"vegetable oils and vanaspati" - Income Tax - 202/CBDT

INSTRUCTION NO 202/CBDT, Dated: August 10, 1970 Section(s) Referred: 37 Statute: Income - Tax Act, 1961 The Finance Act, 1962 provides for a tax concession equal to one-tenth of the tax on the amount of export profits included in the total income of assessees. If the export profits are set-off against any losses in the process of computing the total income, no tax concession will be available. Under the Finance Act, 1963 and subsequent Finance Acts upto 1967, a further concession of deduction of tax on 2 per cent of the sale proceeds from export of specified commodities was allowed from the total tax payable by assessees. During test-checks conducted by the Revenue Audit Parties of the C AG of India, it was found that these concessions were not correctly allowed in several cases. Three of such cases have been specifically commented on by the Audit in Para 51(b) of Audit Report (Civil) on Revenue Receipts, 1970. Some of the mistakes found in these cases are summarized below: i) The total income of a company did not include any income under the head 'business' due to carry-forward and set off of loss from business relating to earlier years. The assessee was, therefore, not entitled to any rebate on the export income; but relief was allowed incorrectly. ii) A company was allowed rebate on its export profits at the full average rate of tax instead of at 1/10th of the average rate. iii) Vegetable oil and Vanaspati industry is one of those industries specifically excluded from those entitled to the concession for exports made out of India. An assessee engaged in the extraction of vegetable oils from oil cakes was granted rebate at the prescribed rate on the sale proceeds relating to export of de-oiled cake on the incorrect assumption that the said exclusion applied only to the articles "vegetable oils and vanaspati" and not to other articles manufactured in that industry. iv) Woolen carpets is one of the items mentioned in the first schedule to the Industries (Development and Regulation) Act, 1951; but under the Finance Act, 1964, the rebate on the export of woolen carpets is not admissible if the export took place before 1st March, 1964. In the case of a company which followed the calendar year as its accounting period, rebate was allowed in respect of turnover on export of woolen carpets worth several lakhs of rupees for the assessment year 1964-65, without verifying the date from which such exports were entitled to rebate. 2. The Board feel that the mistakes of the type referred to above could have been easily avoided, had a little more care been taken in understanding the provisions of the law as they stood at the relevant time. Since specific cases of lapses have been brought out in the Audit Report, 1970, there is every likelihood of this subject coming up for discussion in the Public Accounts Committee meeting. The Board, therefore, desire that a review of all cases of allowance of export rebates be conducted urgently through the Internal Audit Parties and rectificatory action taken promptly wherever found necessary. 3. A report regarding the results of the review undertaken may please be sent to the Board by 15-9-1970.