P.K. BANSAL, A.M. In this appeal Revenue has taken following effective grounds of appeal "The learned CIT(A) has erred in law and on facts of case in : (1) directing to allow interest expenses of Rs. 54,16,190 out of disallowance of pre-operative expenses. (2) directing to exclude sales-tax and excise duty, service charges, commission, conveyance charges and miscellaneous receipts from total turnover while calculating deduction under s. 8 HHC." 2. Ground No. 1 relates to deletion of disallowance made in respect of interest amounting to Rs. 54,16,190 shown by assessee under pre-operative expenses in balance sheet but claimed as deduction under s. 36(1)(iii) of IT Act while computing net taxable income. AO was of view that this expenditure has to be treated as capital expenditure but when matter went before CIT(A), CIT(A) deleted addition by observing in para 5.3 as under : "5.3 Following decision of Hon ble Tribunal in case ofVadilal Dairy International Ltd., decision of Hon ble Gujarat High Court in case ofAlembic Glass Worksand also following my orders for asst. yrs. 1995- 96 and 1996-97 in appellant s own case, AO is directed to allow interest expenditure of Rs. 54,16,190. disallowance in respect of remaining items made by AO is upheld. AO is directed accordingly." 3 . Before us learned Departmental Representative relied on order of AO. reliance was also placed on decision ofChallapalli Sugars Ltd. vs. CIT 1974 CTR (SC) 309 : (1975) 9 8 ITR 167 (SC)and it was contended that expenditure incurred by assessee by way of interest was capital expenditure and, therefore, it cannot be allowed under s. 36(1)(iii) and also in view of Explanation added thereto. 4 . Learned Authorised Representative, on other hand, relied on order of Hon ble Gujarat High Court in case ofDy. CIT vs. Core Healthcare Ltd. (2001) 169 CTR (Guj) 416 : (2001) 251 ITR 61 (Guj). Reliance was also placed on decision of Ahmedabad Bench in case ofKayal Syntex Ltd. vs. Dy. CIT(IT Ref. Nos. 2547 and 2546 of 2000). It was also contended that CIT(A) has allowed interest following decision of Hon ble Tribunal "C" Bench Ahmedabad in case ofVadilal Dairy International Ltd. vs. CIT(ITA No. 500/Ahd/1997, dt. 15th June, 199 8 ). It was pointed out that decision of Hon ble Supreme Court in case ofChallapalli Sugars Ltd. vs. CIT(supra) has been considered by Hon ble Gujarat High Court in case ofCore Healthcare Ltd.(supra). 5 . We have carefully considered rival submissions and perused materials on record. We have gone through orders of authorities below as well as case law relied before us. We find that Hon ble Gujarat High Court has duly considered judgment of Hon ble Supreme Court in case ofChallapalli Sugars Ltd.(supra) at p. 73 in case ofCore Healthcare Ltd.(supra). judgment of Hon ble Gujarat High Court is binding on us. Learned Departmental Representative could not dispute fact before us that facts in case ofCore Healthcare Ltd.(supra), Ahmedabad Bench has also followed said decision. We, therefore, respectfully following decision of Hon ble Gujarat High Court and that of Ahmedabad Bench in case ofKayal Syntex Ltd.(supra) dismiss Ground No. 1 of Revenue s appeal. 6 . Ground No. 2 consists of two issues. First issue relate to direction given by CIT(A) that sales and excise duty could not form part of total turnover for purpose of computing total turnover while working out deduction allowable to assessee under s. 8 HHC. 7. After carefully considering rival submission, we are of view that this issue is duly covered by decision of Special Bench of this Tribunal in case ofIFB Agro Industries Ltd. vs. Dy. CIT (2003) 7 8 TTJ (Cal)(SB) 77: (2002) 8 3 ITD 96 (Cal)(SB). 8 . Hon ble Karnataka High Court in case ofCIT vs. Bharat Earth Movers Ltd. (2004) 1 88 CTR (Kar) 4 88 : (2004) 26 8 ITR 232 (Kar)and Hon ble Madras High Court in case ofCIT vs. Wills (India) Ltd.has also taken same view by following decision of Bombay High Court in case ofCIT vs. Sudarshan Chemicals India Ltd. (2000) 163 CTR (Bom) 596 : (2000) 245 ITR 769 (Bom)as well as decision of Calcutta High Court in case ofCIT vs. Chloride India Ltd. (2002) 17 8 CTR (Cal) 432 : (2002) 256 ITR 625 (Cal). 9 . No contrary decision was brought to our notice by learned Departmental Representative. We, therefore, dismiss issue relating to direction given by CIT(A) that sales and excise duty should be excluded from total turnover while computing deduction under s. 8 HHC. 10. second issue in second ground taken by Revenue relate to direction given by CIT(A) that service charges, commission, charges, conveyance charges, miscellaneous receipts should be excluded from total turnover while working out deduction under s. 8 HHC. 11. Learned Authorised Representative in this regard contended that since 90 per cent of other receipts has been excluded in view of cl. (baa) under Explanation given under s. 8 HHC, therefore, this receipt cannot form part of total turnover. Reliance in this regard was placed on following decisions : (1)CIT vs. Kantilal Chhotalal (2000) 163 CTR (Mumbai) 476 : (2000) 246 ITR 439 (Mumbai); (2)CIT vs. K. Ravindranathan Nair (2003) 1 8 4 CTR (Ker) 46 : (2004) 265 ITR 217 (Ker). 