ORDER
T.N. Chopra, A.M.
1. This appeal has been filed by the assessee against the order of CIT(A), dt. 24th Feb., 2000, for asst. yr. 1996-97. Most of the grounds raised by the assessee are covered by the order of the Tribunal in the assessee’s own case for asst. yrs. 1994-95 and 1995-96 in ITA Nos. 3216/Ahd/97 and 1535/Ahd/99. Copy of the said order has been filed by the learned counsel before us. Various grounds are disposed of as under :
2. Ground No. (1) is against sustaining the disallowance of Technical know-how fees Rs. 4,65,14,148. The AO has dealt with the issue vide para-7 of the assessment order whereas the learned CIT(A) has dealt with the issue vide para-2 of the appellate order. The issue is covered against the assessee by the afore-mentioned order of the Tribunal in the assessee’s own case for asst. yr. 1995-96. Respectfully following the said order and in the context of identical” facts and circumstances of the case, we uphold the disallowance and dismiss ground No. (1).
3. Ground No. (2) is against sustaining the disallowance of Rs. 10,05,25,017 on account of interest and commitment charges. The AO has dealt with the issue vide para-9 of his order whereas the learned CIT(A) has discussed the issue vide para-4 of the appellate order. The issue is covered in favour of the assessee by the aforesaid order of the Tribunal in the assessee’s own case for asst. yr. 1995-96. Respectfully following the said order of the Tribunal for asst. yr. 1995-96 in assessee’s own case and in the context of identical facts, we delete the disallowance and allow ground No. (2).
4. Ground No. (3) is against sustaining the disallowance of Rs. 5,81,02,062 on account of Hermes charges as revenue charges. The AO has dealt with the issue vide para-14 of his order whereas the learned CIT(A) has discussed the
issue vide para-7 of the appellant order. The issue is convered in favour of the assessee by the aforesaid order of the Tribunal in the assessee’s own case for asst. yr. 1995-96. Respectfully following the earlier order of the Tribunal for asst. yr. 1995-96 in assessee’s own case and in the context of identical facts, we delete the disallowance and allow ground No. (3).
5. Ground No. (4) relating to deduction in respect of contribution of GIDC for developing infrastructure as revenue expenditure, was not pressed by the learned counsel for the assessee at the time of hearing. Hence, this ground is dismissed, as not pressed.
6. Ground No. (6) is against sustaining the disallowance of Rs. 66,00,000 and Rs, 1,08,411 on account of contribution to welfare trust and contribution to GACL Benevolent Fund, respectively. The AO has dealt with the issue vide para-17 of his order whereas the learned CIT(A) has dealt with the issue vide para-15 of the appellate order. This issue is covered against the assessee by the aforesaid order of the Tribunal in the assessee’s own case for asst. yr. 1995-96. Respectively following the said order of the Tribunal for asst. yr. 1995-96 and in the context of identical facts and circumstances of the case, we uphold the disallowance and dismiss ground No. (6).
7. That leave us with ground No. (5) dealing with the computation of deduction under Section 80HHC. The assessee has raised mainly two points : (i) for the purpose of “total turnover” excise duty as well as sales-tax payments are to be included while computing deduction under Section 80HHC; and (ii) only net interest may be considered as expenditure. The second point regarding interest has not been pressed in view of the order of the AO, dt. 5th May, 2000. The only point which has been argued before us concerning the computation of deduction under Section 80HHC is whether excise duty and sales-tax form part of the total turnover. The issue has been argued at length on both sides even though it is covered against the assessee by the earlier order of the Tribunal for asst. yr. 1995-96. However, the learned counsel for the assessee strenuously urged that in view of the subsequent decision of the Hon’ble Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom), the issue has to be decided in favour of the assessee.
8. The assessee-company claimed deduction under Section 80HHC amounting to Rs. 35,525 while filing the return of income and in support of their claim the company submitted audit report in Form No. 10CCAC along with the Annexure-A as required under the provisions of Section 80HHC(4) of the IT Act, 1961. In the audit report total turnover has been worked out at Rs. 3,17,19,19,748 as under:
Total
turnover :
Rs.
Rs.
Total sales as per P&L
a/c
3,98,85,53,652
Less : (i) Excise duty
recovered
60,98,51,589
(ii) Inter-unit transfer
19,81,39,064
(iii) Total freight and foreign
agents commission
86,43,251
81,65,33,904
3,17,19,19,248
Export Turnover has been aggregated at Rs. 15,66,65,202
8.1. The learned counsel invited our attention to p. 27 of the paper book wherein computation of deduction under Section 80HHC, as made by the AO while giving effect to the impugned order of the CIT(A), dt. 24th Feb., 2000, has been indicated. In this computation the AO has arrived at the deduction under Section 80HHC at Rs. 47,10,806 as under :
Rs.
Export turnover
15,66,65,202
Total turnover for 80HHC
benefit
3,81,97,37,337
% to turnover
4.10146%
Income as per order giving
effect to CIT(A)’s order
13,53,22,766
Less : Dividend income
2,03,59,620
11,49,63,146
Less : (1) Interest income
Nil
(2) Rent received
Rs. 1,18,146
(3) Export incentive
Rs. 7,99,170
Total
Rs. 9,17,316
90%of Rs. 9,17,316
8,25,585
Net profit for export
benefit
11,41,37,561
Deduction under s. 80HHC :
11,41,37,561×4.10146%
46,81,306
90% of Rs. 7,99,170×4.10146%
29,500
Total Deduction under s. 80HHC
47,10,806
8.2. In the aforesaid computation total turnover has been adopted at Rs. 3,81,97,37,337. This is inclusive of —
Rs.
(i) Excise duty
60,98,51,589
(ii) Sales-tax and CST
3,79,66,000
The only grievance of the assessee is that the excise duty and sales-tax do not form part of the total turnover for the purpose of Section 80HHC.
8.3. Regarding the accounting entries relating to excise duty and sales-tax as made in the books of account, it is pointed out that the sales-tax and Central sales-tax charged from the purchasers is not taken to the P&L a/c and is separately accounted for in the sales-tax collection account. Regarding excise duty, this forms part of the sale price which is credited to the P&L a/c and further payment of excise duty made by the assessee to the excise authorities is in turn debited to the P&L a/c. The 23rd annual report of the assessee-company for the financial year 1995-96 relevant to asst. yr. 1996-97 has been filed. P&L a/c appearing at p. 12 of the annual report indicates that the sales of Rs. 39,885.54 lacs are inclusive of excise duty. On the expenditured side, a sum of Rs. 6,141.01 lacs has been debited to the P&L a/c on account of excise duty.
8.4. Shri J.P. Shah, the learned counsel for the assesses, heavily relied upon the decision of the Hon’ble Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd., (supra) and argued that the issue is directly covered by the Bombay High Court decision which is binding on the Tribunal even if the decision has been rendered by a non-jurisdictional High Court. Shri Shah referred to the decisions of the Hon’ble Gujarat High Court in the case of CIT v. Maganlal Mohanlal Panchal (HUF) (1994) 210 ITR 580 (Guj) and the Hon’ble Bombay High Court in the case of CIT v. Godavaridevi Saraf (1978) 113 ITR 589 (Bom). The learned counsel further referred to the decision of Ahmedabad Bench of Tribunal in the case of Sayaji Iron Works (P) Ltd. The learned counsel strongly contended that where there is a decision, though of non-jurisdictional High Court, directly on the point in issue and there being no contrary decision of any High Court, the same has to be followed by the Tribunal acting anywhere in the country.
