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2014 (9) TMI 887 - HIGH COURT OF KARNATAKAIncome deemed to accrue or arise as per Explanation to Section 9(1)(i)(b) or not – Activities amounts to purchase of goods in India or not - Held that:- If an assessee carries on operations which results in purchase of goods in India for the purpose of export and the income so accrued or arising out of such transactions are exempted from payment of income tax - The whole object of this provision being to encourage export of merchandise from India which enables Indian manufacturer to earn and when it is exported the country would earn foreign export - An incentive is given to a nonresident to carry on business in India - Otherwise the explanation would have no meaning and that is precisely what the Tribunal has held. Relying upon Commissioner of Income Tax International Taxation v. Nike Inc [2013 (8) TMI 194 - KARNATAKA HIGH COURT] - once the entire operations are confined to the purchase of goods in India, for the purpose of export, the income derived therefrom shall not be deemed to accrue or arise in India and it shall not be deemed to be an income under Section 9 of the Act - The object is to encourage exports thereby the Country can earn foreign exchange - The activities of the assessee in assisting the Indian manufacturer to manufacture the goods according to their specification is to see that the said goods manufactured has an international market, therefore, it could be exported - the whole object of the respondent assessee is giving its services both to the foreign buyer and the Indian purchaser is to export the merchandise to the foreign buyer which results in earning foreign exchange - Merely because the assessee do not place orders for purchase, in law it makes no difference - Without placing an order in its name the assessee is enabling a foreign buyer to place order directly with the manufacturer after the assessee approves the manufacturer and requirement and the assessee takes the responsibility of maintaining quality and dispatch of the goods to the destination - The purchase and export of merchandise takes place and therefore the object with which the provision is inserted is achieved –thus, the assessee is entitled to the benefit of exemption – Decided against revenue.
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