Exporters allege harassment – not from Customs but from Income Tax
Yesterday we carried a news story about the travails of the exporters who are now stuck with demands from Income Tax authorities on the sale of DEPB. Under Section 28 of the Income Tax Act the following are classified under profits:-
1. Profit on sale of licences (under Exim Policy)
2. Cash assistance for exports
3. Drawback
Under Section 80 HHC export profits are allowed as a deduction. This concession is to end with this financial year. The problem of the exporters is that Section 28 does not mention DEPB and Section 80HHC does not take into consideration losses, both of which they want to be rectified with retrospective effect. But Income Tax authorities seem to be serious in collecting their arrears. The exporters who had availed these benefits are doomed if the taxmen proceed to collect the arrears! Contrary to common belief, exporters don’t earn huge profits to meet the retrospective demands of the taxmen. North Block is indeed a potential repository of possible Tsunamis for the Indian businessman.
Now this problem is sought to be addressed, subject of course to certain conditions. Now
1. 90% of any profit on the transfer of the Duty Entitlement Pass Book Scheme on the transfer of Duty Free Replenishment Certificate in the case of an assessee having export turnover not exceeding rupees ten Crores during the previous year will be allowed deduction under Section 80HHC
2. For exporters having turnover of more than Rs. Ten Crores, the benefit will be allowed if the assessee has necessary and sufficient evidence to prove that, -
(a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme/ Duty Free Replenishment Certificate
(b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Entitlement Pass Book Scheme/ Duty Free Replenishment Certificate
3. If the Income from exports is a loss it will be set off against the profits from the transfer of export schemes scrips.
4. These benefits are available from the 1st day of April, 1998