Page 119 - GSTL_11th June 2020_Vol 37_Part 2

2020 ] SGS CONSTRUCTION & DEVELOPERS PVT. LTD. v. COMMR. OF S.T., NEW DELHI 205
19. Normally, the term ‘turnover’ would show the sale effected by a busi-
ness unit. It may happen that in the course of the business, in addition to
the normal sales, the business unit may also sell some other things. For ex-
ample, an assessee who is manufacturing and selling stainless steel utensils,
in addition to steel utensils, the assessee might also sell some other things
like an old air conditioner or old furniture or something which has outlived
its utility. When such things are disposed of, the question would be wheth-
er the sale 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 material, which cannot be used for manufacturing
utensils. Such small pieces of stainless steel would be sold as scrap. Here al-
so, the question is whether sale proceeds of such scrap can be included in
the term ‘sales’ when it is to be reflected in the Profit and Loss Account.
16. The Hon’ble Supreme Court also held that for a more accurate
meaning of the term turnover one can also look into the dictionary meanings or
to the materials which are published by bodies of accountants. This is clear from
Para 25 of the judgment :
25. So as to be more accurate about the word “turnover”, one can either refer to
dictionaries or to materials which are published by bodies of Accountants. The In-
stitute of Chartered Accountants of India (hereinafter referred to as the ‘ICAI’) has
published some material under the head “Guidance Note on Tax Audit Under Sec-
tion 44AB of the Income tax Act”. The said material has been published so as
to guide the members of the ICAI. In our opinion, when a recognized body
of Accountants, after due deliberation and consideration publishes certain
material for its members, one can rely upon the same. Para 5 of the said Note
deals with “Sales”, “turnover” and “gross receipts”. Paras 5.2 and 5.3 of the said
Note are reproduced hereinbelow, which pertain to the term “turnover”.
“5.2 In the “Guidance Note on Terms Used in Financial State-
ments” published by the ICAI, the expression “Sales Turnover”
(Item 15.01) has been defined as under :-
“The aggregate amount for which sales are effected or services ren-
dered by an enterprise. The term ‘gross turnover’ and ‘net turnover’
(or ‘gross sales’ and ‘net sales’) are sometimes used to distinguish
the sales aggregate before and after deduction of returns and trade
discounts”.
5.3 The Guide to Company Audit issued by the ICAI in the year
1980, while discussing “sales”, stated as follows :
“Total turnover, that is, the aggregate amount for which sales are
effected by the company, giving the amount of sales in respect of
each class of goods dealt with by the company and indicating the
quantities of such sales for each class separately.
Note (i) The term ‘turnover’ would mean the total sales after de-
ducting therefrom goods returned, price adjustments, trade dis-
count and cancellation of bills for the period of audit, if any. Ad-
justments which do not relate to turnover should not be made e.g.
writing off bad debts, royalty etc. Where excise duty is included in
turnover, the corresponding amount should be distinctly shown as
a debit item in the profit and loss account. ”
1. The aforestated meaning given by the ICAI clearly denotes that
in normal accounting parlance the word “turnover” would mean
“total sales” as explained hereinabove. The said sales would defi-
GST LAW TIMES  11th June 2020  119