The Hindu Business Line : EEPC decries move to tax DEPB beneficiaries

SEEKING an immediate review of the proposed amendments to Section 80 HHC of the Income-Tax Act, engineering exporters have suggested to the Government that the Bill should not be passed in its current form.

They have suggested the Government fully implement the nature and extent of Section 80 HHC, as originally drafted, to dispel the misgivings of the exporting community on the subject.

The amendment Bill, introduced in Parliament on December 6, seeks to impose income-tax on those with export turnover of more than Rs 10 crore and who have claimed DEPB (duty entitlement pass book) benefits retrospectively, with effect from April 1, 1998.

Speaking to Business Line, Mr Rakesh Shah, Chairman, Engineering Export Promotion Council (EEPC), said that a closer scrutiny of the same has revealed several in-built flaws. Describing the tenor of the Bill as discriminatory, Mr Shah said that instead of exempting export income, it goes against the very intention of introducing Section 80 HHC.

The Section allows an exporter, while computing total income, a deduction to the extent of profits derived from such exports. "Export turnover," as per 80 HHC, means sale proceeds received in or brought into India by an assessee in convertible foreign exchange in accordance with Clause (a) of Sub-section (2) of any goods or merchandise to which the section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the Customs station as defined in the Customs Act, 1962.

In a recent representation to the Minister of Commerce and Industry, Mr Kamal Nath, the Council said: "The proposal to levy tax on exporters who have exported goods over Rs 10 crore is discriminatory, particularly the decision to tax only those who had opted for DEPB/DFRC route of incentives and exempting others who had opted for drawback facility."

According to Mr Shah, had exporters been aware that their opting for the DEPB scheme would negate the exemption under Section 80 HHC, "they would have taken a conscious decision to opt out of the alternative scheme available at that time."

The proposed amendment, he added, was "shocking," as it was akin to pulling the rug from the feet of exporters.

Asked if the move to recover taxes would affect the country's exports in the near future, he said that it would make life very difficult for exporters and may change their focus from doubling country's exports to combating the new challenge, threatening their very survival.

According to the EEPC Chairman, the 80 HHC benefit was granted to the exporting community irrespective of the scheme utilised by a particular exporter.

Mr Shah said that with the introduction of schemes such as DEPB and DFRC, necessary amendments to Section 80 HHC were not carried out.

"Besides, the Income-Tax authorities had started interpreting the relevant provisions in a manner which went against the basic intent of the legislature, that is, interpretation of negative profits."