COMMISSIONER OF INCOME TAX vs. PRATIBHA SYNTEX LTD.

ITR/23/2000HC GujaratGJHC24022382200010 July 2007Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE SMT. JUSTICE ABHILASHA KUMARI4 pages
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What were the facts?

The Revenue (Commissioner of Income Tax) has referred a question of law to the High Court of Gujarat at Ahmedabad under Section 256(1) of the Income Tax Act, 1961. The reference concerns an order passed by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench. The dispute revolves around whether excise duty collected from customers, which was statutorily paid to the excise department, should be included in the assessee's (Pratibha Synthex Ltd.) total turnover for the purpose of computing deduction under Section 80HHC. The ITAT had held that it should not be included, despite Explanation (ba) to Section 80HHC which specifically excludes freight or insurance.

What did the High Court hold?

The High Court held that the ITAT was justified in its decision. The Court relied on the Supreme Court's decision in Commissioner of Income-Tax v. Lakshmi Machine Works (2007) 290 ITR 667 (SC). The Supreme Court had reasoned that the formula in Section 80HHC is designed to disallow a part of the concession when the deduction cannot be entirely attributed to exports, requiring a schematic interpretation. Receipts like brokerage, commission, interest, and rent, which have no nexus with exports, are excluded. Following this principle, the Supreme Court held that excise duty and sales tax also cannot form part of the 'total turnover' under Section 80HHC, as their inclusion would render the formula unworkable. Therefore, the High Court answered the reference against the Revenue and in favour of the assessee.

What were the issues?

1. Whether, in the facts and circumstances of the case, the ITAT was justified in holding that the excise duty collected from the customers as a discharge of its statutory liability to the excise department was not part of the total turnover, despite Explanation (ba) to Section 80HHC which excluded only freight or insurance? Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, it relies on a Supreme Court decision which suggests that excise duty and sales tax cannot form part of the 'total turnover' under Section 80HHC for the formula to remain workable. Revenue's Contention: The Revenue's contention is implicit in the question referred, which challenges the ITAT's decision to exclude excise duty from total turnover, particularly in light of Explanation (ba) to Section 80HHC.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/23/2000 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 23 of 2000 For Approval and Signature: HONOURABLE MR.JUSTICE J.M.PANCHAL HON'BLE SMT. JUSTICE ABHILASHA KUMARI ===================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== COMMISSIONER OF INCOME TAX - Applicant(s) Versus PRATIBHA SYNTEX LTD. - Respondent(s) ===================================================== Appearance : MR MANISH R BHATT,learned advocate for Applicant(s) : 1, Mr.Varun K.Patel, learned advocate, for MR SN SOPARKAR, learned senior advocate, for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE J.M.PANCHAL

ITR/23/2000 2/4 JUDGMENT and HON'BLE SMT. JUSTICE ABHILASHA KUMARI Date :

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