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TAXAP/422/2003 5/ 5 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 422 of 2003
For
Approval and Signature:
HONOURABLE
MS.JUSTICE HARSHA DEVANI Sd/-
HONOURABLE
MR.JUSTICE R.M.CHHAYA
Sd/-
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
NO
2
To be
referred to the Reporter or not ? NO
3
Whether
their Lordships wish to see the fair copy of the judgment ?
NO
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? NO
5
Whether
it is to be circulated to the civil judge ?
NO
=========================================================
DY.C.I.T.(ASSTT)
- Appellant(s)
Versus
CADILA
LABORATORIES LTD. - Opponent(s)
=========================================================
Appearance :
MRS
MAUNA M BHATT for
Appellant(s) : 1,
MR RK PATEL for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
and
HONOURABLE
MR.JUSTICE R.M.CHHAYA
Date
: 21/04/2011
ORAL
JUDGMENT
(Per
: HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. The
appellant-revenue in this appeal under section 260A of the Income Tax
Act 1961, (the Act), has challenged the order dated 24.7.2002 made by
the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’ (the Tribunal)
in ITA No.5023/Ahd/94 for assessment year 1991-92.
2. Vide
order dated 19.11.2003, this Court while admitting the appeal had
formulated the following substantial question of law :
“Whether
the appellate tribunal is right in law and on facts in holding that
sales tax should not be included in the total turnover for working of
deduction u/s. 80HHC?”
3. The
Court had also directed that the matter be heard with Tax Appeal No.
265 of 1999.
Mr. R.K. Patel, learned Advocate,
appearing on behalf of the respondent-assessee has drawn the
attention of the Court to the order dated 30.5.2007 passed by a
Division Bench of this Court in Tax Appeal No.265 of 1999 in the
case of Assistant Commissioner Vs. Shri Dinesh Mills Ltd., to
submit that the controversy involved in the present case
stands concluded by the said decision in favour of the assessee.
Mrs. Mauna Bhatt, learned Senior
Standing Counsel, appearing on behalf of the appellant is not able
to dispute the aforesaid position of law. In the circumstances, it
is not necessary to set out the facts and contentions in detail.
A perusal of the above referred
decision of this High Court shows that the Court had held in favour
of the assessee by following decision of the Supreme Court in the
case of CIT Vs. Lakshmi Machine Works, (2007) 290 ITR 667 (SC).
The Supreme Court in
case of Lakshmi Machine Works (supra) has
held thus:
“24.
Section 80-HHC(3) was a beneficial section. It was intended to
provide incentives to promote exports. The incentive was to exempt
profits relatable to exports. In the case of combined business of an
assessee having export business and domestic business the legislature
intended to have a formula to ascertain export profits by
apportioning the total business profits on the basis of turnovers.
Apportionment of profits on the basis of turnover was accepted as a
method of arriving at export profits. This method earlier existed
under the Excess Profits Tax Act, it existed in the Business Profits
Tax Act. Therefore, just as commission received by an assessee is
relatable to exports and yet it cannot form part of “turnover”,
excise duty and sales tax also cannot form part of the “turnover”.
Similarly, “interest” emanates from exports and yet
“interest” does not involve an element of turnover.
25.
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% 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 it 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”.
J ust 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”.” (Emphasis
supplied)
7. In
the light of the above cited decision of the Supreme Court it is
apparent that the controversy involved in the present case stands
concluded in favour of the assessee. In the circumstances, the
question is answered in the affirmative, that is, the Tribunal was
right in law and on facts in holding that sales tax should not be
included in the total turnover for working of deduction under section
80HHC of the Act.
8. The
appeal is accordingly dismissed with no order as to costs.
Sd/-
(H.N.
Devani, J.)
Sd/-
(R.M.
Chhaya, J.)
M.M.BHATT
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