TaxTMI 
TaxTMI 
1976 (9) TMI 35
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....and Export Promotion Council and on the sum of Rs. 4,83,856 representing the income derived from sale of import entitlements ? " The short facts which gave rise to the above reference are these : The assessee is a company carrying on business in the manufacture and sale of cycle rims. Consequently, the assessee is engaged in the production of engineering goods and some of the goods are exported abroad. The Government had introduced more than one scheme to encourage such exports. Under one of the schemes, the assessee became entitled to a sum of Rs. 1,60,717 from the Engineering Export Promotion Council, and obviously this amount was paid to the assessee by way of compensating the loss it suffered by exporting goods abroad rather than sell....
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....16.79 Revenue from import entitlements 4,83,856.04 6,73,025.73 ----------------------- ----------------------- Profit on exports 90,986.35 ----------------------- The Income-tax Officer held that the cash subsidy of Rs. 1,60,717 and profits from sale of import entitlements amounting to Rs. 4,83,856 did not constitute the profits and gains derived by the assessee by export of goods within the meaning of clause 2(5)(a) of the Finance Act, 1966, and that in reality the assessee had incurred loss of Rs. 5,82,039 from export trade as indicated above. The assessee filed an appeal to the Appellate Assistant Commissioner and the Appellate Assistant Commissioner confirmed this conclusion of the Income-tax Officer. Thereafter, the assessee prefe....
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..... " Section 2(5)(d) stated : " The amount of any profits and gains derived from the export of any goods or merchandise out of India in respect of which deduction of income-tax is admissible under sub-clause (i) of clause (a) shall be computed in accordance with the rules made by the Board in this behalf. " Pursuant to this power conferred on the Board, the Central Board of Direct Taxes has made rules called the Income-tax (Determination of Export Profits) Rules, 1966. Rule 2(2) of these Rules with which alone we are concerned runs as follows : " Where in the opinion of the Income-tax Officer it is possible to ascertain the profits and gains on such exports, the qualifying income shall be taken to be the amount by which the profits and g....
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....ring Export Promotion Council is directly relatable to the loss which the assessee sustained by exporting the cycle rims. The import entitlement is again directly referable to the export performance, i.e., the quantum of export made by the assessee and, therefore, the profits and the receipts of the import entitlement will also be receipts referable to the exports. Once it is found that the profits and gains derived from the export have to be ascertained in accordance with the provisions of the Income-tax Act, 1961, and according to those provisions these two receipts have to be treated as business receipts relatable and referable to the export mentioned above, there is no escape from the conclusion that these two receipts will have to be t....