ORDER
G. SANTHANAM, A.M. :
I.T.A. Nos. 597 and 598 (Coch)/89 are by the assessee involving similar issues. I.T.A. Nos. 687 and 688 (Coch)/1989 are by the Revenue involving common issues. Therefore, for the sake of convenience, a consolidated order is being passed.
2. The assessee is an individual and was engaged in the business of export of processed sea foods to foreign countries directly and through export houses. It received cash assistance from Dy. Controller of Imports and Exports and claimed the same as capital receipts not liable to tax. This was negatived by the Assessing Officer and later by the CIT(A). The assessee is on further appeal.
3. In view of the insertion of cl. (iiib) to s. 28 w.e.f. 1st April, 1967 there is no merit in the appeals of the assessee.
4. The Revenue in its appeals is aggrieved against the deduction allowed under s. 80HHC of the IT Act, 1961. In both the asst. yrs. 1987-88 and 1988-89, a major portion of the assessees exports were routed through the export houses and the Assessing Officer did not grant deduction under s. 80HHC as in his view the assessee was not entitled to receive the export proceeds in foreign exchange in relation to such exports. While taking this view, it would appear that the Assessing Officer relied on a communication received from the Reserve Bank of India, in which the Reserve Bank had stated that generally in the case of exports routed through export houses, the bank used to treat the export houses as the exporter for exchange control purposes. Hence, the Assessing Officer allowed deduction under s. 80HHC only in regard to direct exports made by the assessee in both the years. On appeal, the CIT(A) following the decision of the Cochin Bench of the Tribunal in the case of Sea Pearl Industries vs. ITO (1988) 30 TTJ (Coch) 456 : (1988) 26 ITD 380 (Coch) held that the real exporter was the assessee only and, therefore, merely because the exports were routed through the export houses, the deduction cannot be denied. The Revenue is in appeal for both the years.
5. Sri R. Srinivasan, the learned Chartered Accountant has produced before us the following papers in support of his stand that the assessee was the real exporter, that he had exported the goods to foreign countries and that he had received the foreign exchange on his own accord. The details of such papers are as follows :
1. Certificate from Union Bank of India, Cochin, to the effect that the bank had negotiated/purchased the foreign bills for and on behalf of M/s Bharat Sea Foods (assessees concern), Chandiroor, Alleppy Distt. and that the sale proceeds have been realised in an approved manner and has been credited/adjusted in the partys account held with it. The details of the foreign bills purchased by the bank have also been produced.
2. Further certificate to the effect that the collection in respect of such foreign bills purchased by the bank from the assessee has been directly credited to their bills purchase account.
The assessee has also produced sample of invoices. It is seen that it is the assessee who has invoiced the goods against the foreign buyers and had shipped the same. The invoice which is made out in the name of the assessee also mentioned the name of the export house account. But such bills, as has been indicated earlier, were all encashed by the assessee through its banker and the sale proceeds were directly credited to the assessees account as mentioned before. The genuineness of the papers produced before us are not doubted or disputed by the Revenue. In the light of the materials produced before us, we hold that the assessee was the real exporter and had, in fact, exported the goods to foreign countries and was in receipt of the foreign exchange directly to its credit and conditions stipulated in s. 80HHC have thus been fulfilled. Therefore, there is no justification for the denial of deduction under s. 80HHC.
6. To a question from the Bench as to why the assessee should route some of its exports through export houses, though factually the exports are made by him and sale proceeds are received by him directly, Sri Srinivasan explained that some times the assessee gets orders through export houses. The export houses receive import entitlements on such exports, out of which the assessee is given an export premium which constitutes the additional income of the assessee. In fact, it is this export premium received from the export houses that is responsible for earning profit on exports. Such export premium received from the export houses have also been assessed to tax in the hands of the assessee. This is a way of doing export business to minimise losses or to maximise profits by increasing the export turnover. All the same, exports are done directly by the assessee and proceeds are directly credited to this accounts. Therefore, he submitted that the deduction under s. 80HHC cannot be denied to the assessee. In the light of the materials on record and the explanation offered by the assessee. In the light of the materials on record and the explanation offered by the assessee, we are satisfied that the assessee is entitled to the deduction under s. 80HHC as the real exporter and recipient of the foreign exchange on such exports. Thus, we uphold the order of the CIT(A).
7. The second issue in the appeals of the Revenue is whether the investment subsidy received by the assessee will go to reduce the cost of the assets for purpose of computation of depreciation etc. In the light of the following decisions of the jurisdictional High Court, we decide the issue against the Revenue :
CIT vs. Kerala State Drugs and Pharmaceuticals Ltd. (1990) 184 ITR 424 (Ker);
CIT vs. Relish Foods (1989) 180 ITR 454 (Ker) : and
CIT vs. Veneers and Laminations (India) Ltd. (1992) ITR 145 (Ker).
8. In the result, the assessees appeals and the Departmental appeals are dismissed.
