LexCOMMNR. OF INCOME TAX-VII, NEW DELHI versus PUNJAB STAINLESS STEEL INDUSTRIES
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[2014) 8 S.C.R. 729 COMMNR. OF INCOME TAX-VII, NEW DELHI v. PUNJAB STAINLESS STEEL INDUSTRIES (Civil Appeal No. 5592 of 2008) MAY 5, 2014 [ANIL R. DAVE AND DIPAK MISRA, JJ.] .· Income Tax Act, 1961: A B s. 80-HHC - Deduction - Sale proceeds of unused! c unusable portion of steel scrap sold in local market by fbe steel utensils manufacturer - Whether incltJdible in total turnover for the purpose of calculating deduction u/s.80HHC of the Act - Held: Not includible. s. 80-HHC - Object of - Discussed. D Turnover - Meaning of - Discussed. The respondent-assessee is a manufacturer and exporter of stainless steel utensils. In the process of E manufacturing stainless steel utensils, some unused portion of the steel was treated as scrap and disposed of in the local market. The income arising from the said sale was shown in the profit and loss account. The question which has arisen for consideration in F the instant appeals was whether the sale proceeds of ·such scrap of steel is to be included in the total turnover 'for the purpose of calculating the deduction under Section 80-HHC of the Income Tax Act, 1961. Dismissing the appeals, the Court HELD: 1. To ascertain whether the turnover would also include sale proceeds from scrap, one has to know 729 G H 730 SUPREME COURT REPORTS [2014] 8 S.C.R. A the meantng: of the term 'turnover'. The term 'turnover' has neither been defined in the Income Tax Act nor .has been explai.ned by any of the CBDT circulars. In such circumstances, one has to look at the meaning of the; term 'turnover' in ordinary accounting or commercia' B parlance. Normally, the term 'turnover' would show the sale effe~ttd'. by· a bdsiness unit. It may happen that in the' course Of the busine·ss, in addition to the normal salesi the busfcaeSJ unit may also sell some other things such, as al'\ qld_alr conditioner or old furniture or somethinQ' c which has outlived its utility. When such things. are" disposed, of, the question would· be whether the safe proceeds of such things would be included in the 'turnover'. Similarly in the process of manufacturing utensils, there would be some scrap of stainless steel 0 material, which cannot be used for manufacturing utensils. Such small pieces of stainless steel would be sold as scrap. Here also, the question is whether sale proceeds of such scrap can be include.d in the 'term 'sales' when it is to be reflected in the Profit and Loss E Account. [Paras 17 to 19] [737-F-H; 738-A-C] 2. In ordinary accourtting parlance, as approved by all accountants and auditors, the term 'sales', when.: reflected in the Profit aild Loss Account, wou!d indicat~ sale proceeds from sale of the articles or things in whicl\ F the business unit is dealing. When some other things like old furniture or a capital asset, in which the business unlf is not dealing are sold, the sale proceeds therefrom would not be included in 'sales' but it would be showri separately. In simple words, the word "turnover" would G mean only the amount of sale proceeds received· in respect of the goods in which an assessee ·is dealing in. [Paras 20 and 21) [738-D-F] 3. So far as the scrap is concerned, the. sale proceeds from the scrap may either be shown separately H COMMNR. OF INCOME TAX-VII, NEW DELHI v. PUNJAB 741 STAINLESS STEEL INDUSTRIES iri the Profit and Loss Account or may be deducted from A the amount spent by the manufacturing unit on the raw material, which is steel in the case of the respondent- assessee, as the. respondent-assessee is using stainless steel as raw material, from whicl:l utensils are manufactured. The raw material, which is not.capable of B being used for manufacturing utensils will~have to be either sold as scrap or might have to be re-cycled in the form of sheets of stainless steel, if the manufacturing unit : is also having its re-rolling plant. ·1f it is not having such a plant, the manufacturer ·would dispose of the scrap ·of c steel to someone who would re-cycle the said scrap into steel so that the said steel can be. re-used. When such scrap is sold, the sale ·proceeds of the scrap cannot be included in the term 'turnover' fqr the reason that the respondent-unit is engaged primarily·· in the 0 manufacturing and selling of steel utensils and not scrap of steel. Therefore, the proceeds of such scrap would not . be included in 'sales' in the Profit and Loss Account of the respondent-assessee.
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