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TMI Blog1994 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the said sum. On a scrutiny of the agreements, the Assessing Officer came to the conclusion that the export earnings premium actually represented remuneration given to the assessee for various services rendered by it as enumerated in the agreements. Hence he was of the view that it represented only service charges. Therefore, he held that in arriving at the profits of the business, 90% of the same should be deducted under clause (baa) of the Explanation below sub-section (4A) of section 80HHC. Accordingly, the Assessing Officer computed the deduction allowable to the assessee under section 80HHC as follows :-- Rs. Rs. Profit and gains from business 12,30,564 Less : 90% of (i) Export earnings premium 5,93,072 (ii) Import Licence premium 11,23,752 (iii) Freight Brokerage 66,971 ------------------ 17,83,795 90% .... Rs. 16,05,415 (-) Rs. 3,74,851 (A) ------------------ (a) Profit of business (-) Rs. 3,74,851 (A) (b) Own export turnover 9,03,119 (c) Exports through Export houses with disclaimer certificates 2,52,89,709 --------------------- 2,61,92,828 -------------------- (d) Total turnover 2,62,58,829 Sales turnover Add : Export earnings Rs. premium 5,93,07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y went wrong in excluding the above amount from the profits and gains of business and in including the export earnings and freight brokerage in the total turnover. It was also contended that the assessing authority went wrong in not giving deduction under section 80HHC in respect of the REP Licence Premium relating to own exports. As for the freight brokerage credited to the profit and loss account, it was contended that it only represented a rebate or refund received from the principals of the shopping agents in respect of freight payments made for the exports and as such the same has to be deducted from the total freight payments. Further it was contended that as the business activity of the assessee was only that of an exporter any such receipt from the shipping company can be treated only as relating to exports. On a consideration of the submissions made before him, the learned CIT (Appeals) held that the sum of Rs. 5,93,072 credited in the profit and loss account under the head " Export earnings premium " merely represented commission for service charges received by the assessee from the export houses and, therefore, it was in the nature of receipts enumerated in clause (baa) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer and as such they entered prof its and gains of business. As a supporting manufacturer, the assessee is entitled to deduction under sub-section (1A) of section 80HHC read with subsections (3A) and (4A) of the said section. Sub-section (3A) is in two parts. Clause (a) deals with assessees exporting goods exclusively to the export houses. Obviously, the assessee will not fall under clause (a) as it is owning its own exports also. The case would be governed by clause (b) of sub-section (3A) which is as follows : " 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 business the same proportion as the turnover in respect of sale to the respective Export House or Trading House bears to the total turnover of the business carried on by the assessee." The deduction is to be computed in respect of the profits of the business as defined in clause (baa) of Explanation under sub-section (4A) of section 80HHC, which is as under :-- "(baa) 'profit of the business' means the profits of the business as computed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export premium receipts is only a subsidy received by the assessee to cover the cost. Certainly it will fall within the meaning of the term any receipt towards " charges " that entered the profits of the business. Similar is the case with brokerage on freight. In this view of the matter, we reject the contention of Sri Kesavan and uphold the computation of the Assessing Officer in reducing the profits by 90% of the export earnings premium and the brokerage in computing the profits for purpose of deduction under sub-section (1A) of section 80HHC of the IT Act. 4. Sri Kesavan's next submission is that the assessee is purely an exporter, either exporting on its own or exporting to Export Houses and, therefore, the entire profits should be exempt. We do not accept this contention for the reason that from the profit and loss account submitted before us we notice that apart from the exports of goods directly or to Export Houses, the assessee was having local sales also, though negligible as compared to the export turnover. Therefore, it cannot be said that the assessee was having export turnover only. The assessee's business consisted of direct export, export to Export Houses as a supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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