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The CIT(A), however, accepted the export turnover at Rs. 6,35,77,722 but considered the total turnover of the entire business at Rs. 1,48,55,01,543 and computed the profits of the business at Rs. 1,14,39,002 and arrived at a smaller deduction under Section 88HHE of the Act. The AO had added excise duty and sales-tax to paid to arrive at the total turnover which the CIT(A) has directed to be excluded.

31. The learned counsel for the assessee vehemently opposed the determination made by the Departmental authorities. He drew our attention to pp. 48, 49, 50 & 51 of the paper book to impress upon us to the correctness of the assessee's claim under Section 80HHE. The learned counsel contended that the Department failed to understand, the difference between the provisions of Section 80HHC and 80HHE of the Act. The total turnover referred to in Section 80HHE cannot include the global turnover of the assessee from all goods and merchandise. What is referred to in Section 80HHE is deduction in regard to profits in respect of computer software. According to the learned counsel for the assessee, the total turnover referred to therein relates to the total turnover of the computer software business both local and export. It does not take in its hold anything not connected with the computer software business. The department was, therefore, totally unjustified in including all the turnovers of the assessee not connected with the computer software business and that is the reason why the deduction claimed by the assessee is highly distorted. According to him, this is not the intention of deduction under Section 80HHE of the Act, The learned counsel for the assessee relied upon the principle laid down by the Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. and Ors. (2000) 245 ITR 769 (Bom), He drew our attention to the provisions of Section 80HHC and also Section 80HHE of the Act to impress upon us that the provisions of Section 80HHC are concerned with deduction in respect of profits arising out of export business of goods and merchandise whereas the deduction under Section 80HHE is in respect of profits from export of software. Under the very scheme of these provisions, what is to be included as total income should be those kinds of receipts which are specified under Section 80HHE, viz., computer software or its transmission and providing technical services in connection with development or production of computer software. The eligible profits of the business, for the purpose of Section 80HHE have also not been computed by the authorities below properly, the learned counsel for the assessee pointed out. He contended that the AO is not justified in reducing the sundry income while arriving at the profits and gains from software business :

32. The learned Departmental Representative, on the other hand, strongly supported the impugned orders in the light of the discussions in the order of the AO as well as the CIT(A).

33. We have carefully considered the rival submissions and gone through the record. The provisions of Section 80-HHC and Section 80-HHE, although speak of deductions with reference to profits from export business, Section 80HHC provides for deduction in respect of profits retained for export business whereas Section 80HHE deals with export out of India of computer software or its transmission from India to a place outside India by any means and providing technical services outside India in connection with the development or production of computer software. What is an export turnover is again defined in Section 80HHE(5). Identical provision in Section 80HHC(4B) deals with goods and merchandise to which that section applies whereas the provisions of Section 80HHE(5) deals with consideration received in respect of computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with Sub-section (2). The total turnover is defined not to include freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. What essentially Section 80HHE is dealing with is with reference to the turnover of computer software. The total turnover for the purpose of Section 80HHE can only mean, the total turnover of the computer software both in India and outside India. Under the scheme of the said section, it is not correct to include any other turnover not connected with the computer software business, We are, therefore, of the opinion, that the denominator adopted by the Department is wrong and is not in accordance with the scheme of deductions under Section 80HHE of the Act. If we approve the, calculation of the Department, the very object of intending and giving deduction under Section 80HHE is likely to be defeated if the assessee is having other turnover not connected with the computer software.

34. In this connection, it would be relevant to go into the legislative intent in the insertion of the new section, i.e., Section 80HHE of the Act which may be found in (1991) 190 ITR (St) 246, which is reproduced below :

"The proposed section seeks to provide that 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 computer software or its transmission from India to a place outside India by any means or in providing technical services outside India in connection with the development or production of computer software, he shall be allowed a deduction in the computation of his total income of the profits derived by him in respect of such computer software is received in, or brought into, India in convertible foreign exchange within a period of six months from the end of the previous year or such extended period as the CIT may allow in this behalf. Profits derived from the aforesaid business shall be the amount which bears to the total turnover of the business carried on by the assessee."
"A statutory provision must be so construed, if possible that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction."

If the Department's computation is accepted, it would only result in manifest anomalies and arbitrariness, Therefore, in our view, for the purpose of deduction contemplated by Section 80HHE, the total turnover for the said section should not include turnover on account of manufacturing, trading etc. which is totally unconnected with the public software business. Therefore, in our considered view, the total turnover, for the purpose of Section 80HHE consists of turnover from computer software business and providing of technical services. Accordingly, we direct computation of deduction under Section 80HHE on the total turnover of the assessee which, in accordance with the view we have expressed, should be the basis as a denominator.