COMMISSIONER OF INCOME TAX Vs. EXTRA WEAVE

JUDGEMENT

(1.) The sole question raised in the connected appeals filed by the Revenue against the very same assessee is whether the Tribunal was justified in allowing deduction of canvassing commission paid in the determination of export turnover for the purpose of deduction under S.10B of the Income Tax Act (hereafter referred to as the Act for short).

(2.) The assessee is a 100% export oriented unit engaged in manufacturing and export of coir products by using synthetic materials as well. Being a 100% EOU the assessee is entitled to deduction under S.10B on the profit earned on export. However, since the assessee has DTA sales, the eligible export profit for deduction has to be worked out in terms of S.10B(4) of the Act, which provides for working out proportionate profit on export turnover from the total profit. There is no dispute on the total profit or on the total turnover and the only dispute is what is export turnover that qualifies for deduction. While the case of the assessee is that it is the sale proceeds received in convertible foreign exchange that is export turnover, the Assessing Officer reduced therefrom the canvassing commission paid by the assessee to foreign agents in convertible foreign exchange and took only the net export turnover realised for the computation of export profit for deduction. The first Appellate Authority as well as the Tribunal agreed with the claim of the assessee and therefore the Revenue has filed these appeals against the common order of the Tribunal rendered for the assessment years from 2004-05 to 2006-07.

(3.) We have heard learned Senior Standing Counsel Shri. P. K. R. Menon appearing for the Revenue and learned Senior Counsel Shri. T. M. Sreedharan appearing for the assessee.