Is income derived from export trade taxable in India
Baskaran Kanakasabai
(Querist) 10 August 2010
This query is : Resolved
Is income derived from export trade taxable in India?
If so, at what rate/s?
A V Vishal
(Expert) 10 August 2010
Yes, the income derived from export trade is taxable in India subject to certain provisions of the Income Tax Act. The rates may vary according to the status of the assessee, if the assessee is a unit under SEZ scheme then the rate of tax for the FY 2010-11 is 18% on the book profits under S.115JB further an unit not registered under SEZ pays tax @ 30% of its taxable income.
Baskaran Kanakasabai
(Querist) 10 August 2010
Dear Sir
Thanks very much for your response.
If the assessee is an individual and has bought a painting in 2010 in India for Rs.10,00000 and sold it in a foreign auction for 28,00000 and if the expenses involved in the trade like brokerage, consultancy charges, evaluation, expert opinion, conveyance and other expenses involved in the transaction are 700,000, the net profit is 11,00000. How much is the IT payable in this case?
If the same assessee has a net loss of 500,000 from his regular manufacturing business in the same year, can that loss be adjusted in the net profit derived from the one winning export trade?
A V Vishal
(Expert) 11 August 2010
The question involved and which needs to be examined is whether the assessee is regularly involved in buying paintings and selling the same in India or abroad, where the said profit can be claimed as a business profit. In my opinion if it is a single transaction then it is to be treated as income from capital gains and accordingly the provisions of set off of losses should be applied.
Refer S.71(2) of the Income tax Act,1961, Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets).
Baskaran Kanakasabai
(Querist) 11 August 2010
Dear Sir
Thanks very much for your quick and thorough response which was absolutely professional.
sanjeev kumar goel
(Expert) 11 August 2010
mr. baskaran i am agree with the views of mr. a v vishal and in your query you had not mentioned that you are doing painting business regularly. so fro your query it is deemed that you have one tis transaction only once in the financial year hence the profit earned from auction of painting is a capital gain and not your business income and the business loss can be set off with certain conditions as provided in IT Act 1961.
Baskaran Kanakasabai
(Querist) 11 August 2010
Dear Sir
Thanks for your response.
If the assessee does regular trading in paintings as well as a second line of business, can the loss sustained in the first line be adjusted from the profits sustained in the second line?
VENKATRAMAN SHRINIVAS
(Expert) 11 August 2010
From what you project even though it is only hypothetical, it is deduced that it is a one time affair. The assessing Offaicer has the option to treat it as an adventure in the nataure of trade and assesseethe whole income and it need not necessarily be considered under the head Capital gains (unless the asset sold in question falls within the definition of capital asset. Of course patents, paintings etc., have also been included as capital assets from 2009-10)) It appears to be a trading transaction( though a solitary one) and one time affair. Hence only legitimate expenses alaone shall be allowed. As regards loss as opined by Mr.Vishal section 71(2) comes to your rescue.
