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TMI Blog2011 (5) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO. (6) It is, therefore, prayed that the order of the ld. CIT(A) may be set aside and that of the order of the AO be restored to the above extent. 2. The assessee is an exporter of various items such as cater oil, garments, ball pens, rice, wheat, sugar etc. It is also selling these items in domestic market. The first issue relates to disallowance, as export turnover, of additional sum received by the assessee in foreign exchange amounting to ₹ 6,08,326/- on account of favourable exchange rate fluctuation. The assessee has received this sum being the difference between the booked amount of export in the previous year and higher realization this year. The assessee claimed this as part of export turnover of the current year but the AO held that this realization related to exports in the previous year and hence it is not part of the export profit of the current year and treated the same as income from other sources. 3. The ld. CIT(A) following the decision in the case of Wolkem India Ltd. vs. DCIT 65 TTJ (Jp) 59 and Sharp Credit Ltd. vs. DCIT 83 TTJ (Del) 1056 held that additional sum received on account of favourable foreign exchange fluctuation is part of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 % 48.15 Total local sales Rs.200,16,42.825 % 51.85 Total cost of purchase of garments for export sales as well as domestic sales as per assessee Rs.338,41,62,462 Profit on export and local sale of garments Rs.17,65,02,454 Proportionate profit on export of garments in proportion to sale 48.15 x 476502454 = 190 Rs.24,70,66,522 Therefore, direct cost of exports relevant to garments is worked out at ₹ 162,95,86,159/- (i.e. 185,90,22,091 - ₹ 22,94,35,932) as against assessee s claim of ₹ 72,49,51,625/- b) Soyabean Total export sales Rs.58,39,11,556 % 22.98 Total local sales Rs.195,70,49,530 % 77.02 Total sales Rs.254,09,61,086 % 100 Total cost of pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r export Soyabean Rs.59,15,21,674/- 3) Cost of trading goods for export Rice Rs.2,99,59,325/- Total: Rs.466,16,95,374/- Further giving effect to assessee s claim of cancellation of wheat export of 12,97,19,645/- the direct cost was worked out to ₹ 4,53,19,75,729/-(Rs.4,66,16,95,374/- - ₹ 12,97,19,645/-).. This resulted in reduction of deduction u/s 80 HHC. The ld. CIT(A) did not agree with the above working of the AO and upheld the basis adopted by the assessee in working out the cost on the basis of purchase made by it rather than dividing on the basis of sales. 6. We have heard the parties and carefully considered the material on record. In our considered view there is no case for interference in the order of ld. CIT(A). The reasons are that the basis being the sales in domestic market and export adopted by the AO is not logical. The direct cost relates to purchases and, therefore, purchase cost has to be a reasonable basis. It is not identified that distinct types of purchases were made for export and for domestic sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision-wise profitability can be ascertained then profit u/s 80HHC(3) would be deduced in the ratio of disclaimer turnover. His observation in this regard are as under :- 11.2 I have carefully considered the facts of the case and the submissions as advanced by the appellant. I find that my predecessor has held in the order for Asst. Year 99-00 as under :- I am inclined to say that the export profit defined in CBDT Circular No.636 dtd.31.8.1992 and as held in case of appeal No.CIT(A) DC. SR17597-98 in case of Adani Exports Ltd. for Asst. Year 1994-95, does not include export incentives for the purpose of calculating profits reducing in case of disclaimer certificates are issued against export turnover. I appreciate the use of word such trading goods in proviso to sub-section 80 HHC(1). The aforesaid circular brings a clear difference between the export profit and the export incentives and therefore, I direct to consider division wise exports profitability in light of aforesaid circular. It was submitted by appellant company that separate set of records has been maintained for their marine division. In absence of any adverse observations of AO against such turnover and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. We direct him to re-adjudicate the issue considering the stand taken by the assessee/department in the preceding as well as subsequent year. He will also take into account the various judicial pronouncements relied upon by both the sides before us. Needless to mention that, he will allow adequate opportunity of being heard to the assessee while re-adjudicating the issue. 10. The ld. AR submitted that this issue consisted of two aspects one is about division of profitability and the other is about disclaimer. The Revenue has challenged only disclaimer and not about division of profitability, therefore, Revenue cannot now ask for setting aside the matter. 11. We have considered the rival submissions and perused the material on record. In our considered view the division of the issue into two -one the division of profitability and the other the disclaimer is inter-related and cannot be dissected. Ultimate object is working of allowable deduction under section 80HHC by excluding disclaimer part. This can be achieved only by considering the division of profitability relating to trading items and exported items and between exported items in the marin division ..... X X X X Extracts X X X X X X X X Extracts X X X X
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