Export turnover computation: duty drawback and excise refund included, but import-entitlement profits excluded by source-of-income test.

Customs duty drawback and excise duty refund were treated as part of export turnover because they were directly attributable to export activity and had a sufficient nexus with the export business. Profits from import entitlements were excluded because their effective source was import activity, with only an indirect connection to exports; the relevant test was the source of the income, not the mere occasion for obtaining the entitlement. The objection based on a supposed double advantage was rejected as irrelevant. Accordingly, drawback and refund amounts were includible in export turnover, but import-entitlement profits were not.

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Issues: Whether drawback of customs duty and refund of excise duty, and whether profits from import entitlements, were to be included in the export turnover for computing qualifying income under the relevant export-profit deduction scheme.

Analysis: The deduction was linked to profits and gains derived from export business, and the computation rule had to be read in that light. Drawback of customs duty and refund of excise duty were directly attributable to the export activity and had a sufficient nexus with the export business, so they formed part of the export turnover. By contrast, profits from import entitlements had an immediate source in import activity and only an indirect connection with exports; the governing test was the effective source of the income, not the remote occasion for obtaining the entitlement. The objection based on supposed double advantage was held to be irrelevant.

Conclusion: The customs duty drawback and excise duty refund were to be included in export turnover, but profits from import entitlements were not to be included.

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