TaxTMI 
TaxTMI 
2013 (11) TMI 1370
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....2003-2004 and 2001-2002 respectively. 2. The assessee is an manufacturer of plastic containers and trader in cosmetic goods. During the financial years relevant to the appeals under consideration, the assessee had exported trading goods and claimed deduction under Section 80 HHC of the Income Tax Act, hereinafter referred to as the Act. 3. For the assessment year 2003-2004, the assessee exported goods of the value of Rs. 9,00,26,096/-. In respect of the cost incurred on exports, the assessee had taken a figure of Rs.19.80 crores as indirect cost and apportioned them to the exports in the ratio of export turnover and total turnover. However, on going through the Profit and Loss Account of the assessee, the officer noted that the assessee had incurred total indirect expenses at Rs. 105.06 crores and it should be apportioned in terms of 80 HHC (3) (b) read with explanation (d) and (e). The assessee submitted that the definition of "Indirect Cost" did not mean that all costs other than the direct cost should be considered as indirect cost attributable to the trading exports. It submitted that a sum of Rs.19.80 crores alone was attributable as indirect cost to the exports for arriving....
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....to the exports. The assessee submitted a sum of Rs. 11,04,41,299/- was relatable to head office expenses having a bearing on exports and a sum of Rs.3,11,71,438/- as expenses relatable to exports. Viewing that the apportionment of the costs as provided under explanation to section 80 HHC need not be followed when it was possible to identify the expenses incurred for exports and non-exports, the assessing officer rejected the assessee's claim to follow formula. Aggrieved by this the assessee went on appeal before the Commissioner of Income Tax (Appeals). 5. In the appeal relevant to the assessment year 2002 -2003, the First Appellate Authority pointed out that indirect expenses attributable to export goods were not identifiable. Admittedly, there was no documentary evidence filed to prove that the export of goods was effected only through head office for which any exclusive demarcation was done from all other branches of the assessee and there was no indirect expenses incurred at any other branch office that could be directly or indirectly relatable to the export of trading goods. In the circumstances, the Commissioner accepted that the formula as per 80 HHC (3) (b) had to be adopt....
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.... as relatable to exports hence could not be taken as attributable to exports. The Officer had taken them as tantamounting to cost directly attributable to trading goods exported hence direct costs. The Tribunal pointed out the various description of this expenditure as salaries, staff welfare, interest, advertisement, sales promotion, freight handling and conveyance, repairs and maintenance, phone, postage, printing and stationary, rates and taxes, insurance and general expenses. The term "attributable' could be used for things intimately related, since they were related to export as well as to the domestic trading, these expenditures could not be termed as intimately related only to export . In the result, the Tribunal agreed with the assesseee and held that the only manner in which the expenses could be attributable to export was by apportionment. The reasoning of the Tribunal as far as the next assessment year 2003 -2004 on the expenses relatable to the export turnover of Rs. 4,80,47,714/- is concerned, this was also on the same lines. Aggrieved by this, the present appeals are preferred by the Revenue. 7. Learned counsel for the Revenue pointed out that when the assessee is in....
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....r 2002-2003, the assessing officer extracted the expenses allocated under the head export expenses relatable to export and head office expenses as having some bearing on the exports. Thus, for the assessment year 2002-2003, Rs.3,11,71,438/- was given as expenses relatable to exports and Rs. 11,04,41,299/- as Head Office expenses having a bearing on exports and for the assessment year 2003 -2004, the sum of Rs. 4,80,47,714/- was given as export expenses relatable to exports and a sum of Rs.15,00,30,591/- was given as Head Office expenses having a bearing on exports. The assessee took the plea that the export expenses of Rs. 4,80,47,714/- and Rs.3,11,71,438/- were not attributable to exports having no nexus at all to exports in entirety. The entire argument of the Revenue rests on the fact that when the assessee had identified these expenses as relatable to exports there was no need for adopting any formula. The Revenue does not deny the fact that these expenses are not attributable in entireity to exports to treat them as direct costs. Nevertheless, as already pointed out, the reasoning is on the fact that the assessee had shown a detailed analysis of the costs and had given the bre....