Government of Pakistan

Revenue Division

Central Board of Revenue

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C.No. 4(3)IT-Jud/99                                                                                             Islamabad, March 06, 2000

(Income Tax)

Subject:     Method of Proration of Profits between Export Proceeds Falling u/s 80CC & Local Sales

Section 80CC of Income Tax Ordinance, 1979, read with paragraph-CCCC of Part-I of the First Schedule to the Ordinance provides for presumptive taxation of income of Exporters and where the assessee has no income other than the income referred to in sub-section (1) of section 80CC in respect of which tax has been deducted under sub-section (5A) of section 50, the tax so deducted is deemed to be the final discharge of his tax liability and assessee is not required to file the return of total income under section 55 of the Income Tax Ordinance, 1979. However, return of income is to be filed in case the assessee derives income from any other source e.g., commission brokerage or local sales etc. CBR, vide Circular No. 20 of 1992, dated July 1,1992, has provided special treatment to Exporters maintaining books of accounts, which is as under :-

1. Local sales of goods (manufactured for export) as well as waste material not constituting more than 20% of such production, may also be treated as export sales if the assessee opts to pay tax on such sales at the rate applicable to export sales under section 80CC.
   
2. Where income from exports is inseparable from commission, brokerage and other receipts and the assessee cannot prove the extent of overhead expenses relating to non-export receipts, allocation of expenses may be made on a pro-rata basis in the same ratio as the receipts not covered by section 80CC bear to the gross profit on the export sales.

2. Queries have, however, been raised as to what would be the method of proration of profits between export proceeds falling under section 80CC and local sales. It is clarified that prorating of profits between export sales and local sales in respect of assessee maintaining books of account has to be done in accordance with rule 216 of the Income Tax Rules, 1982.

Secretary (IT-Judicial)