Judgment:
1. This Special Bench is constituted under Section 255(4) of the IT Act, 1961 to decide the following issue : "Whether for the purpose of computation of the amount of deduction under Section 80HHC by applying the formula as provided in Clause (a) of Sub-section (3), of the said section, it is necessary to exclude the amounts of excise duty, octroi, sales-tax, etc. from the figure of total turnover of the business of the assesses for the purpose of bringing in a parity between the numerator i.e. "export turnover" and the denominator i.e. "total turnover" in the said formula inasmuch as, export turnover does not include such taxes and duties like excise duty, sales- tax, octroi, etc. which are not leviable on exportable goods ?" Though a reference to Clause (a) of Sub-section (3) of Section 80HHC is made in the question which is applicable Where the export out of India is of goods and merchandise manufactured or processed by the assessee, the real controversy in this case arises under Clause (c) of Section 80HHC(3) which applies where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods because in assessee's case the export is both of manufactured and trading goods.
Secondly, the question of exclusion of octroi from the figure of total turnover is not in issue in this appeal. We, therefore, reframe the question as under: "Whether, for the purposes of computation of the amount of deduction under Section 80HHC by applying the formula as provided in Sub-clause (i) of Clause (c) of Sub-section (3) of the said section, it is necessary to exclude the amounts of excise duty and sales-tax from the figure of "total turnover" of the business of the assessee for the purpose of bringing in parity between the numerator viz--'export turnover' and the denominator 'total turnover' in the said formula, inasmuch as, 'export turnover' does not include excise duty and sales-tax which are not leviable on exportable goods ?" 2. The assessee is a public limited company. It derives income from production and sale of Indian Made Foreign Liquor (IMFL), Industrial Alcohol, bottling of spirit and export of marine food. It claimed deduction under Section 80HHC in respect of export of both manufactured and trading goods originally at Rs. 1,48,06,252 based on the total turnover of business amounting to Rs. 79,34,53,717 and total export turnover of Rs. 23,77,09,602, adjusted total turnover amounting to Rs. 74,64,33,649 and adjusted export turnover amounting to Rs. 19,06,89,533.
3. The AO proposed some adjustments on account of export incentives and after adjusting loss in trading goods worked out the deduction at Rs. 1,05,12,956. as per the practice followed by the assessee the amount of excise duty and sales-tax collected are entered in P&L a/c as part of sales and turnover of the business and a corresponding liability for excise duty is made on the date when the goods are cleared from factory and of sales-tax when the goods are sold. Based on the Tribunal decision in the case of Chloride India Ltd. v. Dy. CIT (1995) 53 ITD 180 (Cal) the assessee then claimed revised deduction of Rs. 1,70,56,997 by excluding excise duty of Rs. 9,00,30,740 and sales-tax of Rs. 85,37,590 from turnover. The AO rejected the assessee's contention observing as under : "2.4. With reference to the claim of the assessee of deduction under Section 80HHC at Rs. 1,70,56,997 filed vide letter dt. 9th March, 1999, it is stated that the assessee has not given any citation of the Tribunal decision. Apparently the claim has been made on the basis of the decision of Tribunal in the case of Chloride (India) Ltd. The case of Chloride (India) Ltd., pertains to asst. yr.
1986-87 and at that time the expression "total turnover" was not defined in the Act. Now the said expression has been defined in the Act and what has to be excluded from the total turnover has been specified. Thus the term "total turnover" cannot be said to be ambiguous and the contentions raised by the assessee are not accepted. The amount of excise duty and sales-tax has to be included in the figure of total turnover for the purpose of deduction under Section 80HHC. As per the decision of the Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. v. CIT (1973) 87 ITR 542 (SC) excise duty and sales-tax forms part of turnover. In view of the aforesaid fact, claim of the assessee for deduction under Section 80HHC at Rs. 1,70,56,997 is rejected. Deduction under Section 80HHC is worked out at Rs. 1,05,12,956 as discussed above." 4. The CIT(A) agreed with the AO and rejected the assessee's claim to for reduction of excise duty and sales-tax from the total turnover shown in P&L a/c.
5. We have heard the learned counsel of the assessee Shri Rahul Mitra and the learned Departmental Representatives Ms. Banani Ghosh, CIT, Departmental Representatives and Shri D.K. Ghosh, Sr. Departmental Representative, considered the rival submissions and gone through the record and various judgments cited at the Bar.
6. Section 80HHC provides for incentives for exports by granting deduction of the export profit earned by the assessee. It reads as under : "80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, 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 or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereinafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in Clause (b) of Sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods.
(1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to Sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.
