9911796707
TMI Blog2010 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act does not contemplate exclusion of freight and insurance expenditure from both export turnover and total turnover ?" The facts leading to filing of this appeal are that the assessee, which is a company, carrying on business of export of granite, for the assessment year 1995-96 filed its return of income along with the requisite certificate and claimed deduction under section 80HHC of the Income-tax Act, 1961 (in short "the Act"). The same was taken up for scrutiny by the Assessing Officer and, according to him, the export turnover of Rs. 79,71,201 claimed by the assessee was not correct and that the FOB value of the assessee had to be taken into consideration and accordingly computed the export value at Rs. 70,25,959. Thereafter, he deducted all the direct and indirect costs from the said amount including freight and insurance charges. Accordingly, the Assessing Officer held that the direct and indirect costs amounting to Rs. 64,83,859 and relief under section 80HHC of the Act were worked out to Rs. 5,42,100 and the said assessment was confirmed by the order dated February 26, 1998. Being aggrieved by the said order the assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, inasmuch as the freight and insurance charges have to be excluded from the purview of "export turnover" and in which case the same cannot be brought within the scope of direct costs while deducting the said amount from the export turnover. He further submits that on a reading of the definitions, the Commissioner of Income-tax (Appeals) rightly held that the freight and insurance charges cannot come within the scope of direct costs and after deducting the same from "export turnover" has rightly directed the Assessing Officer to recompute the profits for the purpose of deduction under section 80HHC of the Act, which order has been rightly confirmed by the Tribunal and which does not call for interference in this appeal. He has also referred to the decision of the apex court in the case of CIT v. Lakshmi Machine Works reported in [2007] 290 ITR 667 (SC) to draw our attention to the object and purpose of section 80HHC of the Act and the decision of the Calcutta High Court in the case of CIT v. H. M. Exports Ltd. reported in [2005] 276 ITR 299 (Cal). Having heard the counsel on both sides and on a perusal of the material on record, the only question that arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) ; (ba) 'total turnover' shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) : Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression 'total turnover' shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 ;" On a conspectus reading of the aforesaid provisions it becomes clear that while determining the export turnover with regard to goods exported outside India or trading of goods as per section 80HHC(3)(b), freight and insurance charges have to be deducted at the first instance. In other words, what the definition of "export turnover" states is that freight and insurance charges attributable to the transportation of goods or merchandise beyond the customs station have to be excluded. Even the definition of "total turnover" does not encompass freight and insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Exports [2005] 276 ITR 299 (Cal), referred to above, wherein it has been held that the provisions are clear if read together and in order to compute profit out of the exports, the export turnover is to be reduced by direct and indirect costs. Since freight and insurance charges are not part of export turnover the same would be excluded while arriving at the export turnover. In the said decision, the Calcutta High Court confirmed the order of the Tribunal, which had also excluded the freight and insurance charges from the export turnover and held that the same cannot come within the scope of direct costs, since it is already excluded from the scope of export turnover. The said decision is squarely applicable to the present case also. It is also necessary to note that in the case of H. M. Exports [2005] 276 ITR 299 (Cal) referred to above it is stated that under the provisions of subsection (3)(b) of section 80HHC of the Act, the legislation has provided that the direct and indirect costs attributable to the said export have to be deducted from export turnover, i.e., to reduce on export costs. While following the said formula, the definition of export turnover has to be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2 reference made to profit and loss account has perhaps led the Revenue to believe that the said expenses are removed from the profit and loss account totally. We clarify that computation for the purpose of section 80HHC of the Act is a specific computation within the entire profit and loss account and the balance-sheet and, therefore, there can be no apprehension in the mind of the Revenue that the freight and insurance charges are totally removed from the profit and loss account. Hence, by clarifying that portion of the order of the Commissioner of Income-tax (Appeals) which has been approved by the Tribunal, we hold that the said authorities rightly did not exclude the freight and insurance charges within the computation of export turnover in the instant case arriving at a figure for the purpose of computation under section 80HHC of the Act. In this view of the matter the substantial questions of law in this appeal have to be answered against the Revenue and the Assessing Officer is directed to work out the computation for the purpose of section 80HHC of the Act in the light of the aforesaid observations. Accordingly, appeal is disposed of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
