1976 (11) TMI 102 - AT - Income Tax

Summary

Issues Involved:
1. Whether the disputed turnover of Rs. 1,50,06,767 represents the turnover of sales in the course of import, which is exempt from sales tax?
2. Whether the assessee is entitled to claim exclusion of transport and handling charges and education allowances?
3. Whether the assessee is entitled to the exclusion of corresponding additional sales tax and surcharge on the finding on point (i) for consideration?

Issue-wise Detailed Analysis:

1. Whether the disputed turnover of Rs. 1,50,06,767 represents the turnover of sales in the course of import, which is exempt from sales tax?

The assessee, Tvl. IBM World Trade Corporation, Madras, entered into an agreement with the Indian Institute of Technology (IIT), Madras, for the supply of an IBM Computer System. The IIT obtained an import license and authorized the assessee to purchase and import the goods. The assessing officer disallowed the exemption claim on the basis that the title in the goods passed from the foreign sellers to the assessee and then to IIT within Tamil Nadu, thus not constituting a sale in the course of import.

The assessee contended that IIT was the real importer and that the goods' title vested with IIT before importation. The assessee acted as IIT's agent, and the goods were appropriated in foreign countries, making the sale in the course of import. The assessee relied on the Supreme Court decision in Kotak & Co., where similar conditions led to the sale being considered in the course of import.

The Tribunal found that the terms of the agreement, import license, and letter of authority indicated that IIT was the importer, and the goods were meant solely for IIT's use. The title to the goods was intended to pass to IIT at the time of shipment from the foreign country. The Tribunal concluded that the sale was in the course of import and exempt from sales tax under s. 5(2) of the CST Act.

2. Whether the assessee is entitled to claim exclusion of transport and handling charges and education allowances?

The assessee claimed exclusions for transportation and handling charges of Rs. 2,21,740 and Rs. 4,482, respectively, under Rule 6(c) of the TNGST Rules. Additionally, the assessee claimed exclusions for educational allowances amounting to Rs. 12,58,012 and Rs. 4,07,518, considering these as discounts under Rule 5(a) of the TNGST Rules.

Given the Tribunal's finding that the sale was in the course of import and exempt from sales tax, the issue of exclusions for transportation, handling charges, and educational allowances was rendered moot. The Tribunal found these points in favor of the assessee.

3. Whether the assessee is entitled to the exclusion of corresponding additional sales tax and surcharge on the finding on point (i) for consideration?

Since the Tribunal determined that the disputed turnover was exempt from sales tax as it represented a sale in the course of import, the corresponding additional sales tax and surcharge were also not applicable. The Tribunal ruled in favor of the assessee on this point as well.

Conclusion:

The appeal was allowed, and the orders of the lower authorities were set aside. The assessment on the disputed turnover was annulled, confirming that the turnover of Rs. 1,50,06,767 was exempt from sales tax as it represented sales in the course of import.