2012 (7) TMI 207 - HC - Income Tax

Deduction u/s 80HHC - reduction of export turnover to the extent of the amount not received in convertible foreign exchange within the statutory period - assessee in view of aforesaid contending proportionate reduction in direct cost and indirect cost in relation to trading of goods in export - Held that - Expenditure both direct and indirect are incurred for export of the commodity and nothing of it is attributable to the receipt of amount through banking channels. Petition of assessee dismissed.

Summary

Issues involved:
1. Interpretation of Section 80HHC of the Income Tax Act regarding deduction of export profit.
2. Reduction in export profit claim leading to levy of interest under Sections 234B & 234C of the Act.
3. Claim for proportionate reduction in direct and indirect costs related to trading of goods in export.

Analysis:
1. The judgment deals with the interpretation of Section 80HHC of the Income Tax Act concerning the deduction of export profit. The Assessing Officer reduced the claim of export profit made by the appellant as it was found that the appellant had not excluded the turnover not received in convertible foreign exchange within the statutory period. The appellant's argument for a proportionate reduction in direct and indirect costs related to trading of goods in export was dismissed by the court. The court held that the disallowance of export turnover as per the statutory provision of Section 80HHC(2)(a) was justified, as the expenditure incurred for export of the commodity is not attributable to the receipt of amount through banking channels. Therefore, the court found no merit in the appellant's challenge against the revised demand of tax.

2. The reduction in the export profit claim resulted in the levy of interest under Sections 234B & 234C of the Act. The court noted that the levy of interest was automatic, but the appellant had the right to apply for waiver. The court clarified that the appellant could still file an application for waiver if it was maintainable, even though one had not been filed earlier. The court upheld the decision of the Commissioner in dismissing the revision filed by the appellant challenging the part disallowance of deduction of export profit and the levy of interest.

3. The appellant's claim for a proportionate reduction in direct and indirect costs in relation to trading of goods in export was based on the argument that when export turnover is reduced, there should be a corresponding reduction in costs. However, the court held that as per the statutory provision of Section 80HHC(2)(a), the disallowance of export turnover to the extent of the amount not received in convertible foreign exchange within the statutory period was justified. The court emphasized that the expenditure incurred for export of the commodity is not linked to the receipt of amount through banking channels, and therefore, there was no ground for allowing the appellant's prayer for a proportionate reduction in costs.

In conclusion, the court dismissed the Writ Appeal, upholding the Commissioner's order and finding no merit in the appellant's challenges against the revised demand of tax and the levy of interest. The judgment provides a detailed analysis of the issues related to the deduction of export profit under Section 80HHC of the Income Tax Act and the consequences of not meeting the statutory requirements.