8.5. Shri S.S. Panwar, the learned senior Departmental Representative, on the other hand, heavily relied upon the decision of the Hon’ble Supreme Court in the case of McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC) and argued that the excise duty and sales-tax form part of the sale price received by the assessee and cannot be deducted for the purpose of adopting the figure of total turnover. Shri Panwar argued that the Bombay High Court decision relied upon by the learned counsel has not considered the Supreme Court decision on the issue which laid down law of the land. According to Shri Panwar, the learned senior Departmental Representative, the decision of any High Court which is contrary to the legal position enunciated by the Hon’ble Supreme Court, cannot be accepted as good law. The learned senior Departmental Representative, referred to the decision of the Hon’ble Bombay High Court in the case of Thana Electric Supply Ltd. (1994) 206 ITR 727 (Bom) wherein it has been held that the decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its territorial jurisdiction. The learned senior Departmental Representative further added that the Tribunal should follow its earlier decision in the assessee’s own case which is in conformity with the view of the apex Court holding that the excise duty and sales-tax are integral part of the total turnover of the enterprise. The learned senior Departmental Representative argued that since the issue is under consideration of the Gujarat High Court in assessee’s own case in pursuance of the appeal filed by the assessee against the Tribunal’s order for the preceding assessment year, it would be expedient on ground of uniformity and consistency for the Tribunal to follow its earlier decision in the assessee’s own case.
9. We have carefully considered rival submissions. Various judicial pronouncements relied upon by the learned representatives of both sides have also been carefully gone through by us. Section 80HHC has been first inserted in the statute by the Finance Act, 1983, w.e.f. 1st April, 1983, with a view to provide incentive to exports. This section has thereafter been amended from time to time. The Finance Act, 1990, introduced Sub-section (3) to Section 80HHC which provides that profits derived from export of goods shall be an amount :
Export Turnover
Profits and gains of business or profession x ————–
Total Turnover
This formula was operative w.e.f. 1st April, 1991. Subsequently, the Finance Act, 1992, made significant amendments in section with a view to eliminate certain problems and difficulties. Under the amended provisions profits derived from exports were to be computed as per Section 80HHC(3) as under:
Profits of the business x Export Turnover
________________
Total Turnover
+90/100 x Export Incentives & Misc. receipt x Export turnover
_______________
Total TurnoverExplanations (b) and (ba) appended below Sub-section (4B) of Section 80HHC define the terms “export turnover” and “total turnover”. Further, Expln. (baa) defines profits of the business. These amended provisions as above are operative from asst. yr. 1992-93 and are relevant for asst. yr. 1996-97 which is the assessment year under appeal.
9.1. The CBDT Circular No. 621, dt. 19th Dec., 1991, explained the underlying rationale behind various amendments made in the provisions of Section 80HHC. Para 32.18 of the circular refers to the definition of export turnover and total turnover and read as under:
“32.18 Whereas the definition of the term ‘export turnover’ excludes freight and insurance attributable to transport, no such exclusion has been specified in respect of the term ‘total turnover’. As a result, in CIF transactions, while the export turnover is taken at FOB value, the total turnover includes the sale proceeds of exports at CIF value.”
From the aforesaid, it is amply clear that the legislature, while specifically excluding freight or insurance attributable to foreign transport of goods as well as export incentives did not consciously exclude excise duty and sales-tax received by the assessee from the customers which are admittedly integral and indivisible part of the sale price of the assessee.
9.2. At this stage, we may refer to the decisions of the apex Court whereby the excise duty and sales-tax have been held as forming part of the trading or business receipt of the assessee. In Chowringhee Sales Bureau (P) Ltd. v. CIT (1973) 87 ITR 542 (SC) it has been held by the Hon’ble Supreme Court that sales-tax collected by the assessee from buyers form part of trading or business receipt of the assessee. This is a Full Bench decision rendered by the Hon’ble Supreme Court in the year 1972. The Hon’ble Supreme Court further held that the fact the appellant credited the amount received as sales-tax under the head “Sales-tax Collection Account” did not make any material difference. Their Lordships observed that it is the true nature and quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. This, the sales-tax collected from the customers clearly form an integral part of the commercial transaction of the assessee. The Hon’ble Supreme Court while taking this view referred to their earlier decision in the case of Punjab Distilling Industries Ltd. v. CIT (1959) 35 ITR 519 (SC). In the case of George Oakes (P) Ltd v. State of Madras (1961) 12 STC 476 (SC), the Constitution Bench of Supreme Court observed that :
“When the seller passes on the tax and the buyer agrees to pay sales-tax in addition to the price, the tax is really part of the entire consideration and the distinction between the two amounts–tax and price–loses all significance.
