Total Turnover Excludes Excise And Sales U/S 80HHC

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: Section 80HHC of the Income-tax Act provides for incentives for exports by granting deduction of the export profit earned by the assessee. But the computation of export profit, in terms of the provisions of this section, poses innumerable difficulties and various issues concerning the interpretation of the provisions of these section are pending at various stages of litigation.

One such issue concerning the interpretation of the term “total turnover” recently came up before the Special Bench of the Calcutta Tribunal in the case of IFB Agro Industries v. Dy. CIT, (2002) 83 ITD (SB) 96.

The issue before the Tribunal was whether it is necessary to exclude the amounts of excise duty and sales-tax from the figure of total turnover of the business of the assessee for the purpose of computation of the amount of deduction u/s 80HHC.

The Calcutta Tribunal noted the divergent views of the Tribunal - three decisions of the Calcutta Tribunal and one of the Pune Bench of the ITAT in Sudershan Chemical Industries Ltd v. Dy. CIT (1997) 60 ITD 629 in favour of the assessee and a decision of Bombay Bench of the Tribunal in Ponds (India) Ltd v. Dy. CIT (1998) 64 ITD 33 and a Calcutta Tribunal decision in Britannia Industries Ltd. v. Dy. CIT (1999) 71 ITD 14 against the assessee.

The terms “export turnover” and “total turnover” are defined in explanation (b) and (ba) respectively to section 80HHC (4A).

The Tribunal observed that though ‘export turnover’ is stated to be the sales proceeds received in convertible foreign exchange without inclusion of freight and insurance, ’total turnover’ is not given any meaning but negatively stated to be not including freight and insurance and also receipts of export benefits.

On behalf of revenue it was contended that as particular items alone are excluded, the general meaning excluding only those specified enumerated receipts should be given to the expression ‘total turnover’.