12. learned Departmental Representative, on other hand, relied on order of AO. 13. We have carefully considered rival submissions and perused materials on record and gone through orders of tax authorities below. We have also gone through case law relied on by learned Authorised Representative before us. From facts on record we noted that AO has included following amount in total turnover while allowing deduction to assessee under s. 8 HHC : Rs. Sales-tax 1,70,10,2 8 3 Service charges & commission 25,5 8 ,344 Conversion charges 12, 8 9,3 8 2 Miscellaneous receipts 12,24,193 Thus, AO has taken total turnover at Rs. 1,05,50,24,916 in place of Rs. 1,03, 29 ,42,714 taken by assessee while computing deduction under s. 8 HHC. AO has worked out books profit after reducing 90 per cent of following amount : Rs. Service charges 25,5 8 ,344 Miscellaneous receipts 12,24,193 Duty drawback 3,49,747 Premium of special input license 8 ,33,5 8 6 Interest income 29 ,06,422 14. assessee disputed before CIT(A) about inclusion of aforesaid sales-tax, service and commission charges, conversion charges and miscellaneous receipts items in total turnover. CIT(A) allowed appeal of assessee and direct AO to exclude aforesaid items consisting of sales-tax, service charges and commissions, conversion charges and miscellaneous receipts from total turnover. While giving aforesaid direction CIT(A), in respect of service charges and commission, conversion charges and miscellaneous receipts observed that AO has already excluded 90 per cent of income relating to these items for purpose of calculating deduction under s. 8 HHC and, therefore, he held "When AO has excluded above four items for purpose of calculating export profit I am of view that none of above income should form part of turnover." 1 5 . Thus from facts on record it is apparent that CIT(A) has misunderstood fact. correct fact was that AO has not excluded 9 0 per cent of conversion charges amounting to Rs. 12, 8 9,3 8 2 while computing business profit for purpose of deduction available to assessee under s. 8 HHC. 1 6 . Revenue has come in appeal before us. We have already confirmed order of CIT(A) so far it relates to exclusion of sales-tax is concerned in preceding paragraph. issue before us now relates only to direction of CIT(A) in respect of exclusion of service charges and commissions, conversion charges and miscellaneous receipts. 17. We have gone through judgment of Mumbai High Court as relied by learned Authorised Representative in case ofCIT vs. Kantilal Chhotalal(supra). In this case it was held "Sec. 8 HHC of IT Act, 1961, has undergone various changes from time to time. Clause (baa) of Explanation to s. 8 HHC inserted by Finance (No. 2) Act, 1991, is clarifactory. Memorandum Explaining Provisions has discussed this point in detail. In(1991) 190 ITR (St) 300it has been mentioned that existing formula distorted figure of export profits when receipts like interest, commission, etc., are included in business profits and, therefore, to clarify meaning of business profits for purpose of s. 8 HHC, legislature has excluded above items from business profits in formula. Therefore, amendment was clearly intended to remove defect in formula for calculating export profits even before 1st April, 1992. In fact, legislature has clarified that receipts like interest commissions, etc. have no nexus with export activity and by including such receipts in business profits existing formula became unworkable. Hence, by amendment, such receipts were excluded. reading of cls. (b) and (ba) of Explanation clearly indicate that legislature has brought on par components of export turnover and sale turnover. Both numerator and denominator show that they refer to sale proceeds. Any receipt which does not form part of sale proceeds cannot come within ambit of above ratio. This is also in view of fact that proration applies to business profits in order to work out export profits. Therefore, numerator and denominator are required to have common element which is sale proceeds. In fact, by proviso in cl. (ba) to Explanation, it is further provided that expression "total turnover" shall have effect so as to exclude ss. 2 8 (iiia), (iiib) and (iiic) which refer to,inter alia, profits on sale of license granted under Imports (Central) Order, cash assistance, duty drawback, etc. This exclusion also shows that legislature clearly intended to exclude all receipts which have no nexus with sale proceeds from export activity. Held accordingly, that for purpose of s. 8 HHC total turnover cannot include reassortment charges, labour charges, commission, interest, rent or receipts of similar nature." 