TMI Blog2002 (6) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Cardex Services India Ltd. 73,87,871 60,04,729 3. Mondial India Ltd. 4,92,01,338 2,53,77,354 4. Indexco Overseas 14,50,149 11,74,964 5. Foreign Exchange difference 14,11,153 - 6. L.M. Buying Ltd. - 31,250 3. The learned Commissioner was of the view that since no services outside India is rendered and no payment was received by the assessee for supply of any information etc., the Assessing Officer in his order dated 20-12- 1995, under section 143(3) of the Act, for the assessment year 1993-94 and order dated 24-5-1996, under section 143(3), for the assessment year 1994-95, wrongly allowed deduction under section 80-O of the Act. The learned Commissioner further found that in assessment for the assessment year 1993-94, the Assessing Officer treated an amount of import licence of ₹ 28,26,450 as part of export of goods. He was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket with particular reference to foreign currency dealings to enable the customer companies to make their future plans . 6. It was also contended that the assessee satisfied requisite conditions of section 80-O of the Act and that in terms of Explanation ( iii) to section 80-O, the assessee is eligible for deduction in respect of services rendered from India for being used outside India. It was thus urged that deduction under section 80-O had correctly been allowed. 7. In its reply on the point of deduction under section 80-O of the Act in assessment year 1994-95, the assessee contended that the claim of allowability of deduction under section 80-O has been considered by the learned Commissioner of Income-tax (Appeals) in his appellate order, dated 22-10-1996, and accordingly following the principle of merger, the provision of section 263 cannot be invoked. 7.1 With a view to explain the nature of business and the activities carried on by the assessee-firm, a Note was submitted to the learned Commissioner, whose attention was invited to the qualification, experience and skill possessed by the firm, for rendering the services as mentioned in the respective agreements w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain services were rendered from India, the benefit of which in the form of information, knowledge, etc. have been used by the foreign principals outside India. It was, therefore, contended that though the assessee was eligible for deduction under section 80-O at the rate of 100% in respect of fees received from principals, it had claimed only 2/3rd of the same as deduction under section 80-O, with a view to avoid litigation. 7.2 Regarding deduction under section 80HHC in the assessment year 1993-94, it was contended that the assessee had rightly claimed deduction for the reasons that section 28(iiia) specifically include profit on sale of import licences granted against export earnings; that the import licences/Exim Scrips have been received by the assessee in its own name issued by the Director General of Foreign Trade; that the said import Licences/Exim Scrips have been surrendered in accordance with the Scheme announced by the Reserve Bank of India to State Bank of India and the payments have been received from State Bank of India; that the firm has not bought any import licence or exim scrips from any other party for dealing therein. Lastly, what is excluded for grant of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of artisans and manufacturer in India cannot be skill covered under section 80-O. In his opinion, the claim of commission is based on and in lieu of services in arranging, supervising, procurement of goods to overseas buyer. He also rejected the assessee s claim of applicability of Circular No. 700, dated 23-3-1995, to the case of the assessee. On the issue of stand of merger taken by the assessee in the assessment year 1994-95, the learned Commissioner observed that the issue before the learned Commissioner (Appeals) was whether the deduction should be granted at the rate of 50% on gross amount received from foreign enterprises. According to the learned Commissioner, there was neither any issue regarding allowability of claim under section 80-O before the learned Commissioner (Appeals) nor did he adjudicate upon it. Therefore, the Assessing Officer s order is not merged with the order of the learned Commissioner (Appeals) so far as allowability of deduction under section 80-O is concerned. For these reasons the learned Commissioner held that the order of the Assessing Officer about the deduction under section 80-O in both the years is erroneous and prejudicial to the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of garments and accessories of textiles and leather and raw-material in these lines of business. He also scrutinized the project reports and correspondence between the assessee and its foreign parties and gave a finding that the assessee-firm had rendered substantial technical services from India. He also recorded a finding that part of the activities of the assessee can however be described as services rendered in India. The Assessing Officer also noticed the kind of services rendered by the assessee to Mondial India Ltd., and Target Australia PTY. Ltd., and finally reached the conclusion on consideration of facts and the nature of services rendered by the assessee that 66.67% of commission received from Mondial India Ltd., Cardex Services India Ltd., and Target Australia PTY Ltd. and 100% from Indexco Overseas UAE is eligible for deduction under section 80-O. He, however, rejected the assessee s claim of deduction under section 80-O on gross receipts. Shri Y.P. Trivedi submitted that on merits the claim of the assessee for deduction under section 80-O attained finality as his order for the assessment year 1992-93 has not been disturbed. In the impugned assessment order for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1984] 8 ITD 296 (Bom.) at page 298. In this connection, he invited our attention to para 5.2 of the assessee s submission, dated 26-3-1998, before the learned Commissioner in proceeding relating to the assessment year 1993-94. Profit on sale of import licence has been accounted for as income. Details of import licence received was also filed (copy at page 13 of the Paper Book-II) which has been duly certified in Audit Report in Form