TMI Blog1992 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase-tax and, therefore, the deduction was wrongly allowed in the original assessment thus resulting in prejudice to the Revenue. After hearing the assessee on the issue he modified the order of the ITO directing him to disallow the impugned amount. The assessee is on appeal. 4. Sri G. Sarangan, the learned counsel for the assessee took us through the paper book and submitted that the issue whether the assessee would be exempt from purchase-tax liability is not free from doubt. Two conditions are necessary under s. 5(3) of the Central ST Act in order to claim exemption of sales-tax. The first condition is that the goods purchased and exported must be one and the same commodity. This test was answered in favour of the tax payer is the case of Neroth Oil Mill's relied on by the Revenue. The other condition viz., whether the purchases were in conformity with a pre-existing export order was not before the Kerala High Court. Or at any rate on that aspect of the matter, there was no dispute before the Kerala High Court. Therefore, to say that the Kerala High Court's decision in Neroth Oil Mills Ltd. Squarely applied to the facts of the case would amount to reading too much into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the same commodity but also to show that there were pre- existing firm orders occasioning the purchases. Unless these two conditions are satisfied the assessee would not be entitled to exemption in terms of the provisions of the Central Sales-tax Act. Whether the assessee has satisfied the condition is a matter to be ascertained by the taxing authorities upon proper enquiry. It cannot be claimed as a matter or right. Thus, the entitlement would depend upon the facts to be proved to the satisfaction of the Assessing Officer of the Commercial tax Department. Till then the assessee is not entitled to exemption though he can prefer his claim. This apart, even assuming that the Kerala decision cited supra was in favour of the assessee in respect of the twin conditions envisaged under s. 5(3) of the Central ST Act, yet the State Govt. has gone on appeal. In other words, even if the liability to purchase-tax is wiped out by the decision of the Kerala High Court, inasmuch as, the negation of such liability is under challenge on further appeal by the State Govt., Sri Sarangan is right in contending that the Damacoles's sword is still hanging over the head of the assessee and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bombay High Court in CIT vs. Sita Devi N. Poddar (1984) 41 CTR (Bom) 179 : (1984) 148 ITR 506 (Bom). He further submitted that the decision of the Kerala High Court in Neroth Oil Mills' case preceded the original assessment and, therefore, it could not constitute information. 10. Sri Abraham on the other hand contended that the ITO was unaware of the decision of the Kerala High Court and committed a mistake in the original assessment in allowing the purchase-tax liability and brought to our notice the comments of Chaturdevi and Pithisaria at pages 3041 and 3042. He also relied on the decision of the Supreme Court reported in CIT vs. Rathinasabapathy Muddaliar (Decd.) by LRs (1964) 51 ITR 204 (Mad) and also the decision of the Kerala High Court reported in United Mercantile Co. Ltd. vs. CIT (1967) 64 ITR 218 (Ker). 11. Having heard rival submissions, we uphold the contention of Sri Abrahim, the learned senior Departmental Representative. The Supreme Court reviewed the entire position in A.L.A. Firm vs. CIT (1991) 93 CTR (SC) 133 : (1991) 189 ITR 285 (SC) and came to the conclusion that if the ITO missed to take note of the law laid down in a particular case, he is free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... started the Assessing Officer has not only the jurisdiction but also the duty to complete the assessment de novo. 16. In the light of the decision of M/s J. Hemchand Co. cited supra, the assessee would be entitled to 75% of the salaries paid. To that extent relief is granted. 17. The assessee is aggrieved that cash incentive received during the year in a sum of Rs. 1,83,838 which is not taxable in the decision of Mehboob Productions Pvt. Ltd. vs. CIT (1977) 106 ITR 758 (Bom) is being taxed in the reassessment. Incidentally this was not brought to tax in the original assessment. 18. We have heard rival submissions. In the light of the decision of the Calcutta High Court reported in 144 ITR 448 (sic) and also our own decision in ITA No. 443/Coch/1981 dt. 2nd April, 1983 and in the light of the retrospective amendment to s. 28 w.e.f. 1st April, 1964, we uphold the order of the CIT(A). 19. ITA No. 54(Coch)/1987 arises out of the original assessment. The first point at dispute is about the disallowance of purchase- tax. 20. We have heard rival submissions. The liability in a sum of Rs. 35,12,864 was claimed by the assessee as provision made for purchase-tax and surcharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 2,976 is concerned, the payment was made to one Aslam Zacharia Sait and it marginally exceeded Rs. 2,500. The genuineness of the payment is not in doubt. Further, it was in connection with the procurement of fish. Hence, the disallowance is deleted. 24. The third point at dispute is about the disallowance of Rs. 5,000 out of the travelling expenses under r. 6D. 25. Having heard Sri Sarangan we decline to interfere. 26. The fourth point at dispute is about the disallowance of Rs. 60,000 out of the foreign travel expenses of its partners. The travel was undertaken by the partners, to Saudi Arbia, UAE and USA. The cost of air-ticket and other expenditure came to Rs. 2,22,567. The Assessing Officer allowed Rs. 1,00,000. The CIT(A) gave further deduction of Rs. 40,000. The assessee is on second appeal. 27. The Reserve Bank has sanctioned the foreign exchange on the ground that the travel was necessitated for business promotion. In the subsequent year, the assessee obtained orders from USA, UK and France. Thus, the trip was conducive to business interest. Of course, some amount has to be disallowed for the personal element such as site seeing, etc. which cannot be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the CIT(A) on this issue is set aside and the same is restored to the file of the ITO with a direction to examine the claim in accordance with law and do the needful. 34. In the result, ITA No. 54(Coch)87 is partly allowed. 35. In the Revenue's appeal [ITA No. 213(Coch)87] the point at dispute is whether the assessee is entitled to weighted deduction under s. 35B of the Act of ECGC Premium in a sum of Rs. 2,311. This is a premium paid to the ECGC on the insurance in connection with the export of goods. In J. Hemchand Co.'s case cited supra, this was allowed in toto on the ground that the Guarantee Corporation furnished information not only about the credit worthiness of the foreign buyer and the upper limit to which the goods could be supplied to them but also a guarantee for the payment of such amount. Thus financial reliability of the market is ensured. In this view of the matter, the same was allowed. We adopt the reasoning of the Special Bench and reject the contention of the Revenue. 36. The next point at dispute is whether the assessee would be entitled to investment allowance on the machineries owned and used in the course of its business. This point is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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