Rebate of income tax in respect of export - Income Tax - 604/CBDT

INSTRUCTION NO. 604/CBDT Dated : August 30, 1973 Under the Finance (no.2) Act/1967 the following rebates of Income-tax were admissible in relation to exports:- (i) a rebate of one-tenth of the income-tax attributable to profits derived by the assessee from export of any goods or merchandise outside India; and in addition (ii)in the case of an assessee who manufactures-specified commodities(i.e commodities listed in the First Schedule to the Industries (Development Regulation) Act 1951 at the average rate of tax applicable to the total income of the assessee on an amount equal to 2 per cent of the sale proceeds of such commodities exported by him directly or sold by him to any other person in India and exported by such person. The Finance (No.2) Act 1967, however, specifically provided that the above mentioned rebate were admissible only with reference to the profits attributable to the export of goods or merchandise made before the date of devaluation of the rupee, i.e before 6th June,1966 or,as the case may be, with reference to the sale proceeds of the specified commodities exported by the manufacturer or sold by him to an exporter in India before the said date. In view of the position, no rebate of Income-tax was available for the assessment year 1967-68 in relation to exports, or sale to an exporter in India,made after the 5th June,1966. This provision was made in consequence of the reduction in the par value of the rupee with effect, grant of rebate of income/tax in relation to exports were discontinued after the Finance (No.2) Act 1967 and these provisions, there fore do not find a place in the Finance Act of 1968 and subsequent years. 2. The Comptroller Auditor General has reported a case in paragraph 19(iv) of his Report for the year 1971-72, where an Income-tax officer has granted rebate of tax under the aforesaid provisions even for the assessment year 1970-71. As rebate of tax in relation to exports is not available for the assessment year 1968-69 and subsequent years, the action of the Incometax Officer in this case was completely unwarranted and unjustifiable. In another case reported in paragraph 19(iii)(b) of the aforesaid Report, rebate of tax has been allowed for the assessment year 1967-68 with reference to the export profits/sales which included cash subsidy and excise drawbacks of very large amounts. As cash subsidy and excise drawbacks cannot be said to form part of export sales or export profits the amount of the subsidy and excise drawback should have been excluded by the Incometax Officer for the purpose of granting rebate of tax under the aforesaid provisions. 3. Income-tax Officers may kindly be directed to review cases in their respective Wards to ensure that rebate of Income tax in relation to exports is granted strictly in accordance with law. They should ensure that for the assessment year 1967-68 no rebate of tax is granted in relation to exports/sales made after the 5th June,1966 and that such rebate is not allowed for any assessment year after the assessment year 1967-68. Wherever possible remedial action should be initiated forthwith. 4. A compliance report indicating the number of cases checked, number of cases in which mistakes have been noted remedial action taken and tax effect in consequence thereof, should please be sent to the Board by 15th September,1973. 5 The consequential effect of these rectification, if any should be given in the Sur-tax assessments also, if applicable.