This Court in that case relied upon the following observation of Lawrence J. in Paparika Ltd. v. Board of Trade :
‘Wherever a sale attracts purchase-tax, that tax presumably affects the price which the seller who is liable to pay even if the price is not ceased to be the price which the buyer has to pay even if the price is expressed as X plus purchase tax.’
Reliance was also placed upon the Mowing observation of Goddard L.J. in Love v. Norman Wright (Builders) Ltd. :
‘Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration, though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on the buyer. If the buyer agrees -to the price, it is not for him to consider how it is made up, or whether the seller has included tax or not.’
After referring to these observations S.K. Das, J., speaking for the Constitution Bench of this Court, observed :
‘We think that these observations are apposite even in the context of the provisions of the Acts we are considering now, and there is nothing in those provisions which would indicate that when the dealer collects any amount by way of tax, that cannot be part of the sale price. So far as the purchaser is concerned, he pays for the goods what the seller demands viz., price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover.”
In the case of Sinclair Murray & Co. (P) Ltd. v. CIT (1974) 97 ITR 614 (SC) the Supreme Court reiterated its aforesaid view and held that sales-tax collected by the assessee constituted its trading receipt.
9.3. With regard to excise duty as part of the turnover a similar view has been taken by the Hon’ble Supreme Court in the case of McDowell & Co. Ltd. (supra) wherein it has been held that the excise duty paid by the purchaser form part of turnover of the assessee. Further reliance is placed on the decision of Gujarat High Court in the case of Navjeevan Udyog Mandir (P) Ltd. v. CIT (1994) 207 ITR 40 (Guj) wherein the Hon’ble High Court has categorically held that the amount of excise duty collected by the assessee from the customers would form part of its trading receipts. Reference may further be made to the recent decisions of the Hon’ble Supreme Court in the cases of Jonahalla Narasimharao & Co. and Ors. v. CIT (1993) 200 ITR 588 (SC) and CIT v. T. Naggi Reddy (1993) 202 ITR 253 (SC).
9.4. In view of the settled legal position regarding the excise duty and sales-tax forming part of the total turnover as laid down by various decisions of the Hon’ble Supreme Court, we feel that any contrary view taken by a judicial authority would be violative of the Constitutional directive enshrined in Article 141 of the Constitution. Article 141 of the Constitution of India lays down that “The law declared by the Supreme Court shall be binding on all Courts within the territory of India”. In other words, the law declared by the Supreme Court is made the law of the land. This article of the Constitution essentially envisages substantial role of the Supreme Court as a legal mentor of the nation. The phrase “Law declared” in Article 141 is of wide amplitude and takes in the “ratio decidendi” of the case as well as “obiter dictum”. An obiter dictum or a mere enunciation of a principle of law pronounced ex cathedra would amount to a declaration of law, under Article 141. Obiter dicta of course does not include passing casual observation made by the Supreme Court.
9.5. With greatest respect to their Lordships of the Hon’ble Bombay High Court we may point out that the aforementioned Supreme Court decision, construing the term turnover of business as inclusive of excise duty and sales-tax have not been considered in Sudarshan Chemicals Industries Ltd. (supra) while taking a contrary view. The learned counsel for the assessee sought to support the Bombay High Court decision by pointing out that the Supreme Court decisions in Chowringhee Sales Bureau (P) Ltd. (supra) as well as McDowell & Co. Ltd. (supra) have been considered by the Bombay Bench of the Tribunal in Sudarshan Chemicals Industries Ltd. (supra) and since the Bombay High Court has upheld the view taken by the Tribunal, the Supreme Court decisions have obviously been considered even if not specifically discussed in the judgment by their Lordships. We regret, we are unable to persuade ourselves to accept the contention of the learned counsel for the assessee.
