The ‘total turnover’ under section 80HHC(3)

Last updated: 17 January 2008

Court :
SUPREME COURT

Brief :
“the income-tax has laid down certain rules to be applied in deciding how the tax should be assessed and even if the result is to tax as profits what cannot be construed as profits, still the requirements of the income-tax must be complied with. Where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed. Profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act [See page 455 of “The Law and Practice of Income-tax” by Kanga and Palkhivala]. Therefore, schematic interpretation for making the formula in section 80HHC workable cannot be ruled out. Similarly, purposeful interpretation of section 80HHC which has undergone so many changes cannot be ruled out, particularly, when those legislative changes indicate that the Legislature intended to exclude items like commission and interest from deduction on the ground that they did not possess any element of “turnover” even though commission and interest emanated from exports. We have to read the words “total turnover” in section 80HHC as part of the formula which sought to segregate the “export profits” from the “business profits”. Therefore, we have to read the formula in entirety.”

Citation :
Commissioner of Income-tax, Coimbatore v. Lakshmi Machine Works CIVIL APPEAL NO. 4409 OF 2005 & OTHERS DECIDED ON 25-4- 2007