Judgment :- N. Kumar, J. The Appeal-ITA No. 798/2009 is preferred by the assessee against the order passed by the Income Tax Appellate Tribunal which held that, for the purpose of deduction under Section 80HHC, if separate accounts are maintained for such eligible business, then deduction under Section 80 HHC is to be computed on the basis of profit from such eligible business and the export turnover and total turnover of such business. 2. The subject matter of these proceedings arise out of the assessment year 2003-04. The assessee is carrying on four different businesses. Out of the four businesses which he is carrying on, the business carried on under the name M/s Esmario Export Enterprises, dealing with sea foods and marine products is an export business. Therefore, the assessee claimed deduction under Section 80HHC by treating the profit of business as defined in Explanation (baa) of Section 80 HHC as per the profits of all businesses and computed deduction under Section 80 HHC in the proportion of export turnover to the total turnover of the business. The assessing officer noticed that the total profit disclosed by the assessee from Raichur Thermal Power Station is Rs.21,96,543/-as against total turnover of Rs.17,87,36,113/-. Abnormality of profit is on account of receipt of roughly about Rs.12,00,000/-on account of civil construction work at Raichur Thermal Power Station before the stipulated time. The assessee while claiming deduction under Section 80HHC has considered the profits of all other businesses run by the assessee besides M/s. Esmario Export Enterprises. According to the assessing officer, the eligible business for deduction under Section 80 HHC was only in respect of M/s Esmario Export Enterprises. Therefore, the assessing officer restricted the deduction under Section 80HHC on the basis of the turnover and profit of the unit, namely M/s. Esmario Export Enterprises, which is only eligible for deduction under Section 80 HHC. 3. Aggrieved by the said assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) upholding the order of the assessing officer held that, only the profit and turnover of the business conducted by M/s Esmario Export Enterprises was eligible for consideration under Section 80 HHC. The global profit were not at all subject matter of the deduction under Section 80HHC. 4. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The global profit were not at all subject matter of the deduction under Section 80HHC. 4. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal held that, when the assessee has maintained separate accounts for different units and the assessee is having a number of businesses, then the deduction under Section 80HHC is to be ascertained in respect of the eligible business and if a separate accounts are maintained for such eligible business then deduction under Section 80HHC is to be computed on the basis of profit from such eligible business and the export turnover and total turnover of such business. Therefore, they upheld the order passed by the Appellate Authority and dismissed the appeal. Aggrieved by the same, the assessee is before this Court. 5. After passing of the order, the assessee filed an application for rectification of the said order relying on a judgment of the Division Bench of this Court in the case of THE COMMISSIONER OF INCOME TAX (APPEALS)-II, BANGALORE vs M/S RAJESH ART JEWELLERS in ITRC Nos.29-3/2002 disposed of on 7.4.2005, on the ground that though the said judgment was cited, the said judgment is not referred to. The said rectification application also came to be dismissed. Aggrieved by this order, appeal-ITA No.799/2009 is filed. 6. The substantial question of law that arise for consideration in these two appeals is as under:- Whether the Tribunal was justified in deleting, in order to ascertain deduction under Section 80HHC, the profit derived from all the businesses cannot be taken into consideration and it is only the profit from eligible business, i.e., export business alone should be taken into consideration? 7. We have heard the learned counsel for the parties. 8. In order to appreciate and answer the substantial question of law, it is necessary to look into the statutory provisions first, Section 80HHC (1) reads as under:- “80HHC. Deduction in respect of profits retained for export business. 7. We have heard the learned counsel for the parties. 8. In order to appreciate and answer the substantial question of law, it is necessary to look into the statutory provisions first, Section 80HHC (1) reads as under:- “80HHC. Deduction in respect of profits retained for export business. Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, [a deduction to the extent of profits, referred to in sub-section (1B)] derived by the assessee from the export of such goods or merchandise.” Sub-section (3) of Section 80HHC deals with how the profit derived from such export business has to be computed. Clause (a) of Sub-section (3) reads as under:- “3. For the purposes of sub-section (1). (a) Where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived, from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee.” Explanation to the Section defines what is convertible foreign exchange, export out of India, export turnover and total turnover and profits of the business. Profits of the business is defined in Explanation (baa) as under:- “profits of the business” means the profits of the business as computed under the head “Profits and gains of business or profession” as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and : 9. The Central Board of Direct Taxes has issued clarifications regarding the aforesaid provisions Circular No.564 dated 5.7.1990. The Central Board of Direct Taxes has issued clarifications regarding the aforesaid provisions Circular No.564 dated 5.7.1990. The relevant portion reads as under:- “The essential ingredients of Section 80HHC are as follows:- .(ii) he should be engaged in the business of export out of India of any goods or merchandise (other than mineral oils, minerals and ores): .(v) The deduction shall be of the profits derived by the assessee from the export of goods or merchandise. What constitutes “Profits derived from the export of goods or merchandise out of India”, has been defined in sub-section (3) of section 80HHC. This sub-section (3) lays down that the profits derived from the export of goods or merchandise shall be the amount which bears to the profits of the assessee (as computed under the head “Profits and gains of business or profession” the same proportion as the export turnover” bears to the “total turnover” of the business carried on by the assessee. 