2002 (3) TMI 222 - AT - Income Tax

Summary

Issues Involved:
1. Computation of deduction under Section 80HHC of the Income Tax Act for the assessment years 1992-93 and 1993-94.
2. Inclusion of export incentives as part of the sale consideration for goods sold to the export house.
3. Treatment of the export benefits received by the assessee by virtue of the disclaimer issued by MMTC.

Detailed Analysis:

1. Computation of Deduction under Section 80HHC:
The primary issue in both assessment years is the computation of deduction under Section 80HHC. For the assessment year 1992-93, the CIT(A) confirmed the AO's computation of the deduction at Rs. 82,26,75,467 against the claimed Rs. 91,25,13,634. Similarly, for the assessment year 1993-94, the CIT(A) upheld the AO's computation at Rs. 45,82,50,645 against the claimed Rs. 53,46,57,779. The AO's restriction of the deduction was based on the exclusion of the entire amount of sale value of REP licenses from the computation.

2. Inclusion of Export Incentives:
The assessee argued that the export incentives received by virtue of an agreement with MMTC should be considered part of the sale consideration for goods sold to the export house, thus qualifying for deduction under Section 80HHC. The assessee contended that the incentives were part of the pricing arrangement and should be included in the total turnover and profits from the sale of goods to the export house.

3. Treatment of Export Benefits:
The short point for consideration was whether the export benefit received by the assessee by virtue of the disclaimer issued by MMTC should be regarded as part of the sale consideration for goods sold to the export house or treated as export benefits under Section 28(iiia) of the Act. The assessee's counsel argued that the sale value of the licenses should not be treated as normal licenses under Section 28(iiia) but as part of the sale consideration.

The Departmental Representative countered that the premium on REP licenses is distinct from the actual value of the sale of goods and should be separately computed. The DR argued that the exact value of the premium on REP licenses was separately presented in the P&L account and classified as extraordinary income by the assessee.

Tribunal's Decision:
The Tribunal found in favor of the assessee, relying on the decision of the Cochin Bench of the Tribunal in the case of United Marine Exports vs. Dy. CIT. The Tribunal held that the export benefits received by the assessee by virtue of the disclaimer issued by MMTC should be regarded as part of the sale consideration for goods sold to the export house. The Tribunal noted that the nomenclature used for the incentive received is not decisive and that the amount received is intimately connected with the sale consideration.

The Tribunal directed the AO to recompute the deduction under Section 80HHC without excluding the sums received by the assessee by virtue of the disclaimer issued by MMTC under clause (baa) of the Explanation to Section 80HHC for both assessment years.

Conclusion:
The appeals of the assessee were allowed, and the AO was directed to recompute the deduction under Section 80HHC as per law, including the export benefits received by the assessee as part of the sale consideration for goods sold to the export house.