2000 (12) TMI 762 - AT - Income Tax

Summary

Issues:
Computation of deduction under section 80HHC in respect of exports.

Analysis:
The dispute in this appeal pertains to the computation of deduction under section 80HHC for the assessment year 1993-94. The assessee, a manufacturer and 100% exporter of Incandescents, parts, and chemicals, received sums from the Government of India, including an amount on encashment of exim-scrip/RRP Licences and a reimbursement under the International Price Re-imbursement Scheme. Initially, the Assessing Officer allowed a deduction under section 80HHC at Rs. 34,75,502. However, the assessment was later reopened, contending that the deduction had been wrongly allowed to the extent of Rs. 3,11,783, representing 90% of the export incentive received. The department argued that the exim-scrip premium did not fall within the specified clauses of section 28 and, therefore, should not be included in export profits for the purpose of section 80HHC. The Commissioner of Income-tax (Appeals) upheld the department's decision.

Upon considering the contentions, it was noted that the International Price Reimbursement Scheme was deemed an export incentive for section 80HHC purposes as per CBDT Circular No. 621 dated 19-12-1991. Referring to a precedent case, it was established that amounts received on surrender of import or export licenses were considered as "cash assistance by whatever name called" under government schemes. In this context, the premium paid on surrender of exim-scrips granted by the Government of India was deemed to fall within this definition, necessitating its inclusion in export profit computation under section 80HHC. The proviso to sub-section (3) of section 80HHC clarified that 90% of such cash assistance should be included in the computation of profits derived from exports. Consequently, the disallowance made by the Assessing Officer was deemed unwarranted, leading to its deletion.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the correct interpretation of the relevant provisions and the inclusion of the premium paid on surrender of exim-scrips in the computation of export profits under section 80HHC.