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Commissioner of Income Tax v. Punjab Stainless Steel Industries

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 5592 of 2008)Decided 5 May 2014
Civil Appeal No. 5592 of 2008
Justice Anil R. Dave · Justice Dipak Misra

Background

A stainless-steel utensil manufacturer sold scrap left over from production in the domestic market. For calculating its export deduction under Section 80HHC, it accounted for that receipt separately rather than adding it to total turnover. The revenue argued that scrap sales should increase the denominator and reduce the deduction.

Decision Breakdown

The Court dismissed the revenue's appeal and the connected appeals. In the absence of a statutory definition relevant here, turnover was understood in ordinary commercial and accounting terms as sales of the goods in which the business dealt. This assessee manufactured and sold utensils, while the scrap was residual raw material arising from that process. Its proceeds could be accounted for separately or adjusted against raw-material cost without forming part of total turnover for the deduction. The Court distinguished a scrap dealer, whose sales of scrap would constitute the business's turnover.

Lesson Learnt

For the export-deduction provision examined here, incidental manufacturing scrap sales were distinguished from sales of the business's actual trading goods. The ruling does not mean scrap receipts are universally excluded from every tax calculation.

Official source (sci.gov.in)View Judgment (PDF)

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