COMMISSIONER OF INCOME TAX V. PRATIBHA SYNTEX LTD.

ITR/23/2000

AI Insights

The case revolves around a reference made by the Income Tax Appellate Tribunal, Ahmedabad Bench, to the High Court of Gujarat concerning the inclusion of excise duty in the 'total turnover' for the purpose of calculating deductions under Section 80HHC of the Income Tax Act, 1961. The Revenue challenged the ITAT's decision, which excluded excise duty from the total turnover. The High Court, referencing a Supreme Court decision, upheld the ITAT's decision, emphasizing that including excise duty would render the deduction formula unworkable.

• Counselvise Citation: [2007] 140 COUNSELVISE.COM (IT) 758985 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 10-07-2007
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax v. Lakshmi Machine Works, (2007) 290 ITR 667 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: MANISH BHATT
• Keywords: Excise Duty; Income tax appellate tribunal; Section 80HHC; Statutory Liability; Total Turnover
• Section: 80HHC; 256(1)

Judgement Text

"ITR/23/2000 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 23 of 2000 For Approval and Signature: HONOURABLE MR.JUSTICE J.M.PANCHAL HON'BLE SMT. JUSTICE ABHILASHA KUMARI ===================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 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 ? 5 Whether it is to be circulated to the civil judge ? ===================================================== COMMISSIONER OF INCOME TAX - Applicant(s) Versus PRATIBHA SYNTEX LTD. - Respondent(s) ===================================================== Appearance : MR MANISH R BHATT,learned advocate for Applicant(s) : 1, Mr.Varun K.Patel, learned advocate, for MR SN SOPARKAR, learned senior advocate, for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE J.M.PANCHAL ITR/23/2000 2/4 JUDGMENT and HON'BLE SMT. JUSTICE ABHILASHA KUMARI Date : 10/07/2007 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE J.M.PANCHAL) 1. At the instance of Revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad has referred the following question of law for the opinion of this Court under Section 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?” 2. This Court has heard Mr.M.R.Bhatt, learned counsel for the Revenue and Mr.Varun K.Patel, learned advocate, for MR S.N.Soparkar, learned senior advocate, for the respondent. 3. During the course of hearing of the case, the ITR/23/2000 3/4 JUDGMENT learned counsel for the respondent has brought to the notice of this Court decision of the Suprme Court in Commissioner of Income-Tax v. Lakshmi Machine Works, (2007) 290 ITR 667 (SC), wherein following view is taken : “The principal reason for enacting a formula in section 80HHC of th 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” under section 80HHC(3): otherwise the formula becomes unworkable.” 4. In view of the authoritative pronouncement of law on the question referred to this Court for opinion, the Reference will have to be answered against the Revenue and in favour of the assessee. ITR/23/2000 4/4 JUDGMENT 5. 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. 6. The Reference is answered against the Revenue and in favour of the assessee. There shall be no orders as to costs. (J.M.Panchal,J) (Smt.Abhilasha Kumari,J) arg "