For the purpose of calculating the deduction, according to the export related deduction provisions such as Section 10AA,80HHC, etc of the Income Tax Act, one has to take into account the profits from the business of the assessee, export turnover and total turnover.
The deduction is determined as under:
Profits of the Business X Export Turnover/Total Turnover
Thus, to determine the amount of deduction, the assessee and the Revenue must be aware of the following three ingredients:
i) Profits of the business
ii) Export turnover
iii) Total turnover
The term ‘turnover’ has neither been defined in the Act nor has been explained by any of the CBDT circulars. In the aforestated circumstances, one has to look at the meaning of the term ‘turnover’ in ordinary accounting or commercial parlance.
Now the dispute is that, whether sale proceed of scrap is constitute as a part of total turnover or not ?
One can very well see that if the total turnover increases, the advantage of deduction would decrease because the amount deductible substantially depends upon the ratio between the export turnover and total turnover.