Reassortment, labour, commission, interest and rent excluded from sale proceeds for calculating export deduction; freight and insurance also excluded

HC held that reassortment charges, labour charges, commission, interest, rent and similar receipts are not part of sale proceeds and therefore cannot be included in business profits or total turnover for computing export profits under the export-deduction formula. The court found the Legislature intended both numerator and denominator to reflect sale proceeds only, and clarified that freight/insurance were excluded from total turnover (remedying pre-1992 distortions). The anomaly after April 1, 1992 was removed; consequently the appeal was allowed with no order as to costs.

---

---

Issues Involved: Whether reassortment charges are includible in business profits while calculating export profits.

Judgment Summary:

Issue 1: Inclusion of reassortment charges in business profits for export profit calculation
The appeal concerned the inclusion of reassortment charges in business profits for export profit calculation. The assessee received reassortment charges as commission from local parties in India for sales to foreign buyers. The Tribunal had ruled in favor of the assessee, but the High Court held that reassortment charges cannot be included in business profits as per the formula due to lack of linkage with export activities. The court referred to a previous judgment and legislative amendments clarifying that certain receipts should not be included in business profits for export profit calculation. The amendment was deemed clarificatory and prospective, effective from April 1, 1992. The court emphasized that receipts without a nexus to sale proceeds from export activity should be excluded from total turnover, including reassortment charges, labour charges, commission, interest, and similar receipts. Therefore, reassortment charges were not to be included in business profits for export profit calculation.

The judgment clarified the legislative intent to exclude certain receipts from business profits for export profit calculation, ensuring a fair and accurate assessment of export profits.

---