TaxTMI 
TaxTMI 
2006 (12) TMI 109
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....umstances of the case, the Income-tax Appellate Tribunal was right in directing that indirect cost for computation of deduction under section 80HHC be reduced by 10 per cent. of incentive income earned?" The assessee is a partnership firm engaged in the business of purchase and export of goods. The income-tax return for the year in question was filed by the assessee on October 30, 1996, declaring nil income. During the course of assessment, the Assessing Officer found that the assessee, while working out the indirect cost of goods exported, claimed deduction at 10 per cent. as indirect expenses on account of expenses incurred for earning export incentives, miscellaneous income and brokerage etc. The claim made by the assessee was disallo....
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....ct, rather a result of the assessee's own imagination. He further submitted that the definition of indirect cost, as provided for in Explanation (e) to the fifth proviso to section 80HHC(3) of the Act, does not postulate the position as is sought to be projected by the assessee, where indirect cost has been defined to mean cost, which is not direct cost, allocated in the ratio of the export turnover in respect of trading goods to the total turnover. Direct cost has been defined in Explanation (d) to the same proviso. Both the clauses are reproduced hereunder for ready reference: "(d) 'direct costs' means costs directly attributable to the trading goods exported out of India including the purchase price of such goods; (e) 'indirect cos....
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....pported the claim of the assessee. He submitted that it is borne out from the provisions of section 80HHC of the Act that 10 per cent. is accepted as the standard expenses for earning income including income from the export incentives. It is for this reason that the same is provided for in clause (baa) in the Explanation attached to section 80HHC of the Act. This being an accepted position, the provisions being beneficial in nature, should be given a liberal construction and the assessee should be permitted to claim 10 per cent. of the income from export incentives as indirect cost while working out of the profits. In response to the preliminary objection raised by counsel for the assessee to the effect that the Revenue having not challe....
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....e Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods. (2) (a) This section applie....
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....xport out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods, the profits derived from such export shall,- (i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub....