9911796707
|
Home
Issues Involved:
1. Attribution of indirect costs to export incentives for deduction u/s 80HHC(3)(b). 2. Disallowance of Rs. 10,000 under postage, telegram, telephone, and telex expenses. Summary: Issue 1: Attribution of Indirect Costs to Export Incentives for Deduction u/s 80HHC(3)(b) The assessee, a partnership firm engaged in the export of trading goods, claimed a deduction of Rs. 84,87,278 u/s 80HHC(3)(b). The controversy centered on whether a part of the "indirect costs" should be attributed to the export incentives received by the assessee, which included duty drawback, excise duty refund, international price reimbursement, octroi duty refund, and sales tax refund, totaling Rs. 10,95,669. The assessee argued that 10% of these incentives (Rs. 1,09,567) should be attributed as indirect costs to the earning of these incentives, thereby reducing the indirect expenses debited in the profit & loss account for computing the deduction. The income-tax authorities opposed this, contending that no part of the indirect costs should be attributed to the export incentives. The assessee's contention was that export incentives are not "export turnover" as defined in clause (b) of the Explanation below sub-section (4B) and are excluded from "total turnover" by the proviso thereto. Therefore, indirect costs attributable to export incentives should not be considered as costs "attributable to such export." The Tribunal examined the legislative intent and the definitions of "direct costs" and "indirect costs" in clauses (a) and (e) of the Explanation below sub-section (3). It concluded that indirect costs should be attributable to the export turnover of trading goods and that any indirect costs reasonably attributable to receipts other than export turnover should be excluded. The Tribunal noted that the Legislature recognized that 10% of certain receipts might be incurred as expenses to earn them, as reflected in clause (baa) of the Explanation below sub-section (4B) and the proviso to sub-section (3). The Tribunal found merit in the assessee's claim, supported by previous Tribunal orders favoring the assessee's view. It held that the assessee could reduce the indirect costs by 10% of the export incentives, thereby increasing the deduction u/s 80HHC. Issue 2: Disallowance of Rs. 10,000 under Postage, Telegram, Telephone, and Telex Expenses This ground will be decided by the Division Bench.
|