(2)(a) This section applies to all goods or merchandise, other than those specified in Clause (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into, India by the assessee (other than the supporting manufacturer) in convertible foreign exchange within a period of six months from the end of the previous year or, where the Chief CIT or CIT is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the Chief CIT or CIT may allow in this behalf.
(b) This section does not apply to the following goods or merchandise namely: (ii) minerals and ores (other than processed minerals and ores specified in the Twelfth Schedule).
Explanation 1. The sale proceeds referred to in Clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India, Explanation 2. For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in Sub-section (1) of Section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof.
(a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports 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 carried on by the assessee; (b) where the export out of India is of trading goods, the profits, derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; (c) where the export out, of India is of goods or merchandise manufactured or processed by the assessee and of trading goods, the profits derived from such export shall,-- (i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods : Provided that the profits computed under Clause (a) or Clause (b) or Clause (c) of this sub section shall be further increased by the amount which bears to ninety per cent of any sum referred to in Clause (iiia) (not being profits on sale of a licence acquired from any other person), and Clauses (iiib) and (iiic) of Section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.
(a) "adjusted export turnover" means the export turnover as reduced by the export turnover in respect of trading goods; (b) "adjusted profits of the business" means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in Clause (b) of Sub-section (3); (c) "adjusted total turnover" means the total turnover of the business as reduced by the export turnover in respect of trading goods; (d) "direct costs" means costs directly attributable to the trading goods exported out of India including the purchase price of such goods; (e) "indirect cost" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover; (f) "trading goods" means goods which are not manufactured or processed by the assessee.
(3A) For the purposes of Sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be,-- (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the profits of the business; (b) in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise to one or more Export House or Trading Houses, the amount which bears to the profits of the business the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the business carried on by the assessee.
(4) The deduction under Sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below Sub-section (2) of Section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
(4A) The deduction under Sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,-- (a) the report of an accountant, as defined in the Explanation below Sub-section (2) of Section 288, certifying that the deduction has been correctly claimed on the basis of the profits of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House; and (b) a certificate from the Export House or Trading House containing such particulars as may be prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section : Provided that the certificate specified in Clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law.
(a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (aa) "export out of India" shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962); (b) "export turnover" means the sale proceeds, received in, or brought into, India by the assessee in convertible foreign exchange in accordance with Clause (a) of Sub-section (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962); (ba) "total turnover" shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962): .
Provided that in relation to any assessment year commencing on or after 1st April, 1991, the expression "total turnover" shall have effect as if it also excluded any sum referred to in Clauses (iiia), (iiib) and (iiic) of Section 28; (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any sum referred to in Clauses (iiia), (iiib) and (iiic) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India; (c) "Export House Certificate" or "Trading House Certificate" means a valid Export House Certificate or Trading House Certificate, as the case may be, issued by the Chief Controller of Imports and Exports, Government of India; (d) "supporting manufacturer" means a person being an Indian company or a person (other than a company) resident in India, manufacturing (including processing) goods or merchandise and selling such goods or merchandise to an Export House or a Trading House for the purposes of export." 7. The controversy in this appeal is with regard to the computation of deduction under Sub-clause (i) to Section 80HHC(3)(c) and the only dispute for our consideration is whether the term "total turnover" is to exclude excise duty and sales-tax recovered and included in the local sales. The assessee's claim is that exports are exempt from excise duty and sales-tax and the export turnover cannot and does not include such levy, the total turnover would also be taken net of the excise duty and sales-tax. The principle stated to be is that like should be compared with the like and when the numerator does not include such levy, the denominator should also not include the same to bring parity between the two. There are divergent views of the Tribunal--in favour of the assessee there are three decisions of Calcutta Tribunal (i) Chloride India Ltd.'s case (supra) for asst. yr.
1986-87, (ii) for asst. yrs. 1990-91 and 1991-92, ITA No. 2448/Cal/1994 and 4/Cal/1994 order dt. 10th Nov., 1998, (iii) Stone India Ltd. (ITA No. 3008 (Cal) of 1995 dt. 10th May, 1999) for asst. yr. 1992-93 and one of Pune Bench of Tribunal in the case of Sudershan Chemical Industries Ltd. v. Dy. CIT (1997) 57 TTJ (Pune) 718 : (1997) 60 ITD 629 (Pune); and against the assessee there is a decision of Bombay Bench of the Tribunal in Ponds (India) Ltd. v. Dy. CJT (1998) 59 TTJ (Bom) 33 : (1998) 64 JTD 33 (Bom) for asst. yr. 1987-88 and a Calcutta Tribunal decision in the case of Britannia Industries Ltd. v. Dy. CIT (1999) 65 TTJ (Cal) 752 : (1999) 71 ITD 14 (Cal) for asst. yr. 1989-90. It may be stated here that the first decision in Chloride India Ltd.'s case (supra) was before the introduction of the definition of the term "total turnover" by way of Expln. (ba) below Section 80HHC(4A) by the Finance Act, 1991 with retrospective effect from 1st April, 1987, whereas the other two decisions are after that insertion and upon considering the amendment and taking divergent views.
