JUDGMENT
N.N. Mathur, J.
These three income-tax reference applications under section 256(2) of the Income Tax Act, 1961, (hereinafter referred-to as ‘the Act’) pertain to the assessment years 1993-94, 1994-95 and 1995-96, respectively. The Tribunal, Jaipur by a common order dated 19-4-1999, refused to refer the questions set out in the application under section 256 for the opinion of this court. Hence, the revenue by these three applications seeks direction to the Tribunal to make a reference on the following question :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in :
(a) holding that sales-tax, octroi and excise duty on local sales should not form part of “total turnover” for the purpose of deduction under section 80HHC, ignoring the principle laid down by the Supreme Court in the case of Chowranghee Sales Bureau (P) Ltd. v. CIT (1973) 87 ITR 542 (SC) and Sinclair Murray & Co. (P) Ltd. v. CIT (1974) 97 ITR 615 (SC).
(b) directing to allow depreciation on the assets of the company, though lying at the guest-house including the guest-house building, furniture, etc., ignoring the fact that the case clearly falls under sub-section (5) of section 37 of the Income Tax Act and further ignoring the Bombay High Court decision in the case of CIT v. Ocean Carriers (P) Ltd. (1995) 211 ITR 357 (Bom), and is this direction not contrary to what the Tribunal has itself went on to hold that the expenditure on account of the guest-house in the form of providing food, etc. would fall in the category of disallowance under section 37(4) ?”
2. It is made clear that second question has arisen only in D.B. IT Ref. No. 11/2000. The material fact for the decision on the present applications are that the respondent assessee- company derived income from the export of goods manufactured by it as well as from the sale of such goods in India. By claiming deduction under section 80HHC of the Act, the assessee did not include the amount of excise duty and the sales-tax claimed by it in respect of sales made within India, in the total turnover. The assessing officer however, recomputed the deductions by including the amount of excise duty and sales-tax in the total turnover, which was confirmed by the Commissioner (Appeals). On further appeal, the Tribunal found that according to the method of accounting adopted by the assessee, the sales-tax and the excise duty recovered from the customers was shown separately in the sales invoices. The Tribunal held that since the export turnover excluded the sales-tax, excise and octroi, the total turnover should not include the same. In the opinion of the Tribunal, under section 80HHC the expression “total turnover” would not include the octroi, sales-tax and excise duty on sale, since the expression “export turnover” did not include these ingredients. The Tribunal further held that it is only the actual sale price, which is relevant and, therefore, anything charged by way of statutory levies such as excise duty and sales-tax in addition to the sale price, is to be excluded. Accordingly, the Tribunal accepted the claim of the assessee that sales-tax, excise duty and octroi on local sales should not form part of ‘total turnover’ for the purpose of computation of deduction under section 80HHC.
3. It is contended by Mr. Sundeep Bhandawat, learned counsel appearing for the revenue, that a reading of section 80HHC shows that the intention of the legislature was to extend the benefit of the provisions only to the export turnover in respect of sales-tax, excise duty and octroi and not to the local sale. Relying on the decision of the Apex Court in Sinclair Murray & Co. (P) Ltd. v. CIT (supra), it is submitted that the sales-tax and excise duty collected by the assessee during the normal day-to-day business activity form part of trading receipt. On the other hand, Mr. N.M. Ranka senior advocate, had supported the judgment of the Tribunal. It is submitted that no referable question of law arises from the order of the Tribunal.