No. 10CCAC, appearing at pages 92-93 of the Paper Book-II. Regarding deduction under section 80HHC in the assessment year 1994-95, Shri Trivedi submitted that as per calculation under section 80HHC(3) there was loss of ₹ 75,342 in the assessment order, for the assessment year 1994-95, following the direction of the learned Commissioner (Appeals) in the appellate order for the assessment year 1992-93 the Assessing Officer observed that loss from the exports of trading goods amounting to ₹ 75,342 is set off against the deduction of ₹ 11,07,636 claimed by the assessee and deduction of ₹ 10,32,294 is granted under section 80HHC. He, therefore, submitted that there is no error in the order of the Assessing Officer, as he had fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evisionary powers of the learned Commissioner for the assessment years 1993-94 and 1994-95. There may be reasons for not taking action under section 147 in respect of the assessment year 1992-93 as it could be interpreted as involving change of opinion. He, therefore, submitted that the learned Commissioner was justified in setting aside the assessments on the aforesaid issues for consideration afresh by the Assessing Officer. 12. In his counter arguments, Shri Trivedi submitted that before the learned Commissioner as well all the requisite evidence regarding rendering of services along with copies of agreements with foreign parties had been submitted. These have been ignored on considerations which are not relevant for the purpose of deciding the issue of admissibility or otherwise of the assessee s claim of deduction under section 80-O of the Act. Placing reliance on the decision of the Hon ble High Court of Bombay in the case of CIT v.Gabriel India Ltd. [1993] 203 ITR 1081, Shri Trivedi submitted that resort to section 263 cannot be had because this section did not visualise a case of substitution of the judgment of the learned Commissioner for that of the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and on 100% from Indexco Overseas, UAE on the ground that these receipts are attributable to the services rendered outside India and from India for use outside India. In para-4, the Assessing Officer stated that the assessee has claimed deduction at the rate of 50% of gross income by way of commission and fees received from foreign parties in convertible foreign exchange under section 80-O. Relying on the decision reported in 40 ITD 521, in Para-5 the Assessing Officer concluded thus : This issue has been discussed at length in the assessment order for assessment years 1992-93 in the assessee s own case. For the reasons discussed therein, 66.67% of commission received from M/s. Mondial India, Cardex Services and Target Australia PTY Ltd. and 100% from Indexco Overseas is considered eligible for deduction under section 80-O. With almost identical observations in assessment order for the assessment year 1994-95, the Assessing Officer in his order dated 24-5-1996 calculated deduction allowable under section 80-O at ₹ 16,19,154. The assessment of both the assessment years was framed by Shri S.K. Dash, Deputy Commissioner of Income-tax, Special Range-9, Mumbai. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise in consideration for use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge experience or skill made available or provided or agreed to be made available or provided to such Government enterprise by the assessee or in consideration of technical or professional services rendered or agreed to be rendered outside India to such foreign Government or enterprise by the assessee, there shall be allowed a deduction of an amount equal to 50% of the income so received or brought into India, in convertible foreign exchange. For the purposes of the section 80-O clause (iii) of Explanation was inserted w.e.f. 1-4-1992 providing therein that services rendered or agreed to be rendered outside India shall include services rendered in India. If we peruse the assessment orders passed by the same Assessing Officer, Shri S.K. Dash, the then Deputy Commissioner of Income-tax, Special Range-9, Mumbai, for the assessment years 1992-93, 1993-94 and 1994-95, it would be obvious that on the issue of claim of deduction under section 80-O of the Act he brought on record all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its ordinary meaning the above expression is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Assessing Officer, the Revenue is loosing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the Revenue. The expression prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of the Revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interest of the Revenue. For example, when an Assessing Officer adopted one of the course permissible in law and it has resulted in loss of the Revenue or where two views are possible and the Income-tax Officer has taken one view with which the learned Commissioner has not agreed, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. In the case at hand, on the same set of the facts the learned Commissioner has ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1992-93, the learned Commissioner (Appeals) ruled that deduction under section 80HHC should be granted to the assessee after setting off the loss on export of trading goods against the positive income of 90% of export incentives, which is claimed in entirety by the assessee. The decision has been accepted by the Department. Respectfully following the direction of the learned Commissioner (Appeals), the loss from export of trading goods amounting to ₹ 75,342 set off against the deduction of ₹ 11,07,636 claimed by the assessee and deduction of ₹ 10,32,294 is granted under section 80HHC. 18. It would, thus, be obvious that while examining the assessee s claim of deduction under section 80HHC of the Act for the assessment year 1994-95, the Assessing Officer followed the direction of the learned Commissioner (Appeals) contained in his appellate order in the assessee s own case for the assessment year 1992-93, which has been accepted by the Department. The effect was that the assessee s claim was reduced by the amount of ₹ 75,342 representing loss from the export of trading goods. Thus, as against the claim of ₹ 11,07,636 made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
