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Income Tax Appellate Tribunal – Rajkot
Accumax Ltd. vs Deputy Commissioner Of … on 31 August, 2000
Bench: B Lal, S Yadav


ORDER

Behari Lal, Accountant Member

1. This appeal has been filed against the order of CIT(Appeals)-I, Rajkot, dated 22-1-1993 for assessment year 1984-85. The various grounds of appeal filed by the assessee are as follows:

“1. The CIT(A) erred in confirming the disallowance under the provisions of Section 37(3A) to (3D)

2. The CIT(A) erred in upholding the disallowance under the provisions of Section 80HHC

The appellant submits that the confirmation of the disallowance under Section 80HHC is not justified.’

2. The assessee is a Public Ltd. Company engaged in the manufacture of drilling machines and other machineries. In this case, the regular assessment was completed under Section 143(3) on 29-2-1988 on a total income of Rs.10,61,140. The CIT(A), Rajkot vide his order dated 26-9-1988 set aside the assessment on the point to examine the element of sales-promotion expenses involved in the sales commission paid by the assessee to its sole-selling agents. However, the CIT, Rajkot vide his order under Section 263 of the Act dated 19-3-1990 set aside the assessment on the point of admissibility of deduction under Section 80HHC and directed the Assessing Officer to complete the fresh assessment as per the directions contained in the above-said order. The Assessing Officer had passed the fresh assessment order dated 3-12-1990 by determining the total income at Rs.17,30,720. He has made the addition of Rs.1,88,061 and Rs.13,04,531 under Section 37(3AJ and under Section 80HHC respectively.

3. The Assessing Officer held that 30% of the commission payments are in the nature of sales promotions expenditure. Therefore, he made the disallowance of Rs.3,68,983 so far as the claim of 80HHC is concerned, the Assessing Officer has stated that any export made through export-house is not eligible for deduction under Section 80HHC. He also stated that the system of preparing invoices followed by the assessee indicate that the assessee was even not knowing who is the foreign buyer and what was the destination of commodity exported. Thus, the assessee’s contention that M/s. Batliboi & Comp. Ltd., have only taken care to see that the assessee’s goods have been shipped and cleared at Bombay was not accepted by the Assessing Officer. Thus, the Assessing Officer disallowed the claim of the assessee for deduction under Section 80HHC. The learned CIT(A) upheld the decision of the Assessing Officer.

4. During the course of hearing, the learned counsel of the assessee contended that the issue of disallowance under Sections 37(3A) to (3D) is fully covered by the ITAT, Rajkot Bench in their order in ITA No. 830/ Ahd./93 dated 22-11-1999. Relying on our own order mentioned above, the disallowance made under Sections 37(3A) to (3D) is deleted.

4.1 So far as the issue of claim under Section 80HHC is concerned, the learned counsel contended that the export of goods have been made by the assessee through their Agents M/s. Batliboi & Company Ltd. He stated that the payments of export of goods was being received through their Agents M/s. Batliboi Ltd. In this connection, he invited our attention to pages 56,57,58 and 59 of the paper book filed during the course of hearing which are actually the bills pertaining to the sale of goods. He also invited our attention to the correspondence of the assessee with Batliboi and Comp. Ltd., mentioned in the above said bills and contended that the expenses incurred for the export of goods had been paid by the party, therefore, the goods have been exported by the assessee through their agents and hence the assessee is entitled for deduction under Section 80HHC. According to the learned counsel, M/s. Batliboi Ltd. was an agent

of the assessee for export of goods though there was no written agreement. He also invited our attention to Section 80HHC of the Act and contended that this Section is beneficial Legislature for earning foreign exchange, therefore, the same should be interpreted liberally. In this respect, he relied on the following Court cases :–

(i) CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC)

(ii) CIT v. H.S. Shivarudrappa [l993] 200 ITR 1 (Kar.)

(iii) CWT v. Smt. Janki Kishori Devi [1991] 192 ITR 229 (All.)

(iv) CIT v. J.K. Hosiery Factory [1986] 159 ITR 85 (SC)

(v) CEO v. R. Kanakasabai [1973] 89 ITR 251 (SC)

(vi) Arvind Boards & Paper Products Ltd. v. CIT [1982] 137 ITR 635
(Guj.).