8. Let us first understand what is the meaning given to the term 'export turnover' and 'total turnover' under the Act. As extracted above the term "export turnover" is defined in Expln. (b) to Section 80HHC(4A) to mean that the sales proceeds received in, or brought into, India by the assessee in convertible foreign exchange on the export of goods outside India but does not include freight or insurance attributable to the transport of goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (hereinafter referred to as "Customs Act"). Under Expln. (ba) "total turnover" is defined not to include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962. The expression "total turnover" also excluded any sum of export incentives referred to in els. (iiia); (nib) and (iiic) of Section 28. It is thus evident that though 'export turnover' is stated to be the sales proceeds received in convertible foreign exchange without inclusion of freight and insurance, 'total turnover' is not given any meaning but negatively stated to be not including freight and insurance and also receipts of export benefits.
The legislature while specifically excluding freight or insurance attributable to foreign transport of goods did not consciously exclude excise duty and sales-tax received by the assessee from the customers.
In other words, the total turnover is the gross amount of turnover of the business as reduced by transport and insurance attributable to transport of goods beyond the customs station and the receipts of export incentives. Revenue's contention is that when particular items alone are excluded, the general meaning excluding only those specified enumerated receipts should be given to the term.
9. What is then the general meaning of the word 'total turnover'. We can find its meaning in various dictionaries. 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 (Miller 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 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. The sale price received by a dealer could be 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. Though 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.
10. The tax which is passed on to the buyer is held to be the part of the price, in India as well as other countries. In the case of Chowinghee Sales Bureau (P) Ltd. v. CIT (1973) 87 ITR 542 (SC) the issue was whether the sales-tax collected by an auctioneer who issued cost memos showing itself as seller was to be excluded from 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 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 "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 receipts." 11. In Sinclair Murray & 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. (supra). A reference to the Constitution Bench of the Supreme Court in the case of George Oakes (P) Ltd. v. State of Madras AIR 1962 SC 1037 was made wherein the vires of the Madras General (Definition of Turnover and Validation of Assessment) Act, 1954 was upheld and in this context the Supreme Court held in that case that when the seller passed 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 two amounts-tax and price-loses all significance. The aforesaid proposition of law was taken after relying upon observation of King's Bench decision, in the case of Paprika Ltd. v. Board of Trade (1944) 1 All ER 372,374 : "wherever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as plus purchase tax." and also of Court of Appeals in the case of Love v. Norman Wright (Builders) Ltd. (1944) 1 All ER 618, 620 : "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 to 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." 12. It has also been held to be part of turnover under some enactments.
In George Oakes (P) Ltd. 's case (supra), the Supreme Court held as under : "Under the definition of turnover in the principal Act the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. The amount goes into the common till of the dealer till he pays the tax.
It is money which he keeps using for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to Government. There is thus nothing anomalous in the law treating it as part of the amount on which tax must be paid by him. This conception of a turnover is not new. It is found in England and America and there is no reason to think that when the legislature in India defined 'turnover' to include tax also, they were striking out into something quite unknown and unheard of before." 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." 13. In the case of McDowell & Co. Ltd v. CTO (1985) 154 ITR 148 (SC), the dispute was whether sales-tax was payable by the assessee Andhra Pradesh General Sales-tax Act, 1957 on the basis of its turnover which excluded excise duty which was leviable on the manufacture of liquor and the manufacturer could not remove the same from the distillery unless the duty imposed under the Excise Duty Act has been paid. In that case, buyers of Indian liquor from assessee's distillery obtained distillery passes for release of liquor after making payment of excise duty and presenting the same at distillery whereupon the bill of sale or invoice was prepared by the distillery showing the price of liquor but excluding excise duty. The matter reached up to the Supreme Court and the Supreme Court in its earlier decision in McDowell & Co. Ltd. v.CTO (1977) 1 SCR 914 took the view that the intending purchaser of the Indian liquor, seek to obtain distillery passes were also responsible for payment of excise duty which was collected from them by the authorities of the Excise Department and held that excise duty did not go into the Government till and did not become part of the circulating capital and therefore, the sales-tax authorities were not competent to include in the turnover of the assessee the excise duty which was not charged by it, but was paid directly to the excise authorities by the buyer of the liquor. The distillery rules were amended thereafter and the new Rule 76(a) provided "No spirit of liquor manufactured or stored shall be removed unless the excise duty specified in Rule 6 has been paid by a holder or a D-2 licence before such removal." The assessee was a holder of D-2 licence and on the basis of this amended provision and after taking into consideration the definition of turnover as given in Section 2(s) of the Sales-tax Act, their Lordships of the Supreme Court in its later decision in McDowell & Co. Ltd.'s case (supra) held that it is the total amount charged as consideration for the sale is to be taken into account for determining the turnover and held that the position is not different when under a proper agreement the legal liability of the manufacturer-dealer for payment of excise duty is specified by the purchaser by direct payment to excise authorities or to the State exchequer. Reference of the earlier decision of the Supreme Court in the case of Hindustan Sugar Mills v. State of Rajasthan AIR 1978 SC 1496, 1499 was made of the following observations : "The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales-tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale...." "Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him: The 'sale price' in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods.
