549. Profits from export business - Whether both manufacturers and export houses/trading houses who pass on benefit under new section 80HHC to manufacturers are entitled to the deduction under section 80HHC
Circular No. 466 was issued by the Central Board of Direct Taxes on 14 August 1986. Its subject is 549. Profits from export business - Whether both manufacturers and export houses/trading houses who pass on benefit under new section 80HHC to manufacturers are entitled to the deduction under section 80HHC.
Creates a route for the section 80HHC benefit to reach the manufacturer whose goods are exported through an export house or trading house. Section 80HHC as substituted by the Finance Act, 1985 gives an Indian company or a resident non-company exporter a deduction of up to 50 per cent of the profits derived from export. The Board decides that where an export house or trading house holding a Ministry of Commerce certificate for the relevant accounting period passes on part or all of its section 80HHC tax benefit to the manufacturer, the amount actually paid may be treated as business expenditure and allowed in computing the export house's total income. The combined benefit, deduction under section 80HHC plus deduction for the payment, must not exceed the maximum benefit available to the export house under section 80HHC, and the 'profits' for that ceiling are computed after taking the payment into account. In the manufacturer's hands the amount received is not to be included in total income if the claim is supported by a certificate from the export house or trading house.
Representations were received that manufacturers exporting through export houses or trading houses got no benefit from the amended section 80HHC, and that where the export house passed on its tax benefit, the payment should be deductible for it.
| Under the 1961 Act | Now |
|---|---|
| s.80HHC | no counterpart recorded |
549. Profits from export business - Whether both manufacturers and export houses/trading houses who pass on benefit under new section 80HHC to manufacturers are entitled to the deduction under section 80HHC
1. Section 80HHC as substituted by the Finance Act, 1985, provides that where an assessee, being an Indian company or a person (other than a company) resident in India exports out of India during the previous year, any goods or merchandise to which this section applies, he will be allowed a deduction of an amount not exceeding 50 per cent of the profits derived from the export of such goods or merchandise.
2. Representations have been received to the effect that the manufacturers of goods or merchandise exported through the export houses/trading houses do not derive any benefit under the amended provisions of section 80HHC. It has further been represented that if the tax benefit derived by the export house/trading house under section 80HHC is passed on to the concerned manufacturer, the amount so passed on should be allowed as a deduction in the computation of the total income of the export house/trading house.
3. The matter has been examined by the Board. It has been decided that if any export house/trading house holding a certificate in this regard issued by the Ministry of Commerce for the relevant accounting period passes on to the manufacturer part or whole of the amount of tax benefit derived by the former on account of deduction under section 80HHC, then the amount of actual payment made to the manufacturer for passing on the tax benefit may, subject to the limit laid down hereinafter be treated as business expenditure and be allowed as deduction in the computation of the total income of the export house/trading house.
4. The total amount of tax benefit on account of deduction under section 80HHC and the tax benefit on account of the deduction in paragraph 3 above shall, in no case, exceed the maximum amount of tax benefit available under section 80HHC to the export house/trading house. For computing the maximum amount of tax benefit under section 80HHC, however, the ‘profits’ as referred to in that section, will be determined after taking into account the deduction referred to in paragraph 3 above.
5. It has further been decided by the Board that the payment so received by any manufacturer whose goods or merchandise are exported through the export house/trading house will not be included in the total income of the manufacturer if such claim for non-inclusion is supported by a certificate by the export house/trading house.
Circular : No. 466 [F. No. 178/54/86-IT(A-I)], dated 14-8-1986.
On an assessment of an export house where the pass-on payment to its supplier is disallowed, or of a manufacturer where the receipt is added to income.
Source: the Income Tax Department’s own published text — its page for this instrument.