2013 (7) TMI 91 - HC - Income Tax

Court upholds Tribunal's disallowance of exchange rate difference for export turnover & rules on cost bifurcation.

Commissioner of Income Tax-IV Versus Vishal Export Overseas Ltd.

Commissioner of Income Tax-IV Versus Vishal Export Overseas Ltd. - TMI Issues:1. Disallowance of exchange rate difference for export turnover.2. Addition on account of estimated cost of goods.3. Eligible deduction under section 80HHC for disclaimer amount.4. Allowance of freight expenses beyond custom point.Issue 1: Disallowance of exchange rate difference for export turnoverThe appellant challenged the Tribunal's order regarding the disallowance of Rs.6,08,326 exchange rate difference for export turnover. The Tribunal directed the Assessing Officer to rectify the assessment of the previous year under section 155(13) of the Income Tax Act and allow the deduction under section 80HHC. Both sides had no objection to this, and the Tribunal upheld the decision based on the consent of both parties. The Court found no reason to interfere as the issue was decided based on mutual consent and no perversity was pointed out.Issue 2: Addition on account of estimated cost of goodsThe issue involved the addition made by the Assessing Officer on account of estimated cost of goods. The Tribunal held that the basis adopted by the Assessing Officer was not logical as direct costs related to purchases should be a reasonable basis. The Tribunal upheld the order of the CIT(A) stating that when purchases are made together for both export and domestic sales, the direct cost of purchases should be bifurcated on a pro-rata basis. The Court agreed with the Tribunal's reasoning and found no grounds to interfere with the decision in favor of the assessee.Issue 3: Eligible deduction under section 80HHC for disclaimer amountRegarding the disclaimer amount of Rs.4.76 crores for eligible deduction under section 80HHC, the Tribunal followed its earlier decision and restored the matter to the Assessing Officer. The Court noted that the Tribunal's decision from the earlier year had been accepted by the Revenue, and there was no challenge made. As the Tribunal merely followed its own order, which was accepted, the Court found no reason to interfere with the decision to restore the file for working out the deduction under section 80HHC.Issue 4: Allowance of freight expenses beyond custom pointThe issue revolved around the allowance of freight expenses beyond the custom point. The Assessing Officer initially held that only the amount beyond the custom clearance point was eligible for reduction from direct expenses. However, the CIT(A) clarified the issue and directed the Assessing Officer to provide necessary relief to the assessee. The Tribunal interpreted the expenses beyond the custom point in line with the law and held that such expenses should be excluded from export turnover and not from direct costs. The Court found no discrepancy in the Tribunal's decision and dismissed the Tax Appeal, as the issue was correctly determined based on the factual matrix and application of the law.