P.D Dinakaran, J.:— In this appeal, the following substantial questions of law were raised for determination:
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that excise duty does not form part of the total turnover for the purpose of calculation of deduction under section 80HHC of the Income-tax Act, 1961?
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in not considering the judgments of the Supreme Court reported in [1973] 87 ITR 542 in the case of Chowringhee Sales Bureau (P) Ltd. v. Cit, West Bengal, and in the case of Sinclair Murray and Co. P. Ltd. v. CIT, [1974] 97 ITR 615 ?”
2. Question No. (1) : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that excise duty does not form part of the total turnover for the purpose of calculation of deduction under sec-tion 80HHC of the Income-tax Act? The Bombay High Court in the decision reported in Commissioner Of Income-Tax v. Sudarshan Chemical Industries Pvt. Ltd., [2000] 245 ITR 769 rejected the contention of the Department to the effect that having regard to the plain words of section 80HHC of the Income-tax Act (for brevity “the Act”), two items, such as excise duty and sales tax ought to have been included in the total turnover. It is further held that, the Legislature has expressly excluded items of freight and insurance from the “export turnover”. However, the Legislature did not exclude sales tax and excise duty from the export turnover. While construing a taxing statute, strict interpretation should be given by the court. Thus, the Bombay High Court, in Commissioner Of Income-Tax v. Sudarshan Chemical Industries Pvt. Ltd., [2000] 245 ITR 769, held as follows (headnote):
“Under section 80HHC(1) of the Income-tax Act, 1961, it is inter alia provided 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. In other words, in computing the total income of such an assessee, profits derived by the assessee from the exports are deductible. The above expression, namely, ‘pro-fits derived from exports’ also find a place in section 80HHC(3)(a). It says that where the export is of goods, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business. In fact, the earlier section 80HHC(3) consisted of two parts, namely, where the assessee carried on a business as 100 per cent, exporter and secondly where the asses-see carried on a composite business. In the latter case, it was provided that the profits derived from exports shall be the amount which bears to the profits of the business as computed under the head ‘Profits and gains of business’, the same proportion as the export turnover bears to the total turnover. The emphasis is on the words ‘Profits derived from the exports’. Therefore, weightage must be given to such profits. Such profits cannot be reduced artificially by including statutory levies in the denominator, namely, total turnover. Therefore, the turnover should be restricted to such receipts which have an element of profit in it. It is only the actual sale price which is relevant. 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 accounting principles, such levies do not form part of the profit and loss account. 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, section 80HHC is a separate code by itself. Hence, the general definition of the word turnover or the case law dealing with the said definition under the Sales Tax Act which is a State levy, cannot be imported into section 80HHC of the Act.”
3. The above proposition of law has been followed by the Calcutta High Court in the case of CIT v. Chloride India Ltd., [2002] 256 ITR 625 and the Kerala High Court in the case of Commissioner Of Income-Tax v. (1) K. Rajendranathan Nair, [2004] 265 ITR 35, wherein it is held that in computing the special deduction under section 80HHC of the Act, in respect of profits from export business, while determining the proportion of export turnover to total turnover, since octroi, sales tax and excise duty are excluded from the export turnover, they should be excluded from the figure of “total turnover”, as it is a settled law that the words of a statute, where there is a doubt about their meaning, are to be understood in the sense in which they best harmonise with the subject of the enactment and the object which the Legislature has in view.
4. In Commissioner Of Income-Tax v. Madras Motors Ltd./M.M Forgings Ltd., [2002] 257 ITR 60 (Mad), where the Assessing Officer took the total turnover to be the turn-over for the purpose of section 80HH of the Act to be the turnover from all the sources of business of the assessee, this court acknowledging the ratio laid down in Commissioner Of Income-Tax v. Sudarshan Chemical Industries Pvt. Ltd., [2000] 245 ITR 769, accepted the contention of the assessee that the total turnover must be confined to the turnover of the product which was exported by the assessee and held that the amount received by way of Modvat credits could not have been received by the assessee, had the assessee not purchased the raw materials for running its industry of manufacturing forgings. This court, thus, held that the amount received by the assessee under Modvat credits were eligible for deduction under section 80HH of the Act, and that the amount earned by the assessee by the International Price Rationalisa-tion Scheme was also eligible for deduction under section 80HH of the Act.
5. In view of the law, as enunciated from the decisions referred supra, we are of the firm opinion that the Tribunal was right in holding that excise duty does not form part of the total turnover for the purpose of calculation of deduction under section 80HHC of the Act.
6. Question (ii)—Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in not considering the judg-ments of the Supreme Court reported in [1973] 87 ITR 542 in the case of Chowringhee Sales Bureau (P) Ltd. v. Cit, West Bengal and in the case of Sinclair Mur-ray and Co. P. Ltd. v. CIT, [1974] 97 ITR 615?
7. In the case of Chowringhee Sales Bureau P. Ltd., [1973] 87 ITR 542 (SC), the issue was whether the sales tax collected by an auctioneer who issued cash memos showing itself as seller was to be excluded from the assessee's business income. In that context, their Lordships of the Supreme Court held that the sum of Rs. 32,986 realised as sales tax by the assessee in its character as an auctioneer forms part of its trading or business receipts. The discussion was more on the issue that the sales by an auctioneer was a sale for the purposes of the Sale of Goods Act and the amount collected by it was as a dealer and, therefore, a trading or business receipt. In this context it was observed that (page 548) : “as the amount of sales tax was received by the appellant in its character as an auctioneer, the amount, in our view, should be held to form part of its trading or business receipt.”
8. In Sinclair Murray and Co. P. Ltd. v. CIT, [1974] 97 ITR 615 (SC) again the dispute was that the sales tax collected by a trader was liable to be included in the total income of the assessee and it was held that the matter stood concluded by the decision in the case of Chowringhee Sales Bureau P. Ltd., [1973] 87 ITR 542 (SC).
9. It is a settled law that though the “total turnover” may include the receipts of excise duty and sales tax, etc., in its general parlance and under specific statutes, because of its wider coverage in the definitions given thereunder, it has to be given a restrictive meaning while computing the “export profit” for the purposes of section 80HHC, namely, only that part of the receipt for sale consideration is to be taken as part of the total turn-over which has an element of profit therein, and, accordingly, the receipts of excise duty and sales tax which do not include an element of profit should be excluded from the “total turnover”.
10. From a perusal of the aforesaid decisions of the Supreme Court, viz., (i) Chowringhee Sales Bureau P. Ltd.'s case, [1973] 87 ITR 542; and (ii) Sin-clair Murray and Co. P. Ltd. v. CIT, [1974] 97 ITR 615, we find that these decisions were rendered under the Sales Tax Act whereunder the definition given for turnover included “the total amount set out in the bill of sale (or if there is no bill of sale the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, defer-red payment or any other thing or value) including any sum charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, what-ever be the description, name or object thereof”. The said definition would clearly indicate that the total amount charged as the consideration for the sales would have to be taken into account for determining the turnover. The word “turnover” as defined under the Sales Tax Act, therefore cannot be given effect to while interpreting the expression “total turnover” under the Income-tax Act. We are, therefore of the view that the Tribunal was right in law in not placing reliance on the ratio laid down in (i) Chowringhee Sales Bureau P. Ltd.'s case, [1973] 87 ITR 542 (SC); and (ii) Sinclair Murray and Co. P. Ltd. v. CIT, [1974] 97 ITR 615 as they are not applicable to the facts of this case.
11. In the result, the above appeal is dismissed. No costs.