True, the excise duty component of the price would not be an addition to the coffers of the dealer, as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so, it would be part of the 'sale price' because it forms a component of the consideration payable by the purchaser to the dealer. It is only as part of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability, statutory or otherwise, under which the purchaser would be liable to pay the amount of excise duty to the dealer. And, on this reasoning, it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill." 14. It is also expressed by the CBDT that the 'export turnover' is to be taken at its FOB as against 'total turnover' at CIF value while explaining the scope of the two terms in para 32.18 of its Circular No.621 dt. 19th Dec., 1991, 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 transaction, while the export turnover is taken at FOB value, the total turnover includes the sale proceeds of exports at CIF value." 15. It is further stated that where legislature uses in Act a legal term which has received judicial interpretation, it is to be assumed that the term is used in the sense in which it has been judicially interpreted unless a contrary intention appears, It could further possibly be said that the word "turnover" as understood in common parlance and as judicially interpreted is the 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. Again if the legislature intended to exclude sales-tax and excise duty from the purview of turnover, it would have specifically said so, when it defined the words "total turnover" in Expln. (ba) appended below Sub-section (4A) of Section 80HHC which has been extracted hereinbefore. This rule of construction has been endorsed by the Hon'ble Supreme Court in the case of Banarsi Debi v. ITO (1964) 53 ITR 100 (SC) approving this statement of Viscount Buckmaster in Banas v. Aberdeen Steam Trawling & Fishing Co. Ltd. (1933) AC 402 when he states : "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." 16. From the aforesaid, one can conclude that excise duty and sales-tax constitute part of turnover and trading receipts of the business and therefore, the term "total turnover", should be taken as inclusive of these levies. The principle seems to be 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. When it has been held by various judicial authorities that the term like "turnover" used in fiscal legislation in countries like England, America as well as India has to be 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 to 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.
17. The two terms, namely, "export turnover" and "total turnover" should unless a contra intention appears be given their natural and general meaning as understood in commercial laws as interpreted by the judicial decisions and not the restricted meaning as claimed by the assessee on the ground that one has a particular kind of receipt and therefore the other should also be of similar nature or specie. The contention of the assessee that like should be compared with the like may give absurd results and it could never be applied unless the same type of goods are exported and sold in local market. A similar plea for interpreting Section 80HHC(3)(b) as it then stood was rejected by the Special Bench in the case of International Research Park Laboratories Ltd. v. Assn. CIT (1994) 50 TTJ (Del)(SB) 650 : (1994) 50 ITD 37 (Del)(SB) by observing 'There are no words in Sub-section (3) as to limit this apportionment of profit on the basis of turnover in exports or to suggest that the apportionment has to be resorted to only when the same kind of goods are exported are also dealt with'. In the present case, export is stated to be of marine goods, etc. and the local sales are of IMFL, Industrial Alcohol, etc. If the export sale is of a different item than sold in the local market, then also, it can be said that two things-export and local-would not be alike or of the same specie.
18. We, however, find two decisions of the High Court accepting the claim of the assessee on the issue. One is of Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom) cited at the time of hearing and the other is of jurisdictional High Court of Calcutta in the case of Chloride India Ltd. (IT Ref. Nos.
131 & 136 of 1995 dt. 19th Dec., 2001) [reported as CIT v. Chloride India Ltd. In these two decisions a contra intention was expressed to the meaning of the term "total turnover".
19. The Bombay High Court held that reading of the two Clauses (b) and (ba) defining the terms "export turnover" and "total turnover" shows that they included anything which has a nexus with the sale proceeds.
Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds; that the turnover should be restricted to such receipts which have an element of profit in it; that it is only the actual sale proceeds that is relevant; that 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; that even according to the accounting principles, such levies do not form part of P&L a/c; that in fact, they are shown as liabilities in the balance sheet; and that in such circumstances, the above two items cannot be included in the total turnover. Their Lordships also held as follows : "Lastly, we are of the view that sales-tax, and excise duties are levied under the separate enactments which have different objects.
We are concerned with Section 80HHC which 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 IT Act. Hence, we do not find any merit in these appeals." 20. The aforesaid decision of Bombay High Court had made no reference or discussion of the three Supreme Court decisions namely Chowringhee Sales Bureau (P) Ltd.'s case (supra), George Oakes (P) Ltd.'s case (supra) and McDowell & Co. Ltd.'s case (supra) referred to above and the other decision of the Supreme Court in the case of Sinclair Murray & Co. (P) Ltd. (supra). However, we find that the Calcutta High Court has considered one of these decisions namely, McDowell & Co. Ltd.'s case (supra) and distinguished the same by stating that the decision was rendered under the Sales-tax Act whereunder the definition given for turnover in Section 2(s) of the Sales-tax Act included "the total amount set out in the bill of sale (or if there is bill of sale the total amount charged) as the consideration for the sale of or purchase of goods (whether such consideration be cash, deferred 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, whatever be the description, name or object thereof ". It was in such context observed by their Lordships of the Calcutta High Court, that the Supreme Court observed that the said definition which 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.
It was therefore, held that the word "turnover" as defined under the Sales-tax Act cannot be given effect to while interpreting the expression "total turnover" under the IT Act.
21. Referring to the decision of the Supreme Court in the case of Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate AIR 1958 SC 353, it was observed that it is well-settled that the words of the 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. The following observation in the case of S. Mohanlal v. R. Kondiah AIR 1979 SC 1132 was then referred to : "It is not a sound principle of construction to interpret expressions used in one Act with reference to their use in another Act; more so if the two Acts in which the same word is used are not cognate Acts, Neither the meaning, nor the definition of the term in one statute affords a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which the term should be understood generally. On the other hand, it is a sound, and, indeed, a well-known principle of construction that meaning of words and expressions used in an Act must take their colour from the context in which they appear." 22. Viewed in this -perspective, their Lordships observed that it can be held that the case of McDowell & Co. Ltd (supra) which deals with separate enactments has got no manner of application to interpretation of the words "total turnover" which find place in the, relevant provision of the IT Act. It was further observed that it is to be borne in mind in this context that the sales-tax, octroi and excise duties are levied under the separate enactments which have different objects and as such the general definition of the word "turnover" or the case law dealing with the said definition under the. Sales-tax Act can in no way be imported into Section 80HHC of the IT Act with which we are presently concerned.
23. It may be noted here that Calcutta High Court considered the McDowell's decision of the Supreme Court only and not the other three decisions of the Supreme Court two of which are under the IT Act and the distinction drawn for McDowell & Co. Ltd.'s case (supra) a case under the Sales-tax Act may ' riot hold good for" these two cases. In the cases of Chowringhee Sales Bureau (P) Ltd. (supra) and Sinclair Murray & Co. (P) Ltd: (supra), the issue was whether the receipt of sales-tax was a trading receipt and not whether they form part of turnover or total turnover. The decision of George Oakes (P) Ltd.'s case (supra) is also for sales-tax levy and as stated above the turnover there includes the total amount set out in the bill and collected by an assessee because of a specific definition given under the sales-tax law, the distinction drawn by their Lordships of Calcutta High Court hold valid for this decision also. We may also observe that on a comparison of the two decisions of the Supreme Court in the case of McDowell & Co. Ltd. (supra), it could be visualised that it may not always be true that the term 'turnover' included excise duty and it depends upon the provisions of law and the fact that the excise duty did not go into the common till of the assessee and did not become a part of circulating capital.
24. It may be stated here that these are the only two decisions of Bombay and Calcutta High Courts which are directly on the issue of interpretation of Section 80HHC wherein it was held that excise duty and sales-tax are not part of the total turnover for the purposes of computing export profit within the meaning of Section 80HHC(3) of the IT Act, 1961.
25. In view of the aforesaid discussion, we are of the opinion that though "total turnover" may include the receipts of excise duty and sales-tax, etc. in its general parlance and under specific statute, 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 turnover 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 "total turnover"'.
26. In the result, the AO is directed to compute the deduction, under Section 80HHC on export profits arrived at on the basis of the export turnover and total turnover exclusive of the receipt of excise duty and sales-tax.