1 8 . We have gone through order of Kerala High Court in case ofCIT vs. K. Ravindranathan Nair(supra). In this case no doubt Hon ble Kerala High Court has held that processing charges received will not form part of turnover and further held that only sale proceeds of goods or mercantile alone will form part of turnover, from facts of case it is not apparent whether processing charges received were also excluded from profit of business for purpose of allocating these profits in ratio which export turnover bears to total turnover. Any receipts which does not form part of total turnover once entered to credit side of P&L a/c increases profit of business. We are of view, if any receipt does not form part of total turnover it should be excluded from profit of business also, because only numerator and denominator will show correct picture. decision of Mumbai High Court in case ofKantilal Chhotalal(supra) laid down same preposition of law. 19. In this case, we find that AO has excluded 90 per cent of service charges and commission and also miscellaneous receipts from business profit, therefore, in our opinion, CIT(A) was correct in law in directing AO to exclude from total turnover service charges and commissions and miscellaneous receipts. So far as conversion charges are concerned, AO has not excluded 90 per cent of conversion charges while working out business profit as per Expln. (baa) of s. 8 HHC. profit earned through conversion charges since already included in profit for business, therefore, in our opinion, conversion charges cannot be carved out of total turnover. We find that under Expln. (baa) of s. 8 HHC, total turnover has been defined w.e.f. 1st April, 19 8 7, which stipulates that total turnover shall not include freight or insurance attributable to transport of goods or merchandise beyond customs station, as defined in Customs Act, 1962. definition given is exclusive. word means has not been used. Therefore, natural meaning of total turnover has not been taken away. word exclude is used when only particulars items are excluded from meaning of word but natural meaning of word remains intact and is to be read excluding those items. Therefore, we do not agree with submissions of learned Departmental Representative that total turnover will include every receipt excluding freight or insurance. Natural meaning of total turnover remains. Turnover in common parlance means how funds received in course of business are turned over by businessman. Naturally, it will be receipt which he receives on his account. receipt, which are received on behalf of other person like Government cannot be part of total turnover. There are two terms generally used in accountant s language gross receipts and turnover. Gross receipt is wider term than turnover. Gross receipt will include all receipts made by businessman in course of business on revenue accountant and it generally represents total of income side in P&L a/c excluding stock. turnover generally represents consideration received on sale of goods, merchandise and services, other receipts, although are part of gross receipt but cannot be regarded to be turnover . In financial management, capital turnover ratio is computed to judge how efficiently capital is utilized. receipts which do not relate to goods or merchandise cannot be regarded to be turnover. legislature also wanted to restrict meaning of turnover to natural meaning, therefore, words gross receipt has not been used as words total sales , turnover or gross receipts are used under s. 44AB. Proviso given under Expln. (baa) also makes it apparent that natural meaning of total turnover has not been snatched away. 20. purpose of defining total turnover under s. 8 HHC is to allow deduction to assessee under s. 8 HHC(3) and for that purpose profit relating to export are to be worked out on basis of total profit of business and, i.e., why business profits are allocated in ratio as export turnover bears to total turnover. Therefore, in our opinion logical interpretation can be that if any receipt does not form part of total turnover it should be excluded from profit of business. If receipt is not excluded from profit of business, receipt has to be considered as part of total turnover. In view of our aforesaid discussion we set aside order of CIT(A) so far it direct AO that conversion charges should be excluded from total turnover because conversion charges in case before us form part of business profit. We, therefore, modify direction of CIT(A) and direct AO to exclude only service charges and commissions amounting to Rs. 25,5 8 ,344 and miscellaneous receipt amount to Rs. 12,24,193 from total turnover in addition to sales-tax for which we have already directed in preceding paragraph. Thus, this ground of appeal of Revenue is partly allowed. 21. In result appeal of Revenue is partly allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. ABIR CHEMICALS LTD.