9.6. A careful perusal of the Bombay High Court judgment would indicate that the Supreme Court decisions in Chowringhee Sales Bureau (P) Ltd. (supra) and McDowell and Co. Ltd. (supra) have not been considered or brought to the attention of the Hon’ble High Court and nor have these decisions been discussed or distinguished by their Lordships. At this stage it would be useful to refer to the observations of the Hon’ble Bombay High Court in the case reported in (1975) Bom 324 (333) (1971)(sic) “it is not open to the High Court to whittle down the import of the Supreme Court decision by drawing fine and subtle distinctions”.
9.7. There is a well known principle of construction that where legislature uses in Act a legal term which has received judicial interpretation, it was to be assumed that the term is used in the sense in which it has been judicially interpreted unless a contrary intention appears. Applying this rule of interpretation in the instant case, it would clearly follow that the word “turnover” has been judicially interpreted as meaning sale price received by a dealer inclusive of sales-tax and excise duty, and the same interpretation is intended by the legislature while using the term “turnover” in Section 80HHC, If the legislature intended to exclude sales-tax and excise duty from the purview of
turnover, which, is contrary to judicial interpretation, it would have specifically said so, particularly when the word “total turnover” has been defined in Expln. (ba) appended below Sub-section (4B) of Section 80HHC which has been extracted hereinbefore. The rule of construction of judicially interpreted words has been endorsed by the Hon’ble Supreme Court in the case of Banaisi Debi and Anr. v. ITO (1964) 53 ITR 100 (SC). At p. 106, the Hon’ble Supreme Court has approved the relevant rule of construction as under:
“The relevant rule of construction is clearly stated by Viscount Buckmaster in Barras v. Aberdeen Steam and Fishing Co. Ltd., thus :
‘It has long been a well-established principle to be applied in the consideration of Act of Parliament that where a word of doubtful meaning has received a clear judicial interpretation, the subsequent statute which incorporates the same word or the same phrase in a similar context, must be construed so that the word or phrase is interpreted according to the meaning that has previously been assigned to it.'”
9.8. In view of the aforementioned settled legal position, we are of the considered opinion that the word “turnover” as used in Section 80HHC would necessarily have to be interpreted as inclusive of sales-tax and excise duty as judicially interpreted by the Supreme Court in a string of decisions rendered before the enactment of the provisions of Section 80HHC.
9.9. The principle that in statute directed to commercial men, words having definite commercial sense must be understood in that sense as that would be the natural proper sense in that context has been generally applied by the judicial authorities in the construction of IT Act. It has, therefore, been held by various judicial authorities that the words like “turnover” when used in IT Act should be understood in a sense in which no commercial men would misunderstand. The word ‘”turnover” used in fiscal legislation in countries like England, America as well as India has been held to include the taxes levied also. The reason for such inclusion is stated to be that the dealer who realised the tax does not hand it over forthwith the Government but keeps it with him and, turns it over in his business before he parts with it. Thus, the tax becomes, for the time being, an integral part of the circulating capital of the tradesman and his turnover in his hands. Therefore, in calculating the total turnover, taxes like sales-tax and excise duty are treated as part of the turnover because “turnover” means the amount of money which is turned over in the business.
9.10. We may now consider the meaning assigned to the word “turnover” in the Standard English dictionaries. The proposition is well accepted that the judicial decisions expounding the meaning of words in construing the statute in pan materia will have more weight than the meaning furnished by the dictionaries. The dictionaries are not dictators of statutory construction, yet it would be permissible to refer to dictionary to find out the general sense in which a particular word is understood in common parlance. The word “turnover” has been defined in Stroud’s Judicial Dictionary, 4th Edition 1974, at p. 2843 as under :
“Turnover : A “business turnover” is the aggregate amount of sales effected, or work done, by a business during a stated period (Milter v. Oliver & Boyd 43 Sc. LR 270). See also Dowling v. Methue, Sons & Co. (1921) SC 948.”
Chambers 20th Century Dictionary New Edition 1983 defines the word ‘turnover’ as the total amount of money changing hands in a business. The Law of Lexicon by P. Rama Nath Aiyer 1997 Edition defines the word “turnover” as the amount of money turned over or drawn in a business in a given time. Obviously the sale price received by a dealer inclusive of sales-tax and excise duty is to be construed as turnover of the business as per the meaning given in the dictionaries as above.
