Decided on December 19,1994



R.V. Easwar, Judicial Member - (1.) THIS appeal by the assessee is directed against the order oftheCIT(A) dated 30-7-1990 for the assessment year 1986-87.
(2.) The assessee is a public limited company engaged in the manufacture of automobile batteries. It also exports batteries and in respect of the export it is entitled to deduction under Section 80HHC of the Act. The entitlement of the assessee to the deduction is not disputed in the present appeal. The dispute centres around the manner of computing the deduction in accordance with Section 80HHC(3)(b) as it stood at the relevant time. Under the said provision, the profit derived from the export of goods or merchandise out of India shall be equal to the amount which bears to the profit of the business as computed under the head 'Profits and gains of the business' the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The Explanation (b) below this Sub-section contains the definition of the 'Export turnover'. As per the definition insofar as it is relevant for the purpose of the present appeal, export turnover excluded freight or insurance attributable to the transport of the goods beyond the customs station. This is how the statutory provision stood as on 1-4-1986. There was no definition of the 'total turnover' for the assessment year 1986-87. However, for the first time a definition of the words 'total turnover' was inserted in the section by introduction of Explanation (bb) at the end of the section w.e.f. 1 -4-1991 by the Finance Act, 1990. As per the definition, the total turnover shall not include the cash compensatory support, duty draw back and profit on sale of import entitlement. This was consequential to the amendment made to Section 28 of the Income-tax Act treating the above three items as business income. We are not concerned with this definition in the present appeal. By Finance (No. 2) Act, 1991, the aforesaid Explanation (bb) was omitted. A new Explanation (ba) was introduced below Section 80HHC with retrospective effect from 1-4-1987. As per this Explanation, total turnover shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station. There is a proviso to this Explanation with which we are not concerned. The dispute in the present appeal, however, does not centre around the point whether the freight and insurance should be included as part of the turnover or not. The dispute is regarding the question whether octroi, sales-tax and excise duty shall be excluded from the total turnover while computing the deduction. Whereas according to the assessee these three items are to be excluded from the total turnover since admittedly they are excludible from the export turnover, according to the revenue these three items have to be included in the total turnover. The bone of contention is that if the view point of the department is accepted, the assessee would get a smaller proportion of the profit as export profit and consequently a smaller deduction under Section 80HHC whereas if the view point of the assessee is accepted, it will get a higher proportion of the total profit as export profit and consequently, a higher deduction under Section 80HHC.
(3.) THE contention of Dr. Pal, the learned counsel who forcefully presented the assessee's case before us, is that having regard to the object of Section 80HHC, the assessee's claim must be upheld. His argument runs like this. THE section was introduced to boost the exports and therefore must receive a liberal interpretation. THE definition of export turnover and total turnover did not specifically include or exclude octroi, sales-tax and excise duty. However, if regard is had to the fact that the Legislature by amendment excluded freight and insurance from the total turnover, thereby bringing the total turnover at par with the export turnover, it would be clear that the intention of the Legislature is to harmonise both the expressions. In other words, the intention of the Legislature is that whatever goes to make the export turnover must also go to make up the total turnover so that while working the proportionate profit, there is a comparison between likes. THE numerator and the denominator should be the same and they should not include different items or ingredients which will result in a distorted or absurd picture. Since the export turnover which is the numerator does not admittedly include sales-tax, octroi and excise duty, the denominator viz., the total turnover should not also include the same. Only if the section is interpreted in this manner, uniformity and harmony can be achieved and the intention of the Legislature can be given effect to.;

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