Expert Advisory Committee
ICAI-Expert Advisory Committee
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2.8       Query

 

Whether duty draw-back, cash incentives/assistance and premium on sale of import

entitlement be treated as export profits for the purpose of Section 80 HHC.

 

1. The Finance Act, 1988, has amended section 80 HHC (1) of the Income-tax Act, 1961, w.e.f., 1-4-1989, which provides as below:

 

“Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, 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 whole of the income derived by the assessee from the export of such goods or merchandise.”

 

2. In the above context, the querist has sought the opinion of the Expert Advisory Committee on whether duty draw-back, cash incentives/assistance and premium on sale of import entitlement, will be treated as export profit, for claiming deduction under section 80 HHC of the Income-tax Act, 1961, as amended by the Finance Act, 1988.

 

                                                                Opinion                                          November 15, 1988

 

1. The Committee notes that as per section 80 HHC (1) of the Income-tax Act, 1961, it is the “whole of income derived by the assessee from the export of such goods or merchandise” which is permissible for deduction. In this context, the Committee notes that para 5.10 and 5.11 of the Guidance Note on Audit Under Section 80 HHB and 80 HHC of the Income-tax Act, issued by the Institute of Chartered Accountants of India, state that “What is of relevance is not the book profit or the commercial profit, but the income from business computed under the provisions of the Income-Tax Act under the head “Profits and Gains of Business or Profession” (para 5.10)….The computation of income under this head is made in accordance with the provisions of sections 28 to 44D of the Act. The computation is of the income of the business…..”(para 5.11).

 

2. On the basis of the above, the Committee is of the opinion that duty draw-back, cash incentives/assistance and premium on sale of import entitlement, if taxable as income, will be considered as income derived by the assessee from export of the relevant goods in case the aforesaid items are related to the said exported goods.

 

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