TaxTMI 
TaxTMI 
2005 (7) TMI 74
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.... these cases and hence we are disposing of the same by a common judgment. The assessee in I.T.A. No. 140 of 2001 claimed deduction under section 80HHC(3A) of the Income-tax Act at the assessment stage and the Assessing Officer excluded 90 per cent. of the export house premium from the business profits on the ground that export house premium has nothing to do with the exports effected by the assessee. Aggrieved by the said order the assessee preferred appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) rejected the claim of the assessee on the ground that the premium received was a local receipt. The Assessing Officer after obtaining clarification from the Commissioner passed an order giving effect to the appellate order. That order is dated March 10, 1999 and the order was served on the assessee on March 22, 1999. The assessee took up the matter in appeal before the Appellate Tribunal with a petition for condonation of delay. The claim of the assessee was allowed by the Tribunal holding that the export premium cannot be excluded from the business profits under clause (baa) of the Explanation to section 80HHC. Reliance was placed on th....
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....house premium, have nothing to do with the exports effected by the assessee. In fact, the Export Houses pay this amount to attract exporters like the assessee to export through their Export House. Since the Export Houses stand to gain materially from increasing the export turnover through them, they are offering these amounts to exporters as additional attractions. Definitely, therefore, these amounts have the characteristics of 'miscellaneous income' only. Therefore, while calculating profits of the business, 90 per cent. of export house premium received is deducted from the net business income." The assessee aggrieved by the said order, preferred appeal before the Commissioner of Income-tax (Appeals). The contention was raised that the export premium received was consideration for the transfer of title to the goods and forms part and parcel of the value of goods exported. It was also contended that the disclaimer certificate given by the Export House in Form No. 10CCAB establishes that the assessee had sold the goods to the Export House. The Commissioner found that the action of the assessing authority in excluding 90 per cent. of the export house premium in computing profits ....
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.... Counsel submitted that the assessing authority should have excluded 100 per cent. of the export premium in computing the profits of the business under section 80HHC and the allowance for expenditure to the extent of 10 per cent. was not justified. Being a question of law, counsel submitted that if a mistake has been committed by the Revenue, the same could be set at rest holding that exclusion of 10 per cent. is on an erroneous understanding of the law. Senior counsel appearing for the assessee, Sri P.K. Kurian, fully supported the findings of the Tribunal. Counsel submitted that the export premium claimed by the assessee through which the exports of the assessee were routed did not fall under the various items like brokerage, commission charges or any other receipt of similar nature contemplated under sub-clause (i) of clause (baa) of the Explanation to section 80HHC(4A) and therefore, no part of the receipt is liable to be excluded while computing the income. Counsel submitted that the export house premium received was consideration for transfer of the title to the goods on board the ship after the goods crossed the customs frontier of India and is nothing but the value of go....
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....e the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House. Sub-section (3A) says that for the purpose of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be, in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more Export Houses or trading houses, the profit of the business and in a case where the business carried on by the supporting manufacturer does not consist exclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses, the amount which bears to the profits of the bus....
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....ents with the exporter for exporting goods to foreign countries. The agreements prescribed that the assessee-manufacturer would export the goods after incurring all the expenses and the bills would be drawn in the name of the Export House. The agreements stipulated that the assessee should be paid over and above the FOB value of goods exported a specified percentage of the FOB value by way of incentive, commission charges, etc. This amount would be paid by the Export House to the assessee in Indian currency. The Export House on receipt of the sale proceeds endorses the same to the assessee which results in foreign exchange being credited to the assessee's account after conversion to Indian rupees. The Export House by this process receives various benefits by way of incentives from the Government of India. The Export House used to give export premium to compensate for the loss of such incentive to the supporting manufacturer. These amounts are not obtained from the foreign importers. Export premium thus received is not part of the sale price of the exported goods and hence would not become part of the sales turnover of the assessee-supporting manufacturer. We are of the view that....
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....facturer. Counsel also submitted that the export house premium does not figure in the disclaimer certificate obtained by the assessee from the Export House in terms of section 80HHC(1A). The certificate is to be obtained in Form No. 10CCAB of the Income-tax Rules. The certificate has to mention the export turnover in rupees in respect of which the certificate is issued and also the figure of purchase from the supporting manufacturer in rupees. It is trite that the entitlement of premium is to the Export House and to the extent of disclaimer alone can claim deduction under section 80HHC. If no disclaimer is claimed by the Export House the entire benefit would go to the Export House. The above reasoning would get support from the decision of the Supreme Court in IPCA Laboratory Ltd.'s case [2004] 266 ITR 521. In that case the apex court was dealing with the question as to whether Export Houses can disclaim such deduction. The court held that it is clear from a reading of sub-section (1) of section 80HHC and sub-section (3) that a deduction can be permitted only if there is a positive profit in the exports of both self-manufactured goods as well as trading goods. The court also con....