A.C.I.T. vs. MULTIPLE EXPORTS

Facts

The assessee, Multiple Exports, engaged in exporting fabrics, deducted 10% of its export incentive amounting to Rs. 7,26,000/- from indirect expenses. This was done to compute export profit for claiming deduction under Section 80HHC of the Income Tax Act for the Assessment Year 1998-99. The Assessing Officer rejected this claim, and the CIT (Appeals) upheld the Assessing Officer's decision. The Income Tax Appellate Tribunal (ITAT), however, allowed the assessee's appeal, directing the Assessing Officer to reduce 10% of the expenditure from indirect costs in computing export profit. The revenue (ACIT) has filed this Tax Appeal against the ITAT's order.

Held

The High Court held that the substantial question of law raised in the appeal is required to be answered in favour of the assessee. The Court referred to the decision of the Hon'ble Supreme Court in Hero Exports (Supra), wherein it was held that the assessee was entitled to exclude the costs attributable to export incentives, commission, interest, etc., in arriving at the expenses attributable to the export trade. The High Court found no reason to give elaborate reasons as the Supreme Court's decision was clear on the point. Consequently, the impugned judgment and order passed by the ITAT was confirmed, and the Tax Appeal was dismissed. No costs were awarded.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in directing the Assessing Officer to reduce 10% of the export incentive as expenditure from indirect costs in computing export profit for the purpose of working out deduction under Section 80HHC of the Income tax Act? Assessee's contention: The assessee argued that the issue is settled by the Supreme Court's decision in Hero Exports vs. Commissioner of Income-tax (2007) 295 ITR 454 (SC). The assessee contended that the Supreme Court held that an assessee is entitled to reduce indirect costs by costs attributable to export incentives, commission, and interest when arriving at expenses attributable to export trade. Revenue's contention: The revenue, represented by its advocate, was not in a position to dispute the assessee's submission or point out any contrary decision.