The learned counsel for the assessee also vehemently argued that Botliboi Ltd. was only an agent for exporting the goods and the exports were actually made by the assessee. Bottliboi and Comp. Ltd., was only booking the orders for the assessee as the assessee was not in direct touch with the foreign party. He stated that when the income is received by an agent, he receives it for and on behalf of the principal and there is no question of any over-riding title. In this regard, the learned counsel placed its reliance on the following Court cases :–

(i) CIT v. Y.S. Desale [1982] 137 ITR 117 (Bom.)

(ii) Sea Pearl Industries v. ITO [1988] 26 ITD 380 (Cochin Bench).

In this regard, the learned counsel also invited our attention to Bindra’s Interpretation of Statutes page 895 which reads as follows :–

“The common law rule as to agency is taken from the Roman maxim quipper alium facit perre ipsum facere videtur meaning “he who does an act through another is in law deemed to do it himself.”

A shortened from of this is qui facit per alium facit per se or “he that acts through another is deemed in law to do it himself”.

The word agent and agency are derived from the Latin words “ago”, agent, agents, agenties, meaning an actor, a doer, a power or force that produces or accomplishes a thing, a generator, a producer (Mechem, Section-1). Agent thus is a person acting for another and agency came to – be recognized as a status or relation between the person acting and the person for whom he so acts.”

5. The learned Departmental Representative contended that the assessee did not know the foreign party to whom the goods were sold. There was also no written agreement between the assessee and the foreign party for exporting the goods to the foreign party. The learned DR also pointed out that the deduction under Section 80HHC had already been claimed by Batliboi Ltd., therefore, giving further deduction to the assessee would amount to double deduction. It was also contended by the DR that the goods were being purchased by Batliboi Ltd. from the assessee for exporting the same, therefore, the question of allowing deduction under Section 80HHC to the assessee does not arise. The learned DR also invited our attention to item No. 4 of page 60 of the compilation filed by the assessee. At page 60, there is a letter written by Batliboi to the assessee dated 9th February, 1984. This is regarding the settlement of Bill of the assessee No. Exp.AML/84 dated 21 -1-1984. Item No. 4 reads as follows:–

“Advising Sales-tax Section to issue you ‘H’ form”

According to the learned DR, form No. ‘H’ is issued from Principal to principal and therefore, the question of any agency does not arise. The ld. OR also invited our attention to the letter dated 22nd November, 1999 produced by the learned counsel during the course of hearing. In this letter it has been clearly mentioned that the rebate under Chapter VI of Income-tax for 80HHC has been claimed by Batliboi Comp. Ltd. It is further mentioned in their letter that ‘As per our Management Policy, we do not pass on any benefit available under Section 80HHC of I.T. Act, 1961 to our supporting manufacturers”. Thus, the ld. DR contended that the deduction under Section 80HHC, has already been claimed by Batliboi on the goods purchased from the assessee. Hence, the assessee is not entitled for any rebate under Section 80HHC of the Act on the same goods.

6. We have heard both the parties. We have also gone through the written submissions filed by the learned counsel of the assessee during the course of hearing. The main point for consideration is whether the assessee is the real exporter of the goods or the real exporters is “Batliboi” of Bombay. As per the provisions of Section 80HHC applicable to the assessment year under consideration, the tax concession will be available to Indian Companies and non-corporate tax payers resident in India who has exported out of India any qualifying goods or merchandise during the relevant accounting year. Further to qualify for tax concessio’n, the sale proceeds of the goods or merchandise exported out of India must be receivable by the assessee in convertible foreign exchange. In the present case, the assessee is an Indian Company engaged in the manufacture of various types of Drilling Machines. The assessee had not made any export but the goods manufactured by the assessee had been exported by “Batliboi”. The Assessing Officer proved that the invoices prepared by the assessee for export of goods were in the name of “M/s. Batliboi Co. Ltd. A/c foreign buyer”. Thus, the assessee was not aware even about the whereabouts of the foreign buyers. Thus, the assessee had not exported out of India any

qualifying goods during the accounting year under consideration. The sale proceeds of the goods had been recovered by “Batliboi” in convertible foreign exchange. Therefore, as per the provisions of Section 80HHC the assesses is not entitled for any deduction under Section 80HHC. The exports have been made by “Batliboi”, the sale proceeds had been received by “Batliboi” in convertible foreign exchange, therefore, deduction under Section 80HHC is allowable to “Batliboi” only.