4. We have carefully gone through the decision of the Apex Court in the case of Chowringhee Sales Bureau (P) Ltd. v. CIT (supra). In the said case, the assessee, a private limited company, was dealing in the business of furniture. It also acted as an auctioneer. In respect of the sales effected by it as auctioneer, the appellant realised during the year in question, in addition to the commission, Rs. 32,986 as sales-tax. This amount was credited separately in the books under sales-tax collection account. The total balance standing to the credit of said account up to the end of the relevant previous year stood at Rs. 2,71,698. This sum was neither paid over to the exchequer nor refunded to the persons from whom it was collected. The Apex Court found that the assessee did not pay the amount of sales-tax to the actual owner of the goods auctioned because the statutory liability for payment of the sales-tax was that of the assessee. The assessee- company did not deposit the amount realised by it and the sales-tax with the exchequer because it took the position that statutory provision creating a liability upon it was not valid. As the amount of sales-tax was received by the assessee in its character as auctioneer, the amount was held to form part of its trading or business of the assessee. Thus, this case has no application to the facts of the instant case.
5. Section 80HHC(1) of the Act inter alia provides that where an assessee is engaged in the business of export of any goods, there shall be allowed in computing the total income of the assessee a deduction of the profits derived by the assessee from the export of such goods or to say that in computing the total income of such assessee, the profits derived by the assessee from such exports are deductible.
6. The Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom) has analysed the provisions of section 80HHC as follows :
“Under section 80HHC, the legislature intends that the profits from exports should not be taxed. For this purpose, a formula has been introduced whereby if the business is of composite nature then the proportionate profit relatable to the export business is to be found out by multiplying the profits of a business by the export turnover and dividing the product by the total turnover. This formula finds place in section 80HHC(3) as it stood at the relevant time. Under clause (b) of the Explanation to section 80HHC, export turnover is defined to mean sale proceeds received in India by the assessee in foreign exchange. Under the said definition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading of the above two clauses shows that they include anything which has nexus with the sale proceeds. Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds. Further the meaning of export turnover in clause (b) of the Explanation to section 80HHC, therefore, clearly shows that export turnover did not include excise duty and sales-tax.”
After analyzing the provisions, the court held that the use of the words “profits derived from the exports” leads to the inference that the weightage is to be given to such profits. The court further held that the turnover should be restricted to such receipts, which have an element of profit in it. The court held, thus :
“Anything charged by the assessee by way of excise duty and sales-tax cannot be taken into account as they do not have any element of profit. Even according to the accounting principles, such levies do not form part of the P&L. a/c. In fact they are shown as liability in the balance-sheet. In the circumstances, the above two items cannot be included in the total turnover.”
Thus, in view of the judgment of the Bombay High Court, the only conclusion can be that it is only the actual sale price which is relevant.
7. It is now well settled that the incidence of sales-tax is really on the consumer and it is in substance a tax imposed on the goods on the occasion of sale. The statutory liability, however, for payment of sales-tax is raised on the dealer on his total turnover, whether or not he realises the tax from the purchasers. Thus, the price charged by the dealer would be inclusive of sales-tax, for it is to his interest to pass on the burden of tax to the purchaser. Thus, the sales-tax or excise duty collected by the assessee is not income or receipt. It is collected in fiduciary capacity refundable to the customer or payable to the state and, as such, does not form part of the turnover. Rule 44 of the Rajasthan Sales Tax Rules permits collection of sales-tax and to show such collection in the invoice to be credited to the sales-tax account. Thus, where a sales-tax is collected separately, it does not constitute part of the turnover. In view of the settled legal position, no referable question of law arises from the order of the Tribunal on question No. 1.
8. So far as the second question is concerned, it appears from the record that the assessee is not maintaining any guest-house at the site of the mines at Sirohi road but maintaining a structure to provide certain common facilities to the staff and workers, who had to be provided a shelter at the mines for the purpose of taking meals and recreation facilities during the working of the mines and also for providing safety zone while the blasting in the mines is in operation. The learned Tribunal on appreciation of facts, has arrived at the conclusion that the expenditure was not on the guesthouse. Thus, the expenditure of Rs. 16,478 has been rightly disallowed (sic-allowed) under section 37(4). The finding of fact does not give rise to any referable question of law.
9. No referable question of law arises from the order of the Tribunal. The Tribunal has rightly refused to refer the question Nos. 1 and 2 for the opinion of this court.
All the three reference applications stand dismissed.
OPEN