Commissioner of Income Tax vs Maruti Textiles Pvt. LTD.

J.M. Panchal, J.—At the instance of Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench, (B) has referred the following question of law for the opinion of this Court u/s 256(1) of the Income Tax Act, 1961 (�the Act� for short):

Whether in the facts and circumstances of the case, the ITAT was justified in holding that the excise duty collected from the customers as a discharge of its statutory liability to excise department was not part of the total turnover despite explanation (ba) to Section 80HHC which, excluded only freight or insurance?

This Court has heard Ms. Mauna M. Bhatt, learned Counsel for the Revenue and Mr. Varun K. Patel, learned advocate, for MR S.N. Soparkar, learned senior advocate, for the respondent.

In this case return of income was filed by the respondent on November 29, 1994 for assessment year 1994-95, which was processed u/s 143(1)(a) of the Act and assessment was completed on January 19,1995. This fact is emphasised to indicate that the subsequent amendment made in the Act is not applicable to the facts of the instant reference.

During the course of hearing of the case, the learned Counsel for the respondent has brought to the notice of this Court decision of the Supreme Court in Commissioner of Income Tax, Coimbatore Vs. Lakshmi Machine Works, , wherein following view is taken:

The principal reason for enacting a formula in Section 80HHC of the Income Tax Act, 1961, is to disallow a part of the concession thereunder when the entire deduction claimed cannot be regarded as relating to exports. Therefore, while interpreting the words �total turnover� in the formula in Section 80HHC one has to give a schematic interpretation. The various amendments made therein show that receipts by way of brokerage, commission, interest, rent, etc., do not form part of business profits as they have no nexus with the activity of export. The amendments made from time to time indicate that they became necessary in order to make the formula workable. If so, excise duty and sales tax also cannot form part of the �total turnover� u/s 80HHC(3): otherwise the formula becomes unworkable.

In view of the authoritative pronouncement of law on the question referred to this Court for opinion, this Court is of the view that Reference will have to be answered against the Revenue and in favour of the assessee.

Accordingly, it is held that the ITAT was justified in holding that excise duty collected from the customers as a discharge of its statutory liability to excise department was not part of the total turnover of the assessee despite explanation (ba) to Section 80HHC which, excluded only freight or insurance.

The Reference is thus answered against the Revenue and in favour of the assessee. There shall be no orders as to costs.