High Court Of Madras
CIT vs. Adyar Gate Hotel Ltd.
Section 5, 80HHD
Asst. Year 1994-95
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 233 of 2006
23rd February, 2006
Counsel Appeared :
Mrs. Pushya Sitaraman, for the Appellant
JUDGMENT
P.D. Dinakaran, J. :
The above tax case appeal is directed against the order of the Tribunal dt. 27th June, 2005, in ITA No. 725/Mad/1999 for the asst. yr. 1994-95.
2. The brief facts are as follows :
2.1 The relevant assessment year is 1994-95. The assessee is a company engaged in hotel business. The assessee excluded expenditure tax, luxury tax and sales-tax in the business receipts for the purpose of computation of deduction under s. 80HHD and also claimed refund of expenditure tax. According to the assessee the reason for non-inclusion of the above amounts was that these collections were not routed through the P&L a/c. The AO held that (i) since the liability to pay these taxes arose on account of the assessee carrying on the business, the receipts form part of the total turnover; and (ii) with regard to the refund of expenditure tax, since the assessee had been following the mercantile system of accounting, the excess collection was made assessable on accrual basis. Thus, the AO has also taken the refund as the assessee’s income to form part of the total turnover.
2.2 Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A), who upheld the order of the AO with regard to the inclusion of sales-tax, luxury tax and expenditure tax in the total income following the decision in the case of Sriram Transport Finance Co. Ltd. vs. Asstt. CIT (1997) 63 ITD 336 (Mad). With regard to the issue of refund of expenditure tax, the CIT(A) directed the AO to verify the figures given by the assessee and the actual date of refund and tax it in the relevant assessment year. 2.3 Hence, the assessee preferred further appeal before the Tribunal. The Tribunal following the ratio laid down in the case of CIT vs. Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596 : (2000) 245 ITR 769 (Bom), held that expenditure tax, luxury tax and sales-tax should not be included in the total business receipts of the assessee for the purpose of computation of deduction under s. 80HHD. With regard to the treating of refund of expenditure tax as income of the assessee, the Tribunal finding that the refund was granted a long period after finalisation of accounts of the assessee, held that the refund of expenditure tax will not form part of the current year’s income and allowed the appeal.
3. Not satisfied with the order of the Tribunal dt. 27th June, 2005, the Revenue has preferred the present appeal raising the following substantial questions of law :
“(i) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that expenditure tax, luxury tax and sales-tax should not be included in the total business receipts of the assessee for the purpose of computation of deduction under s. 80HHD ?
(ii) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the refund of expenditure tax will not form part of the income of the current year ?”
4.1 Issue No. 1 :
“Whether, on the facts and circumstances of the case, the Tribunal was right in holding that expenditure tax, luxury tax and sales-tax should not be included in the total business receipts of the assessee for the purpose of computation of deduction under s. 80HHD ?
4.2 In this regard, it is apt to refer to the decision of this Court in CIT vs. Wheels India Ltd. (2005) 197 CTR (Mad) 284 : (2005) 275 ITR 319 (Mad), wherein a Division Bench of this Court, in which one of us (P.D. Dinakaran, J.) was party, held as follows (headnote) :
“The object of s. 80HHC is required to be kept in mind while considering that section. The general definition of the word ‘turnover’ or the definition under the sales-tax laws or the case law dealing with the definition of turnover under the State levy cannot be imported into s. 80HHC of the Act, particularly, when such expressions are incorporated and explained in the provision itself. Sales-tax and excise duty are not to be included in the total turnover while computing the deduction under s. 80HHC.”
4.3 In the abovesaid decision, the decision of the Bombay High Court reported in CIT vs. Sudarshan Chemicals Industries Ltd. (supra) was also referred to, wherein it has been held as follows :
“That the total turnover cannot include the sales-tax and the excise duty and total turnover should be restricted only to such receipts which have an element of profit in it and it would be only the sale price which should be the relevant figure.”
4.4 Similar view has been taken by a Division Bench of this Court in the case of CIT vs. Sundaram Fasteners Ltd. (2005) 194 CTR (Mad) 339 : (2005) 272 ITR 652 (Mad), wherein it has been held as follows (p. 656) :
It is a settled law that though the ‘total turnover’ may include the receipts of excise duty and sales-tax, etc., in its general parlance and under specific statutes, because of its wider coverage in the definitions given thereunder, it has to be given a restrictive meaning while computing the ‘export profit’ for the purposes of s. 80HHC, namely, only that part of the receipt for sale consideration is to be taken as part of the total turnover which has an element of profit therein, and, accordingly, the receipts of excise duty and sales-tax which do not include an element of profit should be excluded from the ‘total turnover’.”
5.1 Issue No. 2 :Â “Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the refund of expenditure tax will not form part of the income of the current year ?”
5.2 On a perusal of the records, it is seen that based on the materials available on record, the Tribunal found that the AO failed to take into account the actual date of refund, which admittedly falls during the next assessment year and therefore, the same is not taxable for the asst. yr. 199495.
5.3 In view of the above factual finding, we do not see any reason to interfere with the order of the Tribunal on this issue.
6. In view of the foregoing conclusion, we do not see any question of law much less a substantial question of law arises for consideration in this appeal. Accordingly, the appeal stands dismissed.
[Citation : 293 ITR 86]
