TaxTMI 
TaxTMI 
2011 (5) TMI 922
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.... of the case, the ld. CIT(A) ought to have upheld the order of the AO. (6) It is, therefore, prayed that the order of the ld. CIT(A) may be set aside and that of the order of the AO be restored to the above extent. 2. The assessee is an exporter of various items such as cater oil, garments, ball pens, rice, wheat, sugar etc. It is also selling these items in domestic market. The first issue relates to disallowance, as export turnover, of additional sum received by the assessee in foreign exchange amounting to Rs. 6,08,326/- on account of favourable exchange rate fluctuation. The assessee has received this sum being the difference between the booked amount of export in the previous year and higher realization this year. The assessee claimed this as part of export turnover of the current year but the AO held that this realization related to exports in the previous year and hence it is not part of the export profit of the current year and treated the same as income from other sources. 3. The ld. CIT(A) following the decision in the case of Wolkem India Ltd. vs. DCIT 65 TTJ (Jp) 59 and Sharp Credit Ltd. vs. DCIT 83 TTJ (Del) 1056 held that additional sum received on account of....
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.... Total local sales Rs.200,16,42.825 % 51.85 Total cost of purchase of garments for export sales as well as domestic sales as per assessee Rs.338,41,62,462 Profit on export and local sale of garments Rs.17,65,02,454 Proportionate profit on export of garments in proportion to sale 48.15 x 476502454 = 190 Rs.24,70,66,522 Therefore, direct cost of exports relevant to garments is worked out at Rs. 162,95,86,159/- (i.e. 185,90,22,091 - Rs. 22,94,35,932) as against assessee's claim of Rs. 72,49,51,625/- b) Soyabean Total export sales Rs.58,39,11,556 % 22.98 Total local sales Rs.195,70,49,530 % 77.02 Total sales Rs.254,09,61,086 % 100 Total cost of purchase of soyabean for export sales as well as domestic sales as per assessee. Rs.257,40,77,375/- Loss on export and local sale of garments (-) Rs.3,31,16,243/- Proportionate loss on export of soyabean in proportion to sale 22.98 x 33116243 &nb....
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....ical. The direct cost relates to purchases and, therefore, purchase cost has to be a reasonable basis. It is not identified that distinct types of purchases were made for export and for domestic sale. If purchases are made together both for export and domestic sales then direct cost of the purchases has to be on pro-rata basis of purchases for both the sales i.e. domestic sales and export sales. There can be several reasons for getting more profits in either domestic sales or in export sales and, therefore, sales cannot be a reasonable basis for working out direct cost of purchases. Once there are uniform purchases then this basis is reasonable and correct. We accordingly uphold the order of ld. CIT(A) and dismiss the ground of the Revenue. 7. The third ground relates to deleting the amount relating to disclaimer amounting Rs. 4.76 crores. The facts relating to this ground are that assessee is making both export sales as well as domestic sales. It is transferring certain exports to other parties and disclaiming deduction under section 80HHC as per that section. Such disclaimer certificates are issued to supporting manufacturers. It was noticed by the AO that such disclaimer cert....
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....ives and therefore, I direct to consider division wise exports profitability in light of aforesaid circular. It was submitted by appellant company that separate set of records has been maintained for their marine division. In absence of any adverse observations of AO against such turnover and profitability, I direct to consider division wise profitability and proportionate reduction in deduction u/s 80HHC(1) in ratio of disclaimer turnover to total of such trading goods and wherein no such division wise profitability is to be ascertained profit of sec.80HHC(3) would be reduced in ratio of disclaimed turnover excluding summation of division was disclaimed turnover to total export turnover excluding summation of division was disclaimed turnover to total export turnover excluding summation of division wise total export turnover." As similar facts are involved for this year also, following the order of my predecessor, I direct the AO to consider division wise profitability and proportionate reduction in deduction u/s 80 HHC(1) in ratio of disclaimer turnover to total turnover of such trading goods and wherein no such division wise profitability is to be ascertained profit of section....
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.... and cannot be dissected. Ultimate object is working of allowable deduction under section 80HHC by excluding disclaimer part. This can be achieved only by considering the division of profitability relating to trading items and exported items and between exported items in the marin division and other division. We accordingly follow the order of the Tribunal in assessee's own case for Asst. Year 1999-00 as per para referred to above and restore the matter to the file of the AO for working out the deduction u/s 80HHC considering the division-wise profitability on the basis of turnover/profit as adopted in earlier years and then considering the disclaimer amount work out the available deduction u/s 80HHC. As a result, this ground of Revenue is allowed for statistical purposes. 12. Ground No.4 relates to allowing freight expenses beyond customs point. The facts relating to this issue are that assessee claimed an amount of Rs. 32,87,842/- and Rs. 1,89,82,039/- as freight on export totaling to Rs. 2,22,69,882/-. The AO pointed out that sum of Rs. 1.89 crores is expenditure beyond the customs clearance point and this amount has to be reduced from the direct expenses. However, the AO fur....