The Hindu Business Line : Exporters seek tax relief on DEPB credit

WITH the Finance Bill 2004 not providing any specific relief on the contentious issue of taxation of duty entitlement passbook (DEPB) credit, exporters have approached the Finance Minister, Mr P. Chidambaram, on the same matter and pressed for suitable amendments.

A delegation of exporters led by the President of the Federation of Indian Export Organisations (FIEO), Mr Rafeeque Ahmed, met the Finance Minister here and expressed concern on the Union Budget proposals.

Besides demanding restoration of Section 80HHC that exempted profits made by exporters from taxation, the FIEO delegation also made a case for specifying in the statute book that DEPB credit should not be subject to income-tax.

An FIEO official said that the legislative amendment should be applicable from 1997 (when the DEPB scheme was launched) so that the exporters can get relief on the past cases scrutinised by the income-tax authorities. "Our contention is very simple. When you have not been taxing other import licences, what is the justification for taxing DEPB credit," the official said.

Informed sources said that more than 40 per cent of India's exports (in value terms) come under the DEPB scheme. India's exports target for 2004-05 has been pegged at $73.4 billion.

"We are hopeful that the Finance Minister would resolve the DEPB credit taxation issue in our favour when he comes up with amendments to the Finance Bill 2004," Mr Subash Mittal, Vice-President, FIEO, and a member of the FIEO delegation that met the Finance Minister, told Business Line here.

In August 2003, the Income-Tax authorities had in certain cases contented that DEPB credit is an income accruing to the exporters, and, therefore, chargeable to income-tax.

Exporters got a three-month reprieve till November after they approached the Revenue Department. The taxation of DEPB credit was again deferred for another three months, pending amendment to the Income-Tax Act in the 2004-05 Budget.

With the expiry of the second deadline in February and the dissolution of the 13th Lok Sabha in February, the legislative amendments to the Income-Tax Act that exporters were looking forward to did not materialise.

Under such a situation, informed sources pointed out that some assessing officers were granting relief to exporters on the issue even as some continued to assess such credits as income liable to taxation under the Income-Tax Act, 1961.