(1.) THIS appeal has been filed by the Revenue against the order of the learned Tribunal dt. 21st Dec., 2005, so far as it relates to Appeal Nos. 390 and 405. However, it is clarified, that as a matter of fact the appeal is confined to the order of the Tribunal so far as it relates to Appeal No. 405 only, which appeal was filed by the assessee, regarding the matter relating to asst. yr. 1996 -97. We find from the perusal of para 9 of the order of the Tribunal, that it was conceded that the Revenue's appeal was infructuous, and was inadvertently taken, because the learned CIT(A) has decided the ground in favour of the Revenue itself.
(2.) THE appeal was admitted vide order dt. 21st March, 2007, by framing two substantial questions of law reading as under:
(3.) BEFORE us it is contended by the learned Counsel for the Revenue that the matter now stands concluded by two judgments of the Hon'ble Supreme Court, in CIT v. Lakshmi Machine Works : [2007]290ITR667(SC) , which judgment has subsequently been followed by the Hon'ble Supreme Court in CIT v. Catapharma (India) (P) Ltd. : [2007]292ITR641(SC) . A look at the judgment in Lakshmi Machine's case (supra) shows, that therein it was clearly held, 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. The words 'total turnover' in Section 80HHC have to be read as part of the formula, which sought to segregate the 'export profits' from the 'business profits'. Therefore, the formula has to be read in entirety. In that formula the entire business profit is not given deduction. It is the business profit, which is proportionately reduced by the fraction/ratio of export turnover total turnover which constitutes Section 80HHC concession (deduction), and since Section 80HHC(3) was a beneficial section, it was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have a formula, to ascertain export profits, by apportioning the total business profits, on the basis of turnovers. Therefore, just as commission received by an assessee is relatable to exports, and yet it cannot form part of 'turnover', excise duty and sales -tax also cannot form part of the 'turnover', and were not includible in the 'total turnover'. It was held, that otherwise, the formula becomes unworkable. Moreover, excise duty and sales -tax are indirect taxes, and they are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable.