The formula under Section 80HHC of the Income Tax Act, 1961 aimed to segregate 'export profits' from 'business profits' and required a purposeful and schematic interpretation to make it workable. Excise duty and sales tax did not form part of the 'total turnover' as they did not involve any element of turnover and were not includible in the formula.

JUDGMENT

WITH

Civil Appeal Nos. 4411/2005, 5370/2005, 5372/2005, 5939/2005, 6145/2005,

3037/2006, 2596/2006, 917/2006, 919/2006, 920/2006, 1494/2006, 1495/2006,

3389/2006, 4572/2006, 5157/2006, 3616/2006, 3911/2006, 3913/2006,

3615/2006, 3169/2006, 4738/2006, 5688/2006, 2907/2006, 3496/2006,

5860/2006, 165/2007, 683/2007, 431/2007, 991/2007, 248/2007, 1162/2007,

163/2007, 1636/2007, 1637/2007, 1529/2007, 1530/2007, 1532/2007, 1533/2007,

1266/2007, 1536/2007

Civil Appeal No. 2145 of 2007 arising out of S.L.P. (C)No.16085/2006,

Civil Appeal No. 2146 of 2007 arising out of S.L.P. (C)No.16752/2006,

Civil Appeal No. 2147 of 2007 arising out of S.L.P. (C)No.18239/2006,

Civil Appeal No. 2148 of 2007 arising out of S.L.P. (C)No.6633/2006,

Civil Appeal No. 2149 of 2007 arising out of S.L.P. (C)No.3513/2007,

Civil Appeal No. 2150 of 2007 arising out of S.L.P. (C)No.7911/2007

arising out of CC 10725-10726/2005

Kapadia, J.

Leave granted in special leave petitions. All the above civil appeals deal with a common

question of law and, therefore, they are decided together by this judgment. For the sake of convenience, the facts in C.A. No.4409 of 2005 are mentioned hereinbelow.

For the assessment year 1993-94 M/s. Lakshmi Machine Works (assessee) filed its return of income declaring its taxable income of Rs.50.80 lakhs. On 10.6.94 intimation under Section 143(1)(a) of the Income Tax Act, 1961 (for short, the Act) was sent by the Department accepting the returned income. Later on the Department issued notice under Section 143(2) of the Act. One of the items for issuing the said notice was the quantum of deduction under Section 80HHC of the Act.

The assessee had computed the allowable deduction under Section 80HHC without taking into account in the total turnover the sales tax and excise duty. The assessee was asked to explain why the total turnover should not be recomputed by including sales tax and excise duty. In this connection, the Department placed reliance on the judgment of this Court in the case of M/s. Chowringhee Sales Bureau (P) Ltd. v. C.I.T. West Bengal [1973] 83 ITR 542(SC). The assessee objected to the above inclusion. However, that objection was dismissed by the A.O. on the ground that under Section 80HHC(ba) deduction from "total turnover" was restricted only to three items, namely, profit on sale of import licence, duty drawback and CCS. The A.O. further held that from the profits of business, the assessee was entitled to deduct the above three items and also brokerage, commission, interest, rent, charges or any other receipt of similar nature. Before the A.O., the assessee contended that items which cannot be regarded as profits, the question of treating those items as part of "total turnover" did not arise. The A.O. treated certain miscellaneous receipts and interest receipts as part of business profits to which the assessee objected. The assessee pointed out that under Section 80HHC as it stood in the assessment year 1993-94, a deduction of 10% was allowed whereas the balance 90% stood excluded from the business profits. However, the assessees argument for non-inclusion of sales tax and excise duty was not accepted by the A.O. Aggrieved by the above decision, the matter was carried in appeal to the C.I.T. (Appeals). The appellate authority agreed with the submissions made on behalf of the assessee. It was held that sales tax and excise duty were liabilities of the assessee to the Government. They were shown separately from the value of the goods, therefore, they were not included in the "total turnover" for working out the deduction under Section 80HHC.

Aggrieved by the said decision, the Department carried the matter in appeal to the Tribunal. Following the judgment of the Bombay High Court in the case of Commissioner of Income-Tax v. Sudarshan Chemicals Industries Ltd. and another (2000) 245 ITR 769 (Bom.), the Departments appeal stood dismissed. Hence, this civil appeal.

The short point wh