Octroi, sales-tax, and excise duty are statutory levies that do not form part of the sale proceeds and have no nexus with the profits derived from exports. Therefore, they should be excluded from the total turnover while computing the deduction under section 80 HHC of the Income Tax Act, 1961.

Asit Kumar Bisi, J.

Identical facts and question of law are involved in both the reference cases being I.T.R. No. 131 of 1995 and I.T.R. No. 136 of 1995. I.T.R. No. 131 of 1995 relates to the assessment year 1986-87 and I.T.R. No. 136 of 1995 relates to the assessment year 1987-88. The assessee is a private limited company engaged in the manufacturing of automobile batteries. It also exports the batteries and it is entitled to deduction in respect of the exports under section 80 HHC of the Income Tax Act, 1961 (hereinafter referred to as the Act). The dispute involved in the appeal before the Income Tax Appellate Tribunal was whether the octroi, Sales-tax and excise duty should be excluded from the total turnover while computing the deduction under section 80 HHC of the Act. As contended by the assessee, these three items should be excluded from the total turnover since they are excluded from the export turnover and the exports are not liable to such levies. The deduction under section 80 HHC of the Act is granted on the proportion which the export turnover bears to the total turnover. The contention of the revenue on the other hand is that the said three items have to be included in the total turnover. If the contention of the revenue is accepted, the assessee would get a smaller proportion of the total profit as export profit and consequently there would be a smaller deduction under section 80 HHC of the Act. If the assessee's contention is accepted the total turnover would be reduced by the octroi, sales-tax and excise duties which would increase the proportion, of the export profits and consequently the deduction under section 80 HHC of the Act would be increased.

2. Applying the principles of interpretation of the statutory provision granting a deduction the tribunal was of the view that while working out the ratio or proportion both the export turnover and the total turnover should consists of the same components or ingredients. According to the tribunal uniformity or harmony between the export turnover and the total turnover must be sought to be achieved and in doing so the three statutory levies viz. octroi, sales-tax and excise duties must be excluded from the expression "total turnover" since such levies do not form part of the expression 'export turnover'. Thus the Tribunal accepted the assessee's contention and directed the computation of the deduction under section 80 HHC of the Act by excluding the said statutory levies from the expression 'total turnover'.

3. On the aforesaid facts at the instance of the revenue the following question of law is referred by the Tribunal to this Court under section 256 (1) of the Act whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that octroi sales-tax and excise duty should be excluded from the figure of 'total turnover' while computing the deduction under section 80 HHC of the Act.

4. Mr. Mallick appearing on behalf of the revenue in I.T.R. 131 of 1995 had raised the following contention. The definition of 'total turnover' in Explanation (bb) at the end of sub-section (4A) of section 80 HHC was brought about on the statute book for the first time by the Finance Act, 1990 with effect from 1.4.1991. However, it was replaced by a new clause (ba) by the Finance (No. 2) Act, 1991, with retrospective effect from 15.4.1987., i.e., assessment year 1987-88. By virtue of the Explanation (ba), the freight and insurance charges had been excluded from the purview of the 'total turnover'. It had been done admittedly in order to remove an anomaly in view of Explanation (b) on the statute book defining 'export turnover' as excluding freight and insurance. Accordingly it would be observed that before induction of Explanation (ba) defining 'total turnover' the result was that, while the 'total turnover' included freight and insurance, they were statutorily excluded from the ambit of 'export turnover'. It is in order to bring the definition o