D.K. Seth, J. - (1.) This appeal was admitted on the ground "Whether, on the facts and circumstances of the case, the Tribunal was correct in upholding the order of the CIT(A) directing the AO to exclude the freight, insurance, etc. beyond the customs point from the amount of "direct costs" while computing the deduction under Section 80HHC ?"
(2.) In relation to this question, Mr. Agarwal pointed out to the definition of 'export turnover' and 'total turnover' in Clauses (b) and (ba) of the Explanation at the end of Section 80HHC and submitted that the concept of 'total turnover' cannot be applied while finding out the profits derived from export under Sub-section (3), Clause (b) of Section 80HHC. The concept of total turnover is applicable only to Clause (a) of Sub-section (3) of Section 80HHC. Therefore, the freight and insurance attributable to the transport of the goods or merchandise beyond the customs station cannot be excluded from the direct costs, while arriving at the figure of profits derived from export under Sub-section (3), Clause (b) of Section 80HHC.
(3.) On the other hand, Mr. Bajoria ably assisted by Mr. Khaitan, submitted that the concept of 'total turnover' is not relevant for the purpose of Clause (b) of Sub-section (3) of Section 80HHC. The concept of 'export turnover' as defined in Clause (b) of the Explanation at the end of the section would be relevant for the purpose. Therefore, according to them, the export turnover is to be reduced by direct and indirect costs attributable to such export after arriving at the figure of the export turnover. In order to arrive at the export turnover, the freight and insurance attributable to the transport of the goods or merchandise beyond the customs stations is to be excluded, Once it is excluded, it cannot be excluded once again or twice over from direct cost since it does not form part of the direct cost. Mr. Khaitan had relied upon the decisions in CIT v. Sudarshan Chemicals Industries Ltd. (2000) 245 ITR 769 (Bom) and CIT v. Chloride India Ltd. in support of the contention.;