In the High Court of Judicature at Madras Dated : 09.08.2010 Coram :- THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLA and THE HON'BLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) Nos.742 to 745 of 2010 Commissioner of Income Tax-VI .. Appellant in all Chennai. the appeals. vs. M/s. Electromags No.6, Jerizim P.H.Street Seevaram Village .. Respondent in all Perungudi, Chennai 600096. the appeals. Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961, against the common order of the Income Tax Appellate Tribunal, Madras 'A' Bench, dated 08.04.2005 passed in I.T.A.Nos.924, 925, 1022 and 1023/Mds/1999. against the Order of the Commissioner of Income -Tax (Appeals)-VI, Chennai dated 18.3.1999 and 28.4.1999 made in I.T.A.Nos.6 & 231/98-99 and 250 & 249/98-99 against the Orders of the Deputy Commissioner of Income-Tax, Special Range-VIII, Chennai and Joint Commissioner of Income-Tax, Special Range-VIII, Chennai, dated 26.02.1998 and 23.02.1999 for the Assessment Years 1995-96, 1996-99, 1996-97 and 1998-99 respectively. For Appellant : Mr.Patty B.Jaganathan Sr. Standing Counsel for Income-tax Common Judgment (Judgment of the Court was delivered by F.M.IBRAHIM KALIFULLA,J.) The Revenue has come forward with these appeals, raising the following substantial question of law: https://hcservices.ecourts.gov.in/hcservices/ "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that sales tax and excise duty have to be excluded from the total turnover for the purpose of computing the deduction u/s.80HHC in relation to export profits?" 2. The question is no longer res integra, inasmuch as the same is now covered by the decision of the Hon'ble Supreme Court reported in 290 ITR 667 (CIT vs. Lakshmi Machine Works). The Hon'ble Supreme Court has answered the question as under in paragraph 18. "18. .... The object of the legislature in enacting Section 80-HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, “turnover” was the requirement. Commission, rent, interest, etc. did not involve any turnover. Therefore, 90 per cent. of such commission, interest, etc. was excluded from the profits derived from the export. Therefore, even without the clarification such items did not form part of the formula in Section 80-HHC(3) for the simple reason that they 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 Assessing Officer (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 80-HHC(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 https://hcservices.ecourts.gov.in/hcservices/ Section 80-HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80-HHC from time to time." (the underlining is ours) 3. Having regard to the law laid down by the Hon'ble Supreme Court, the question is answered against the appellant-revenue. The appeals fail and the same are dismissed. Consequently, M.P.Nos.1 of 2010 (3 petitions) are also dismissed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ATR To 1. The Secretary Central Board of Direct Taxes New Delhi. 2. The Assitant Registrar, Income Tax Appellate Tribunal Madras 'A' Bench Madras. 3. The Commissioner of Income Tax (Appeals)-VI No.121, M.G.Road, Chennai 600034. 4. The Deputy Commissioner of Income Tax Special Range-VIII, Chennai-34. 5.The Joint Commissioner of Income Tax, Special Range-VIII, Chennai-34. 1 cc To Mr.Patty B.Jaganathan, Sr.Standing Counsel for Income-Tax, SR.58060 TC (A) Nos.742 to 745 of 2010 bvn(co) pmk.2.09.2010. https://hcservices.ecourts.gov.in/hcservices/