Facts of the Case

The appeal was filed by the Revenue before the Delhi High Court against the order of the Income Tax Appellate Tribunal (ITAT). The dispute concerned the computation of deduction under Section 80HHC of the Income-tax Act, 1961, specifically whether the amount of excise duty collected by the assessee should form part of the total turnover while calculating the eligible deduction.

The Tribunal had relied upon judicial precedents holding that excise duty does not constitute part of the turnover for the purpose of Section 80HHC and therefore must be excluded while computing the deduction. The Revenue challenged the Tribunal’s view before the High Court.

Issues Involved

  1. Whether excise duty collected by the assessee forms part of “total turnover” for the purpose of calculating deduction under Section 80HHC of the Income-tax Act, 1961?
  2. Whether the Income Tax Appellate Tribunal was justified in excluding excise duty from total turnover while computing deduction under Section 80HHC?
  3. Whether any substantial question of law arose from the Tribunal’s order warranting interference by the High Court?

Petitioner’s (Revenue’s) Arguments

  • The Revenue challenged the order of the Tribunal and sought inclusion of excise duty in the total turnover for computation of deduction under Section 80HHC.
  • It was contended that the Tribunal had erred in granting relief to the assessee by excluding excise duty from total turnover while calculating export profits eligible for deduction.

Respondent’s (Assessee’s) Arguments

  • Bharat Gears Ltd. supported the Tribunal’s order.
  • The assessee relied upon various judicial precedents which had consistently held that excise duty is not part of the turnover for the purpose of Section 80HHC.
  • It was argued that excise duty is merely a statutory levy collected on behalf of the Government and therefore should not inflate the figure of total turnover for deduction purposes.

Court Order / Findings

The Delhi High Court upheld the order of the Income Tax Appellate Tribunal and dismissed the Revenue’s appeal.

The Court noted that the Tribunal had relied upon the following judgments:

  • CIT vs Sudarshan Chemicals Industries Ltd. (245 ITR 769) (Bombay High Court)
  • Rathi Engg. Works & Klockner Windsor (I) Ltd.
  • CIT vs Wheels India Ltd. & India Pistons Ltd. (275 ITR 319) (Madras High Court)

These decisions held that excise duty paid by the assessee is required to be excluded from total turnover while computing deduction under Section 80HHC.

The Court further observed that the Delhi High Court itself had earlier taken the same view in:

  • CIT vs Rollatainers Ltd. (ITA No. 331/2004, decided on 12.07.2004)

Since the issue was already settled by binding precedents, the Court held that no substantial question of law arose for consideration. Consequently, the appeal filed by the Revenue was dismissed.

Important Clarification

  • Excise duty does not constitute a component of “total turnover” for the purpose of Section 80HHC.
  • While calculating export profit deduction under Section 80HHC, excise duty collected by the assessee must be excluded from total turnover.
  • Where the issue is already covered by binding judicial precedents, no substantial question of law arises for consideration by the High Court.
  • The judgment reinforces the settled principle that statutory levies collected on behalf of the Government cannot artificially increase turnover for deduction calculations.

Sections Involved

  • Section 80HHC of the Income-tax Act, 1961 – Deduction in respect of profits derived from export of goods or merchandise.

Link to Download the Order-https://delhihighcourt.nic.in/app/case_number_pdf/2006:DHC:24761-DB/61318042006ITA5072006_151518.pdf

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