CGI INFORMATION SYSTEMS vs. DEPUTY COMMISSIONER

The Tribunal was correct in rejecting the alternate contention that, in computing the deduction under Section 80HHE, if the ‘total turnover’ is to be increased by the aforesaid amount of advances received from customers written back, the

The Tribunal committed an error in not adjudicating on the Appellants’ contention that foreign exchange fluctuation loss ought not to be reduced from the ‘export turnover’ in computing the deduction under Section 80HHE of the Act? and

The Tribunal committed an error in not also adjudicating the alternate contention that, in computing the deduction under Section 80HHE, if foreign exchange fluctuation loss is to be reduced from the ‘export turnover’, the same ought to also be reduced from the ‘total turnover’?”

Heard Shri T.Suryanarayana, learned Senior Advocate for the appellant and Shri E.I.Sanmathi, learned standing counsel for the Revenue.

Briefly stated the facts of the case are, during the course of business, assessee has received a sum of Rs.6,21,943/- as advance sale consideration. The business deal was not completed. Resultantly, assessee wrote back the advance and appropriated the same and claimed benefit under Section 80HHE of the Income Tax Act, 19611. The AO2, while computing the

Shri Suryanarayana, placing reliance on Commissioner of Income-tax-VII, New Delhi Vs. Punjab Stainless Steel Industries,5 submitted that the Turnover means, the sale proceeds of the goods. In the instant case, the sale has not taken place and the advance money has remained with the assessee. He argued that the said amount may be at best treated as assessee’s income but cannot be included in total turnover while computing deduction under Section 80HHE.

Shri Sanmathi for the Revenue submitted that ITAT has noticed that it is not clear as to whether the advance amount received is on account of domestic sale or international sale. Unless the said amount is ascertained, a definite finding cannot be recorded.

We have carefully considered rival contentions and perused the records.

The formula to compute the deduction under Section 80HHE is as follows:

It requires three components, profit of the business, export turnover and total turnover. Assessee’s grievance is, the advance amount written back by the assessee has been included in the total turnover. Therefore, what is to be determined at first, is ‘what is turnover’. In Punjab Stainless Steel Industries, the Apex Court was examining the sale of scrap of stainless steel by assessee therein and it has been held that ‘turnover’ would mean only the amount of sale proceeds received in respect of goods in which the assessee is dealing in. Here is the case where the

Shri Suryanarayana submits that as the first question has been answered in favour of the assessee, the second question does not arise for consideration. He does not press the third question. He submits that the fourth question is covered by decision of the Apex Court in Commissioner of Income-tax, Central-III Vs. HCL Technologies Ltd.6 and the said submission is not disputed by Shri Sanmathi.

In view of the above, following; ORDER (i) Appeal is allowed;