Date:15/12/2004 URL: http://www.thehindubusinessline.com/2004/12/15/stories/2004121501981700.htm

Back Exporters hit by new interpretation of tax rules

Our Bureau

Mumbai , Dec. 15

BUSINESS at export houses across industries in Mumbai is taking a beating with the Mumbai Income-Tax Department's interpretation of Section 80HHC under the Tax Exemption Rules.

According to the Federation of All-India Textile Manufacturers' Associations President, Mr Arvind Poddar, Mumbai's I-T department has issued notices for recovery stating that the benefit of Section 80HHC was wrongly claimed by exporters. The incentives were provided to exporters to create a level playing field so that their exports stayed competitive in the global market.

Section 80HHC provides exporters such incentives as duty drawback, advance licences, and premium on sale of licences. These are exempt from income tax.

However, Mr Poddar said that over the last year-and-a-half, the I-T department had been initiating action against companies that could not show that their assessable income was higher than the incentives they were given. And this action was being taken with retrospective effect.

He said the small and medium-sized exporters had the most to lose. Mr Poddar added that a large number of exporters would be driven out of business if assessments for previous years were opened. While this is true for export houses across all industries, the action would especially affect textile export houses.

The association is due to make another representation to the Finance and Commerce Ministries and the Prime Minister's Office. The association will ask the Finance Ministry to issue a clarification to the Income-Tax Department on the matter.