The Hindu Business Line : ITAT upholds assessee claim in export income case

IN a landmark verdict delivered recently, a bench of the Income-Tax Appellate Tribunal (ITAT), Kolkata has unambiguously settled the much-debated issue of taxing of income (by the Revenue Department) of export business under Section 80HHC in the specific case of clubbing of turnover of two businesses — one for export and the other for domestic sale.

It was held that if profit of an export business can be separately identified, the department cannot aggregate the turnover of a domestic business.

The verdict also brings into sharp focus the inconsistency in approach while delivering justice, as when certain orders are passed by AOs and the same is turned down by CIT Appeals, resulting in matters coming up before the various ITATs, whose views too differ from time to time.

Upholding the claim of the assessee, the ITAT, Kolkata concluded that "the two separately named and variedly located and differently engaged units do exist in reality and they had existed so at the material time."

The ITAT did not find any infirmity in the earlier order of the CIT Appeals, and by upholding the same, dismissed the appeal by the Revenue Department.

The case of the Assistant Commissioner of I-T vs Akbar Ali, Kolkata pertains to the period when Section 80HHC benefits were allowed for export income. The assessee is an individual engaged in the business of leather and leather goods, owning Star Leather (engaged in processing of raw hides and manufacturing of finished leather), Crescent Tannery (manufacturing leather goods), Ambar Shoes, and North East Tannery (both of which have been closed down).

While Star Leather is engaged in domestic sale, Crescent is engaged in exports.

The said assessee had claimed deduction under 80HHC (for 96-97 assessment year) in respect of income of Crescent Tannery, and while calculating the deduction, the AO aggregated the sale of both the concerns.

When the appeal by the assessee against this verdict came up before CIT Appeals, it was allowed on the premise that the two companies were two different independent entities. "Therefore, the turnover of the two concerns cannot be clubbed together for the purpose of computing deduction under 80 HHC."

Aggrieved by this, the Revenue Department went in appeal before the ITAT, and the Department's representative supported the AO's order, placing reliance on the decision of the Delhi ITAT in the case of International Research Parl Laboratories Ltd vs ACIT.

It has been held in an earlier ITAT judgement that in case the assessee maintains books of accounts for the export business and profit and gains derived from his export business are "ascertainable", then his export turnover would be the same figure.