Financial Daily from THE HINDU group of publications
Thursday, Dec 08, 2005


News
Features
Stocks
Shipping
Archives
Google

Group Sites

Industry & Economy - Taxation


Negative profits: I-T Act change proposed to give relief to exporters

K.R. Srivats

New Delhi , Dec 7

IF the tax treatment of profits on sale of DEPB licences had left the exporting community somewhat aggrieved, there is major relief coming their way on the `negative profit' front.

The Taxation Laws (Second Amendment) Bill 2005 introduced in the Lok Sabha on Tuesday seeks to ensure that export incentives are allowed to be set off against `negative profit' situations for calculation of Section 80 HHC benefits.

For this purpose, the Income-Tax Act is to be amended on a retrospective basis from April 1, 1992.

Indications are that the exporting community would get a relief of about Rs 800-1,000 crore from this move. This is the approximate sum that was under dispute for "negative profit" cases from 1992-93.

The garment export sector would be a significant beneficiary of the proposed amendment on `negative profit' situations. Exports from this sector are mainly undertaken through the drawback scheme and not through the DEPB route.

A `negative profit' situation arises when the export price of an item is, say, Rs 100 and this is less than the cost of procurement or manufacture (including taxes and duties) of, say, Rs 105.

If the drawback applicable here were, say, Rs 10, the exporters would add this to the export price and show a net profit of Rs 5 and this amount would be claimed for Section 80HHC deduction.

The Income-Tax Department, however, contended that export incentives should not be added to the negative profit and the resulting amount could not be claimed as a deduction under Section 80 HHC.

The Department then sought to tax the entire export incentives on an independent basis. It had reopened past cases and Section 80 HHC benefits were denied to such `negative profit' cases.

On their part, the exporters argued that they usually operated on thin margins and that the export incentives should be included in determining export profit or export losses.

The issue of negative profits got settled at the level of the Prime Minister's Economic Advisory Council, which had come out in favour of the exporting community on this controversial issue.

Related Stories:
Tax exemption with riders for profit from DEPB licences — Amendment Bill introduced in LS; provisions a let down, say exporters

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

More Stories on : Taxation



Stories in this Section
Why support to R&D is crucial


Tropical cyclone `Fanoos' threatens south coastal Tamil Nadu
PF interest rate fixed at 8.5% — Rs 370-cr shortfall likely
Govt bid to make India an automotive hub
Kerala: Minister claims Rs 40,000-crore investments in 4 years
Adoor calls for total ban on plastic bags
JCT project gets UN nod for carbon trading
Infrastructure projects: Montek for viable public-pvt partnerships
Peenya industrial units keen to upgrade, tap global business
India could become a hub for vaccine production: PM
MoUs signed for new steel projects — Jharkhand Govt seeks detailed project report from corporates
Need for advanced technology in steel making stressed
Negative profits: I-T Act change proposed to give relief to exporters
Parliament approves Tax Tribunal Bill
VAT revenues in Delhi up 30 pc in April-Nov
Kerala Chamber plea on VAT registration
Textile industry holds promise with removal of quota regime
DoT clears Tata-Star DTH proposal
Visvesvaraya varsity opens centre of excellence
Exim Bank proposes 3 funds for food processing sector
Indian elected to Abu Dhabi trade body board
Women employee ratio in SSI sector higher in South
CPI(M) against FDI in retail: Karat
HK meet of WTO a `staging post' for greater convergence: Kamal Nath
CII organising meet on pumps tomorrow
Textile machinery expo from Dec 15
IDBI Bank property expo at Hyderabad
Annual management event at Mumbai
`Structural dynamics plays key role in disaster mitigation'
Executive development programme at Mangalore
In Hyderabad today
Shrimp exporters turn innovative; revamp biz
Oilmeal exports up 16 pc in April-Nov
Finance Ministry releases Rs 500 cr for relief work in TN
Mangalore mgmt assn award


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line