3. Several doubts have been expressed about how the deduction under section 80HHC is to be allowed. Representations received by the Board show that there is lack of uniformity amongst authorities in respect of allowing the aforesaid deduction. 4. Sub-section (3) of section 80HHC statutorily fixes the quantum of deduction on the basis of a proportion of the profits of business under the head “Profits and gains of business” irrespective of what could strictly be described as “profits derived from the export of goods or merchandise out of India”. The deduction is computed in the following manner:- Export turnover Profit of the business x ------------------ Total turnover 7. “Total turnover” was not defined earlier. There has been lack of uniformity amongst the assessing authorities and many assessing authorities are treating export incentives to be a part of the total turnover. The Finance Act, 1990, has therefore, clarified the position by inserting a definition for the term “total turnover” in the Explanation below section 80HHC. According to this definition, “total turnover” shall exclude cash compensatory support, duty drawback and profit on sale of import entitlement licenses. 8. To sum up, the deduction shall be allowed in the following manner:- Export turnover (sale proceeds actually received in foreign exchange) Profit of the business X ---------------------------------------------------------------------------- (including export Total turnover (excluding export incentive) incentives) 1. 9. According to this definition, “total turnover” shall exclude cash compensatory support, duty drawback and profit on sale of import entitlement licenses. 8. To sum up, the deduction shall be allowed in the following manner:- Export turnover (sale proceeds actually received in foreign exchange) Profit of the business X ---------------------------------------------------------------------------- (including export Total turnover (excluding export incentive) incentives) 1. 9. Thus, in the case of an assessee who is doing export business exclusively, “export turnover” and “total turnover” would be identical, if the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time limit. In that case, the entire profit under the head “Profits and gains of business or profession” (which will include the three export (incentives) will be deductible under section 80HHC. However, in order to arrive at the amount deductible under section 80 HHC in the case of an assessee doing export business as well as some other domestic business, the fraction of “export turnover” to “total turnover” will be applied to his profits computed under the head “Profits and gains of business of profession”, (which again will include the three export incentives)”. 10. This provision fell for consideration by the Apex Court in the case of COMMISSIONER OF INCOME TAX vs K. RAVINDRANATHAN NAIR [(2007) 295 ITR 228]. After noticing the aforesaid provisions, the Apex Court held that, Section 80HHC of the income-tax Act is not a charging section. It was an incentive provision. Its object was not to ascertain the real income. Section 80HHC(3) provided for the following formula: Profits of business X Export turnover Total turnover Section 80HHC had a head note. That head note said “Deduction in respect of profits retained for export business”. The said head note was inserted by the Finance Act, 1985 with effect from April 1, 1986. Under the original section as inserted by the Finance Act, 1983, the head note stated “Deduction in respect of export turnover”. Therefore, the very basis shifted from “export turnover” to retention of profits for export business.” By the Finance Act (No.2) Act, 1991 with effect from April 1, 1992, for the first time, the expression “profits of the business” stood defined to mean the “profits of the business” as computed under the head “Profits and gains of business” under sections 28 to 44D of the Income-tax Act. Therefore, before giving deduction under section 80HHC(3)(a), (b) or (c) of the Income–tax Act, the gross total income of the assessee being profits from business had to be arrived at in terms of clause (baa) of the said Explanation. While calculating “business profits” the same had to be done in terms of section 28 to section 44D of the Income-tax Act alone. Other provisions like sections 70 and 71 of the Income-tax Act were excluded. During assessment year 1993-94 80HHC(3) of the Income-tax Act constituted a code by itself. Subsequent amendments have imposed restrictions/qualifications by which the said provision has ceased to be a code by itself. In the above formula there existed four variables, namely, business profits, export turnover, total turnover and 90 per cent of the sums referred to in clause (baa) to the said Explanation. In the computation of deduction under section 80HHC all four variables had to be taken into account. All four variables were required to be given weightage. The substitution of section 80HHC(3) secures profits derived from the exports of eligible goods. Therefore, if all the four variables are kept in mind, it becomes clear that every receipt is not income and every income would not necessarily include element of export turnover. This aspect needs to be kept in mind while interpreting clause (baa) to the said Explanation. A bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges, etc., formed part of gross total income being business profits. But for the purposes of working out the formula and in order to avoid distortion of arriving at the export profits, clause (baa) stood inserted to say that although incentive profits and “independent incomes” constituted part of gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover. Therefore, in the above formula, we have to read all the four variables. On reading all the variables it becomes clear that every receipt may not constitute sale proceeds from exports. That, every receipt is not income under the Income tax Act and every income may not be attributable to exports. Therefore, in the above formula, we have to read all the four variables. On reading all the variables it becomes clear that every receipt may not constitute sale proceeds from exports. That, every receipt is not income under the Income tax Act and every income may not be attributable to exports. This was the reason for this court to hold that indirect taxes like excise duty which are recovered by the taxpayers for an on behalf of the Government, shall not be included in the total turnover in the above formula. 