9911796707
TMI Blog2015 (1) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as outside the country. The exports made by it yield foreign exchange. Therefore, it is entitled to claim the deduction under Section 80HHC of the Act. Since it is a company, it reflects book profits in the profit and loss (P&L) accounts maintained under the provisions of the Companies Act. Section 115JA of the Act mandates that if the total income of a company, arrived at under the Act is less than 30% of the book profits in the P&L accounts of the previous year, the total income of such assessee company shall be deemed to equal to 30% of the book profit. The manner in which the book profit must be arrived at, is dealt with in the explanation to Section 115JA of the Act. For all practical purposes, the book profit is nothing but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to be followed in arriving at the profits derived from export of trading goods under sub- section 3 (b) thereof and the indirect costs mentioned therein must be only those, that are referable to the activity of export and not other activity including manufacture. He contends that on account of the indiscriminate deduction of the amount under the heading of indirect costs from the profits derived from the export turnover, the book profits referable to Section 115 JA of the Act do not suffer the otherwise expected level of reduction, and thereby, the appellant is exposed to higher tax liability. Sri S.R. Ashok, learned Senior Standing Counsel for the respondent, on the other hand, submits that the method of calculation of profits derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year prepared under sub-section (2), as increased by (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; (g) the amount or amounts set aside as provision for diminution in the value of any asset, if any amount referred to in clauses (a) to (g) is debited to the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 : Many of the expressions employed in these provisions are defined in the Explanation, which is as follows: Explanation. For the purposes of this sub-section, (a) "adjusted export turnover" means the export turnover as reduced by the export turnover in respect of trading goods ; (b) "adjusted profits of the business" means the profits of the business as reduced by the profits derived from the business of export out of India of tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it takes in its fold, the costs attributable to export of trading, including purchase price. When it comes to the question of indirect costs, it is couched in residuary terms, namely, not being direct costs. The definition further makes an indication that the allocation of direct costs shall be in the ratio between export turnover and total turnover. Once the costs incurred by an assessee for export of trading is determined, the figure indirect costs, as defined under clause (e) of Explanation, can be derived, just by relating the direct costs to the total costs. It is too well known that the ratio between export turnover over and the total turnover is an important phenomenon that, cuts across the gamut of Section 80HHC of the Act. The ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
