INCOME TAX

AMENDMENT OF SECTION 80-HHC BY TAXATION LAWS (AMENDMENT)ACT, 2005 IMPOSITION OF PENALTY/RECOVERY OF TAXES REG.

CIRCULAR NO. 02 /2006, DATED 17-1-2006

Section 80-HHC read with section 28 of the Income-tax Act, 1961 has been amended by the Taxation Laws (Amendment) Act, 2005. The section 80-HHC so amended, inter-alia, provides that

Profits on sale of Duty Entitlement Pass Book Scheme (DEPB) credits or Duty Free Replenishment Certificate (DFRC) will be treated at par with duty drawback for the purposes of proportionate increase of profits derived from exports computed under clause (a) or clause (b) or clause (c) of sub-section (3) of section 80-HHC in the case of,-

(i)    an exporter having export turnover not exceeding Rs.10 crores;

(ii)   in the case of an exporter having export turnover exceeding Rs.10 crores if-

(a) he had an option to choose either duty drawback or duty entitlement pass book scheme; and

(b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under duty entitlement pass book scheme.

OR

(c) he had an option to choose either duty drawback or duty free replenishment certificate; and

(d) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under duty free replenishment certificate.

2. The amendments relating to Duty Entitlement Pass Book Scheme and Duty Replenishment Certificate have been brought into the statute with retrospective effect. Therefore, it has been decided that no penalty shall be levied or interest shall be charged in respect of any fresh demand raised consequent to the enactment of Taxation Laws (Amendment) Act, 2005, on account of variation in the returned/assessed income attributable to profits on sale of DEPB credits or DFRC. Further, in such cases where assessments have already been completed and,-

(i)   interest has been charged, the Chief Commissioner of Income-tax shall waive the interest relating to claim of profit on sale of DEPB credits or DFRC for deduction u/s 80-HHC;

(ii)  penalty has been levied, the Chief Commissioner of Income-tax shall waive the penalty relating to claim of profit on sale of DEPB credits or DFRC for deduction u/s 80-HHC; or

(iii) penalty relating to claim of profit on sale of DEPB credits or DFRC for deduction u/s 80-HHC, has been initiated but not levied, the penalty proceedings shall be dropped.

3. Further, it is also directed that such demand shall be recovered over a period of 5 years. For this purpose, every Assessing Officer raising such a demand will maintain the details of such demand in a separate register so that the information can be furnished to the Board as and when required. These registers shall be kept in the custody of the Assessing Officers who will hand it over to their successors at the time of their transfer.

[F. No. 142/1/2006-TPL]