9.11. In the IT Act, the word “turnover” has been used in various sections in conjunction with the sales and gross receipts viz., Sections 44AA, 44AA(2)(ii), 44AB(a) and 44AF and would have to be construed in the commercial sense as inclusive of taxes levied like sales-tax and excise duty, etc.
9.12. We may look at the matter from another angle also. The sales-tax and excise duty, etc. constitute business expenditure and Section 43B has been specifically enacted in the IT Act, 1961, by the legislature whereby deduction for such levies are to be allowed on actual payment. Therefore, it is an admitted position that the sales-tax and excise duty are not merely balance-sheet items as claimed by the learned counsel for the assessee but these are items of deductible business expenditure which are to be taken into consideration while computing profits of business under the IT Act. We have earlier referred to the definition of “profits of the business” as contained in Expln. (ba) below Section 80HHC(4B). The taxes like sales-tax and excise duty would necessarily have to be considered while computing the profits of the business and calculating the relief under Section 80HHC. Once sales-tax and excise duty are to be considered for arriving at the profits of the business, it would be quite illogical to say that such taxes would not be included in the total turnover of the business. The contention urged, by the learned counsel is thus runs clearly contrary to the explicit statutory position as contained in the provisions of Section 80HHC. Now in the instant case, it has to be noted that in the P&L a/c which forms the basis for working out the relief under Section 80HHC, the assessee has debited an amount of Rs. 6,141.01 lakhs by way of excise duty (refer p. 12 of the Annual Report for F.Y. 1995-96). On the credit side of the P&L a/c the assessee has included in the sales an amount of Rs. 60,98,51,589 on account of excise duty as part of the sale price. It is quite illogical and irrational for the assessee to contend that even though the excise duty is taken into account in the P&L a/c, the sales price received by the assessee would be reduced by a portion of the consideration received from the customers by way of excise duty for arriving at the figure of total turnover. The interpretation being urged by the learned counsel is, in our opinion, clearly contrary to the statutory provisions and principles of commercial accounting as well as the we accepted rules of interpretation of statutes as discussed above.
9.13. Regarding the Bombay High Court decision in Sudarshan Chemicals Industries Ltd. (supra) we have already pointed out that the decision does not consider the earlier Supreme Court decisions wherein turnover has been construed as inclusive of excise duty and sales-tax. Apart from this, it appears to us that the Bombay decision involves asst. yr. 1986-87 as referred to at p. 771 of the report whereas the assessment year before us in the present appeal is asst. yr. 1996-97, i.e., post 1992 amendments of Section 80HHC introduced by the
Finance (No. 2) Act, 1991, made far-reaching changes in the provision by way of rationalisation and simplification thereof as explained by CBDT in Circular No. 621, dt. 19th Dec., 1991, Sec. 80HHC(3) as amended with effect from 1st April, 1992, introduced a proviso whereunder profits computed under main Clauses (a), (b) and (c) are to be further increased by the amount which is equal to :
Export Turnover
-90/100 x (Export incentives and other receipts) x ————–
Total Turnover
9.14. From this amended section it would be apparent that the incentive received by the exporter by way of excise duty refund or other incentive are to be further taken note of for the purpose of computing deduction under Section 80HHC. The proviso is thus essentially intended to include the part of profits attributable to export incentive like excise duty draw back as export profits for the purpose of relief under Section 80HHG. This proviso and the amended provisions of Section 80HHC w.e.f. 1st April, 1992, have not been considered by the Hon’ble Bombay High Court in Sudarshan Chemicals Industries Ltd. (supra) probably because the assessment year before their Lordships pertained to assessment year prior to 1st April, 1992. The Bombay High Court decision is, therefore, in any case distinguishable and would not apply for asst. yr. 1996-97 under reference. The Bombay High Court decision, therefore, would not support the case of the assessee.
9.15. For the aforesaid reasons, we hold that the sales-tax and excise duty form part of the total turnover for the purpose of Section 80HHC. This ground is, therefore, dismissed.
10. The appeal is partly allowed.