Export profit rebate turns on total business income after set-off of losses, not isolated export profits

For export profit rebate under rule 2(3), "total income" means total income computed under the Income-tax Act, 1961, not export profits in isolation. The qualifying income is to be worked out on the assessee's whole business income after permissible set-off of business losses against profits from other sources, so the export business cannot be severed from other business activities for rebate calculation. On the stated figures, the qualifying income is Rs. 96,690 rather than Rs. 2,01,107.

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Issues: Whether, for the purpose of export profit rebate under section 2(5) of the Finance (No. 2) Act, 1962 read with rule 2(3) of the Income-tax (Determination of Export Profits) Rules, 1962, the qualifying income had to be taken as Rs. 2,01,107 or Rs. 96,690.

Analysis: The expression "total income" in rule 2(3) was held to mean total income as computed under the Income-tax Act, 1961 and not merely the profits of the export business in isolation. The rule was read as referring to the profits and gains of the whole business of the assessee, so the export business could not be severed from the other business activities for this purpose. Since business loss from one source was capable of set-off against profits from another source under the Act, the qualifying income had to be worked out on the basis of the total business income after such adjustment, and not on the gross export profit alone.

Conclusion: The qualifying income for computation of export profit rebate was Rs. 96,690, not Rs. 2,01,107, and the question was answered against the assessee.

Ratio Decidendi: For export profit rebate, "total income" in the relevant rule means the assessee's total income as computed under the Income-tax Act, including permissible set-off of business losses, and the rebate must be calculated on the qualifying income so determined for the whole business.

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