11. From the aforesaid statutory provisions, the clarification issued by the Board of Direct Taxes and the judgment of the Apex Court it is clear that, in computing the deduction in respect of profits retained for export business all the four variables should be kept in mind. As the total turnover is defined for the purposes of this Section alone, which means it shall not include the following receipts:- .(a) freight and insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962. .(b) indirect taxes as held by the Apex Court in the case of COMMISSIONER OF INCOME TAX vs MADRAS MOTORS LIMITED/M.M.FORGINGS LTD [(2002) VOL.257 60] .(c) what is excluded under (baa). All other incomes are included in the total turnover. Therefore, if the assessee is having several units dealing with several goods, for the purpose of assessment, the income from all these businesses is to be taken into consideration, excluding only what is stated above. In order to attract Section 80HHC he must be in the business of export which in turn brings foreign exchange to the country. In order to determine what is the business profit out of that export income, the formula is provided in sub-section (3). The said formula has now been explained by the circular as well as by the Apex Court. The said formula is as under:- Export turnover Profit of the business X ----------------- Total turnover In fact in the circular it has been specifically stated at paragraph 4 that, Sub-section (3) of section 80HHC statutorily fixes the quantum of deduction on the basis of proportion of the profits of business under the head “Profits and gains of business” irrespective of what could strictly be described as “profits derived from the export of goods or merchandise out of India”. Therefore, even the profits derived in a business which is not part of export business is to be taken into consideration. In other words, when all the income derived from the business is included in the turnover correspondingly, all the profits from such businesses also should form part of the profit of the business. In fact this could be squarely gathered if we look into the law prior to 1992. Section 80HHC (3) (a) reads as under:- “80HHC. Deduction in respect of profits retained for export business.- .(3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be, .(a) in a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head `Profits and gains of business or profession’. .(b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export:” 12. A perusal of the said provision makes it very clear that Section 3 (1)(a) dealt with a case where a business carried on by the assessee consisted exclusively of the export business. Clause (b) dealt with business carried on by the assessee which is not exclusively of the export business. Now, the said provision is substituted by Finance Act No.2/1991 with effect from 1.4.1992 deleting clause (a) which dealt exclusively with export business only. In addition to that clause b(aa) expressly states what are the incomes which do not form part of the total turnover for the purpose of computing profits of business. Therefore, the intention is very clear. It is not to take into consideration only the profits derived from export business. When once the income from all the businesses are included in the total turnover, the profit derived from all those businesses should form part of the profits of business for the purpose of computing the deduction under Section 80HHC. It is to be kept in mind that this provision is not a charging section, but an incentive provision. When once the income from all the businesses are included in the total turnover, the profit derived from all those businesses should form part of the profits of business for the purpose of computing the deduction under Section 80HHC. It is to be kept in mind that this provision is not a charging section, but an incentive provision. That is the reason why the Apex Court in unequivocal terms held in the aforesaid Ravindranathan Nair’s case that, every receipt may not constitute sale proceeds from exports. Every receipt is not income under the Income Tax Act and every income may not be attributable to exports. 13. Therefore, the finding of the Tribunal that for the purpose of calculating deduction under Section 80HHC, it is only the profits from the eligible business, the turnover of the eligible business is to be taken into consideration is contrary to the scheme of Section 80HHC and the circular. The finding is when the assessee has maintained separate accounts for different units and the assessee is having a number of businesses, then deduction is to be ascertained in respect of eligible business and if a separate accounts for such eligible business then deduction is to be computed on the basis of profit from such eligible business and export turnover and total turnover of such business. This finding is ex facie contrary to the definition clause contained in the explanation where the total turnover is explicitly defined for the purposes of this Section. In law there is no distinction between an assessee maintaining separate accounts in respect of each business or the assessee maintaining one account. Whether he maintains one account or separate accounts, for the purposes of the Act, the income of the business is calculated on the total turnover and he is assessed on that basis. When once the income from all the businesses is pooled together and constitutes a total income, only the profits derived from all those businesses also should form the components of the profits of business. In fact that is the view taken by the Division Bench of this court in Rajesh Art Jeweller’s case which is not properly appreciated by the Tribunal even though it was pointed to them and they committed a serious error in ignoring the same and interpreting the provisions contrary to the intent and purport of the said Section. In fact that is the view taken by the Division Bench of this court in Rajesh Art Jeweller’s case which is not properly appreciated by the Tribunal even though it was pointed to them and they committed a serious error in ignoring the same and interpreting the provisions contrary to the intent and purport of the said Section. The Tribunal seems to have been very much carried away by the fact that the assessee has maintained separate accounts for his each business which in law makes no difference. Hence, the impugned order cannot be sustained. Accordingly, we pass the following order:- .(a) Appeals are allowed. .(b) The impugned orders passed by the Tribunal, Appellate Authority and the Assessing Officer are hereby set aside. .(c) The substantial question of law is answered in favour of the assessee and against the revenue. .(d) No costs.