TaxTMI 
TaxTMI 
2007 (4) TMI 297
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....ned CIT(A) erred in arriving at a sum of Rs. 7.39 crores being the interest expenses for working out the indirect cost under s. 80HHC against the net debit in the P&L a/c of Rs. 4.52 crores (income from interest at Rs. 39 crores and expenditure of Rs. 43.52 crores the net result being debit of Rs. 4.52 crores). 2(a) Without prejudice to the ground at S. No. 2, the appellant had given adequate evidence that the entire expenditure of interest amounting to Rs. 43.52 crores was in relation to imports only and no element of interest could be related to exports and as such no part of the interest be taken in the expenses while working the indirect cost. (3) On the facts and circumstances of the case, the learned CIT(A) erred in holding that 90 per cent of the export incentive amounting to Rs. 8,28,87,587 as claimed by the appellant be apportioned between the export house and the supporting manufacturers ignoring the fact that the appellant did not issue any disclaimer certificate in respect of export incentive to supporting manufacturer." 3. Rival contentions have been heard and records perused. With regard to deduction claimed under s. 80M on dividend income, the AO....
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....enditure with respect to such investment works out to be Rs. 12,35,200. It is also a matter of record that assessee was in receipt of dividend once in a year in the form of 8 to 10 dividend vouchers, which were to be deposited in the bank account. Therefore, it cannot be said that any major administrative expenses was attributable to such deposit of dividend warrants in bank. Recently, Tribunal, Special Bench, in case of Punjab State Industrial Development Corporation Ltd. vs. Dy. CIT (2006) 103 TTJ (Chd)(SB) 364 : (2006) 102 ITD 1 (Chd)(SB) has held that actual expenditure incurred has to be considered while allowing deduction under s. 80M and there is no question of taking expenditure on estimation or presumption basis. 8. In view of the above, we direct the AO to allow deduction under s. 80M after reducing a sum of Rs. 12,35,200 from the amount of gross dividend. We direct accordingly. 9. Next grievance of the assessee relates to computation of deduction under s. 80HHC(3) cl. (b) of the Act. During the year, the assessee was engaged in the export of trading goods, profit arising therefrom was claimed as deduction under s. 80HHC(3) cl. (b) of the Act. While computing the in....
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....ost to mean cost, not being direct costs, allocated in the ratio of export turnover in respect of trading goods to the total turnover. However, any part of costs which is not attributable to the export of trading goods, is not required to be considered for arriving at indirect cost. Thus, even the indirect cost in order to be apportioned in the ratio of export turnover in respect of trading goods, to the total turnover, some relation of such expenditure to the trading goods exported out of India is required to be established. In the case of Glaxo Smith-Kline Asia (P) Ltd., the Tribunal has held that only indirect cost which is attributable to the export turnover is required to be reduced while computing deduction under s. 80HHC, in respect of export of trading goods and not all other costs. In the instant case, the assessee is engaged in the import of nonferrous metals, ammonia, etc. The assessee was directed by the Government of India to defer its payments in foreign exchange under the bankers acceptance scheme, therefore, it had taken credit facilities with respect to the import of such goods. Some other credit facilities were also availed by the assessee in respect of its local ....
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.... 43.52 crores None of aforesaid interest was paid in connection with exports and was not, therefore, related to exports. Therefore, no part of interest paid was required to be considered for computing indirect cost while computing deduction under s. 80HHC of the Act. 15. In view of the above, being agreeing the submission of learned Authorised Representative Shri Vohra, we do not find any merit in the order of lower authorities for apportioning the interest expenditure which are not attributable to the export of trading goods, while working out indirect cost liable to be reduced from the amount of export turnover of trading goods, for working out deduction eligible under s. 80HHC(3)(b) of the Act. 16. The last grievance of the assessee relates to apportioning export incentive between export house and supporting manufacturer, when the assessee did not issue any disclaimer certificate in respect of incentive to the supporting manufacturers. 17. Rival contentions have been heard and record perused. During the course of scrutiny assessment, the AO held that, as per provisions of s. 80HHC(3), its proviso and also as per proviso to s. 80HHC(2),....
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....so to sub-s. (1) of s. 80HHC of the Act requires the assessee to reduce from the total eligible profits, the profits relatable to export turnover disclaimed in favour of the supporting manufacturer. Thus, disclaimed profits are computed by apportioning the "total profits derived by the assessee from the export of the trading goods" in the ratio of export turnover disclaimed to the total turnover of the trading goods. Computing the disclaimed profits under proviso to sub-s. (1) of s. 80HHC of the Act, only "profits derived from export of trading goods" have to be apportioned and not the total eligible profits computed in sub-s. (3) of that section which comprises of profit from export of trading goods, manufactured goods as well as profits on sale of license granted under Import and Exports Act, etc., cash assistance received against export under any scheme of Government of India, any duty, customs or excise repaid under Customs and Central Excise Duties Drawback Rules, 1971. etc. The expression "total profits from export of trading goods", in the context of the said proviso, only refers to the profits computed under cl. (b) of sub-s. (3) of s. 80HHC of the Act, without including ex....