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TMI Blog2013 (11) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case, the Tribunal was right in holding that the indirect expenditure related to exports should only be calculated on the basis of ratio of export turnover to total turnover under Section 80HHC when the details of indirect costs identified as pertaining to exports has been furnished by the assessee? 2. Whether on the facts and circumstances of the case, the tribunal was right in holding that the indirect expenditure related to exports should only be calculated on the basis of the formula u/s 80HHC if regular books of accounts are not maintained?". The assessment years are 2002-2003, 2003-2004 and 2001-2002 respectively. 2. The assessee is an manufacturer of plastic containers and trader in cosmetic goods. During the financial years relevant to the appeals under consideration, the assessee had exported trading goods and claimed deduction under Section 80 HHC of the Income Tax Act, hereinafter referred to as the Act. 3. For the assessment year 2003-2004, the assessee exported goods of the value of Rs. 9,00,26,096/-. In respect of the cost incurred on exports, the assessee had taken a figure of Rs.19.80 crores as indirect cost and apportioned them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the working had to be based on the guidelines and not resorting to apportionment. Thus, when the costs were easily identifiable they were direct costs allocated to exports and those sum identified as common for both exports and domestic turnover, need to be apportioned under 80 HHC (3)(b). Thus viewed, the officer rejected the assessee's explanation based on the provisions under 80 HHC (3) (b) to adopt apportionment. 4. The assessment for assessment year 2002-2003 is also on similar lines. Here again, the assessee provided the break-up of the figure of Rs. 14.16 crores claimed as indirect costs relatable to the exports. The assessee submitted a sum of Rs. 11,04,41,299/- was relatable to head office expenses having a bearing on exports and a sum of Rs.3,11,71,438/- as expenses relatable to exports. Viewing that the apportionment of the costs as provided under explanation to section 80 HHC need not be followed when it was possible to identify the expenses incurred for exports and non-exports, the assessing officer rejected the assessee's claim to follow formula. Aggrieved by this the assessee went on appeal before the Commissioner of Income Tax (Appeals). 5. In the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner in which the cost could be allocated would be by adopting the respective ratio. Thus, the Tribunal, agreed with the Commissioner and rejected the revenue's appeal. The Tribunal, pointed out the admitted fact that the separate books of accounts for export and domestic division had not been maintained and in the circumstances, when the language of Section 80 HHC (3) (b) of the Act is plain and simple, the proper course hence would be to resort to the apportionment of indirect costs as prescribed under 80 HHC (3) (b). The treatment of Rs.3,11,71,438/- mentioned by the assessee, ( for the assessment year 2002 -2003 ), as relatable to exports hence could not be taken as attributable to exports. The Officer had taken them as tantamounting to cost directly attributable to trading goods exported hence direct costs. The Tribunal pointed out the various description of this expenditure as salaries, staff welfare, interest, advertisement, sales promotion, freight handling and conveyance, repairs and maintenance, phone, postage, printing and stationary, rates and taxes, insurance and general expenses. The term "attributable' could be used for things intimately related, since they were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the head office is concerned, there is no dispute between the revenue and the assessee. The only question is as regards the expenses relatable to the exports for which the assessee had followed the formula. 10. It is not disputed by both parties that the assessee had not maintaned separate books for the export and the trading goods. On an enquiry made by the Assessing Officer, the assessee was asked to provide the break-up of Rs.19.80 crores for the assessment year 2003-2004 and of the figure of Rs. 14.16 crores for the assessment year 2002-2003. In paragraph 1.10 of the assessment order relevant to the assessment year 2002-2003, the assessing officer extracted the expenses allocated under the head export expenses relatable to export and head office expenses as having some bearing on the exports. Thus, for the assessment year 2002-2003, Rs.3,11,71,438/- was given as expenses relatable to exports and Rs. 11,04,41,299/- as Head Office expenses having a bearing on exports and for the assessment year 2003 -2004, the sum of Rs. 4,80,47,714/- was given as export expenses relatable to exports and a sum of Rs.15,00,30,591/- was given as Head Office expenses having a bearing on expo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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