule 1D of the Wealth Tax Rules on the consideration of a latter amendment to the Wealth Tax Act by inserting Schedule-III to the Act almost in the same manner, in which Rule ID had earlier been enacted. 8. The subsidy on export (cash assistance) is considered to constitute business income under section 28(iiib). Similarly sale of rep licence (Rs. 42,041) and duty drawbacks received by the assessee (Rs. 16,47,091), considered by clauses (iiia) and (iiic) respectively of section 28 are closely connected with export activities. These amounts have been receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten back - Rs. 9,63,439 (This item cannot represent any sale proceed. On the other hand, it has arisen by way of remission of an old liability). (v) Other sundries - Rs. 7,561 (This item seems to consist of various types of miscellaneous receipts unconnected with sale). In view of the above discussions, all these items as enumerated in the immediately preceding sub-paragraph should be deducted from the figure of total turnover of business. We order accordingly. 9. Now it is required to answer the question as to whether the proviso to section (ba) of the Explanation to section 80HHC can be considered to lead to any absurd result or not. It is required to be mentioned in this connection that the two decisions of Supreme Court to which the ld. counsel for the assessee has alluded are in the cases of Allied Motors (P.) Ltd. and Podar Cement (P.) Ltd. where the provisos considered by the Supreme Court did not specifically mention any particular date for applicability of the said provisos. So far as the instant case is concerned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken into consideration by referring to the definition thereof as per clause (b) of the above-mentioned Explanation to section 80HHC, which means merely the sale proceeds received in or brought into India in convertible foreign exchange, in respect of goods exported out of India. In that way, it is evident that the items under consideration are not includible in the definition of 'export turnover'. The arguments put forward by the ld. counsel for the assessee may thus look quite attractive and plausible. At the same time again, we must notice that the computation of the deduction under section 80HHC(3) is required to be done in accordance with the following formula :--- Export turnover Export Profit = Profits gains of business X --------------- Total turnover. It may be noted that in the expression on the right-hand side of the abovementioned equation, two quantities are used in the numerator and one in the denominator. Mathematically, the two expressions in the numerator are inter-changeable and if they are actually inter-changed, the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from total turnover with effect from 1-4-1991. It may be noted that by virtue of the insertion of clause (bba) to the same Explanation, the profits of business would also get shorn of 90 per cent of such items of receipts, 10 per cent thereof being referable to the expenses incurred to earn such receipts. Hence, it may be said that the Legislature, in its wisdom, has caused maintenance of the parity between the numerator and the denominator from this angle, almost simultaneously. Hence, in our view there would be no absurdity or undue or unwanted results in treating the items under consideration as parts of the total turnover of business of the assessee. The judgments of ITAT, Calcutta Bench in the cases of Chloride India Ltd. and Stone India Ltd. would also, therefore, be perfectly in line with this argument and our final finding. Hence, the question of interpreting the section in a way other than what is literally stated and what appears to be correct from the common sense angle, would not at all arise. In view of the above position, we are unable to accept the contention of the assessee that all the items as considered by the Assessing Officer as parts of the total turnover of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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