7. Now another point for consideration is that whether “Batliboi” of Bombay are the real exporters or the assessee is the real exporter. For claiming the deduction under Section 80HHC, two main conditions are necessary to be fulfilled i.e., (i) Tax concessions will be available to Indian Companies and non-corporate tax payers resident in India who have exported out of India any qualifying goods or merchandise during the relevant accounting year (ii) The sale proceeds of the goods or merchandise exported out of India are received by the assessee in convertible foreign exchange. Even if it is presumed that the assessee, an Indian Company had exported out of India qualifying goods but they had not received the sale proceeds of goods exported out of India in convertible foreign exchange. The sale proceeds had been received by “Batliboi” in convertible foreign exchange. Therefore, the assessee is not entitled for the deduction under Section 80HHC. The assessee sold the goods to Batliboi” and “Batliboi” company actually exported the goods and received the foreign exchange in their bank accounts. Therefore, “Batliboi” had fulfilled both the conditions necessary for claiming deduction under Section 80HHC. The claim made by the assessee, is, therefore without appreciating the legal provisions of the Act prevailing during the assessment year under consideration.

8. The various Court cases relied upon by the learned counsel for the assessee are not relevant to the facts of the present case. Some of the Court cases relied upon by the learned counsel are regarding the interpretation of statutory provisions. It has been held by the Courts that if the provisions of taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has to be accepted. In the present case, there is no ambiguity so far as the provisions of Section 80HHC are concerned. For claiming the deduction under Section 80HHC, too main conditions are necessary to be fulfilled i.e., (i) tax concessions are available to the Indian Companies and non-Corporate Tax payers who have exported, goods out of India any qualifying goods or merchandise during the relevant accounting year, (ii) The sale proceeds of the goods are mercandise exported out of India must be received by the assessee in convertible foreign exchange. In the present case, the assessee has not exported the goods. The goods have actually been exported by Batliboi of Bombay. The sale proceeds of goods have also been received by “Batliboi’ of Bombay in convertible foreign exchange. Therefore, the two main conditions for allowing the concession under, Section 80HHC have been fulfilled by “Batliboi” of Bombay and not by me assessee. The assessee has

neither exported the goods nor received the proceeds of the goods in convertible foreign exchange. Therefore, the question of allowing any concession under Section 80HHC to the assessee does not arise. Therefore, the question of two interpretations of the Statute in the present case does not arise. The various cases relied upon by the learned counsel for the assessee are therefore not applicable to the facts of the present case. Some of the cases relied upon by the learned counsel for the assessee are pertaining to the income received by an agent on behalf of the assessee. These cases have no application whatsoever to the facts of the instant case. M/s. Batliboi of Bombay has not been appointed as an agent by the assessee for exporting their goods out of India. During the course of hearing, the learned counsel produced before us one agreement dated 25-1-1984 which has been entered by the assessee with Voltas Ltd. The territory covered by this agreement is whole of India and therefore this agreement is not for the goods which are to be exported out of India. This agreement further confirms the contention of the department that the assessee has not entered into any agreement with “M/s. Batliboi” for exporting their goods out of India. We arc also of the view that if the assessce had entered into an agreement with M/s. Voltas Ltd., for the sale of their goods in India, they could have also entered into similar agreement with “Batliboi” for exporting their goods out of India. The very fact that the assessee has not entered into an agreement with “Batliboi” for exporting the goods, fully supports the findings of the Assessing Officer that the “Batliboi” was not appointed as their agent for exporting the goods. In view of the above discussion, we do not find any substance in the arguments of the learned counsel for the assessee that “Batliboi” was acting as an agent of the assessee for exporting the goods out of India. Similarly, the reliance placed by the learned counsel on Bindra’s Interpretation of law has no relevance to the facts of the present case.

9. During the course of hearing, a letter dated November 22, 1999 written by Batliboi Ltd. of HMP Engineers Ltd., Gear Box Division was also produced before us. In this letter, it has been made, very clear by Batliboi Ltd. that the rebate available under VIA of Income-tax Act for 80HHC has already been availed by them for the goods pertaining to the assessee exported out of India. It has also been made very clear in this letter that M/s. Batliboi Ltd. do not pass on any benefit available under Section 80HHC of the Income-tax to their supporting manufacturers. In view of the above letter, the claim of deduction under Section 80HHC has already been claimed by Batliboi Ltd. Therefore, the assessee is not entitled for any claim under Section 80HHC of the Act on the same goods on which the claim has already be.en made by M/s. Batliboi Ltd. In view of the above discussion, we fully support the findings of the learned CIT(A) and no interference is required from our side.

10. In the result, the appeal is partly allowed.


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