Export house premium

LEGAL DIGEST

Export house premium
The Supreme Court has ruled that the export house premium received by a company can be included in its "profits of business" while computing deduction under Section 80HHC of the Income Tax Act.

The judgement in the Commissioner of Income Tax vs Baby Marine Products case explained that the premium was an integral part of the business operation, which consisted of sale of goods by the company to the export house. In this case, the company was engaged in selling marine products both in the domestic and international markets.

The company entered into contracts with export houses whereby as and when it sold goods to an export house, as consideration for the sale, it received the entire FOB value of the exports plus the export house premium of 2.25 per cent of the FOB value. While filing the income tax returns, it showed the export house premium as part of its total turnover, thereby seeking deductions available to the exporters under Section 80 HHC (1A) of the Act.

The income tax officer rejected the claim, leading to the dispute. The tribunal held that the export house premium was an integral part of the sale price realised by the company from the export house. The appeal of the commissioner of the income tax to the Supreme Court was dismissed.

Domestic tariff area sales
The Supreme Court has dismissed a large number of petitions moved by export oriented units challenging the policy circular of August 30, 2005 which amended the foreign trade policy for 2004-2009. The judgement in the M/s Hindustan Granites vs Union of India case dealt with the domestic tariff area (DTA) sales by 100 per cent EOUs.

The question involved was whether DTA sales by the EOUs formed an integral part of the EOU scheme, introduced in 1980 in the EXIM policy. The petitions were dismissed by the Supreme Court on six grounds. For instance, the EOUs undertook to export their entire production except permissible sales in DTA. Therefore, the DTA sales constituted an exception or an incidental facility.

Accident compensation
The Supreme Court freed Oriental Insurance Co Ltd from the liability of paying compensation for the motor vehicle accident death of a manager of a company, interpreting the provisions of the Motor Vehicles Act.

The manager was provided with a car by the company, Apace Savings & Mutual Benefits (India) Ltd. He was using the car for company purposes when the car hit a tree and he died. His widow and daughter claimed Rs 15 lakh as compensation. The motor accident claims tribunal, Nainital, awarded Rs 7.2 lakh which should be paid by the company and not the insurer.

On appeal, the high court held that the insurance company was liable to pay the compensation and it could recover the amount from the owner. Therefore, the insurance company moved the Supreme Court.

It held that the insurance company was not liable to pay as he was not covered by the policy, whether he was treated as the owner of the vehicle or as an employee. He did not come under the Workmen's Compensation Act either, being a manager.