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TMI Blog1995 (3) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer was of the view that the export routed by the assessee through various Export Houses were not eligible for deduction under section 80HHC and in such cases the Export Houses were the exporters and were entitled to foreign exchange. Hence, he allowed deduction only in respect of the value of Rs. 17,02,904 representing the direct exports of the assessee. Though the assessee drew the attention of the Assessing Officer to the fact that this issue has been examined in detail by this Bench in its own case for assessment year 1983-84 wherein the Tribunal had held that the assessee is entitled to deduction u/s 80HHC not only in regard to its direct exports but also in regard to the export through export houses, he rejected this contention stating that the said decision was not accepted by the department. But, on appeal, the CIT (Appeals) allowed the claim of the assessee under section 80HHC relying on the Tribunal's decision for the assessment year 1983-84. Hence, the revenue is aggrieved. 3. Mr. C. Abraham, learned departmental representative, contended as follows : (a) The agreement entered into between the export house and the assessee is only to carry out the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee only. (d) The assessee undertakes the storage, export clearance pre-shipment inspection, inspection by export inspection agency, etc. These authorities treat the assessee as the exporter. (e) The assessee has applied for the export, has made claims for draw back before the Customs and Central Excise Department and dealt with the clearing agent and the Customs. (f) The Marine Products Development Authority has considered the assessee as the exporter. (g) Bankers have shown that the credits for export proceeds in the assessee's name are included in their accounts and this includes exports through export houses. (h) Full freight is paid by the assessee till the goods reach its destination and the insurance cover is also taken by the assessee. (i) There is no definition of export house in the Income-tax Act. One has necessarily to refer to paragraph 165 of Chapter 17 in Volume I of the Import & Export Policy Book of 1983 to understand what is an export house. A registered exporter who had shown a minimum amount of turnover can be an export house. For this purpose, exports through third parties are also considered as exporters. The allowance of the export house c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi with its enclosures (copy of accounts). (18) Copy of letter dated 20-4-1988 and its enclosures from M/s. Shaw Wallace & Co. Ltd., Calcutta. (19) Copy of letter dated 25-2-1988 addressed to the Joint Controller, RBI, Cochin. (20) Copy of reply dated 28-3-1988 from RBI, Cochin. The counsel for the assessee vehemently contended that the decision in Mineral & Metal Trading Corpn.'s case went on different facts. It was a case under barter system where the manufacturer cannot himself export the goods but had to sell the same to a Government Corporation. It was on those facts the decision was rendered. Such a barter system was not prevailing in the assessment year under consideration and the assessee was free to contract with the foreign buyer unlike in the barter system. Therefore, he pleaded that the ratio laid down by the Supreme Court should be confined to the facts of that case and should not be extended to the case of the assessee. 6. We have heard rival submissions. It is admitted by both sides that the modus operandi concerning the transaction by which the export orders were obtained, processed, shipped and the transfer of all documents by the assessee on board ship in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not considered by the Delhi High Court as relevant for conferring the benefit of tax credit certificate on the Government Corporation. The assessee before the Supreme Court suffered from the incapacity to enter into a contract with foreign buyer on account of the barter system. The assessee before us does not suffer from any incapacity to contract in view of the scrapping of the barter system ; the Government Corporation in the case before the Apex Court entered into contract with a foreign buyer and then only entered into contract with Ferro Alloys Corporation on principal to principal basis ; in the case before us, the exporter entered into contract with the assessee for the export of goods ; then only it entered into contract with the foreign buyer. Thus, the contract with the assessee preceded the contract with the foreign buyer. It is not as if the contract by the export house with the foreign buyer was in absolute terms as ultimately the price at which the goods are to be invoiced to the foreign buyer was made the subject-matter of approval by the assessee. On account of all these factors, we hold that the facts of the case before us are not similar. Hence, the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use and the foreign buyer. The conduct of the parties as revealed in the correspondence and the condition that the price of the goods exported should be approved by the assessee would show that there are three parties to the contract resulting in the export of goods namely (1) the assessee, (2) the export house and (3) the foreign buyer. It cannot be considered as a contract on principal to principal basis. This tripartite nature of the contract was not either noticed or given due weightage in the earlier order of the Tribunal. In such a situation, it has to be seen as to whom the deduction under section 80HHC should be given, whether to the assessee or to the export house. It all depends upon the terms of contract as between the assessee and the export house. We have seen some samples of such contracts. In some cases the benefit of RLP licence is reserved for the export house while the assessee is permitted to have the benefit of import licence, duty draw-back and cash assistance. The contract in some cases is silent on the question whether the tax benefits should be enjoyed by the assessee or by the export house. Shri Narayanan, the learned counsel for the assessee, vehemently co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the export of such goods or merchandise : Provided further that an amount equal to the amount of the deduction claimed under this sub-section is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee. (2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange. (b) This section does not apply to the following goods or merchandise, namely :-- (i) mineral oil ; and (ii) minerals and ores. (3) For the purpose of sub-section (1), profits derived from the export of goods or merchandise out of India shall be,-- (a) in a case where the business carried on by the assessee consists exclusively of the export out of India of the goods or merchandise to which this section applies, the profits of the business as computed under the head " Profits and gains of business or profession " ; (b) in a case where the business carried on by the assessee does not consis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from export of goods out of India has been defined in the case of the assessee exclusively in the business of exports and in the case of the assessee not exclusively in the business of exports. The issue before us is similar to that in the preceding year. Shri Abraham, learned departmental representative, contends that the Tribunal in its order for the assessment year 1983-84 had held that in view of the amendment to section 80HHC with effect from 1-4-1986, only the assessees who are exclusively engaged in the export business are entitled to the benefit of section 80HHC. The assessee in the case before us was having both export sales and domestic sales and therefore in terms of the decision of the Tribunal cited supra, no benefit can be given to the assessee. We have already indicated in para 7 above that it was not necessary for the Tribunal, in dealing with a case for the assessment year 1982-83, to have expressed any opinion on an amendment that was brought into statute much later with effect from 1-4-1986 and at any rate the opinion expressed by the Tribunal can at best be taken only as a passing remark and such remark cannot have the force of a binding precedent for subse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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