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TMI Blog1994 (9) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with M/s. Mahajan International - its sister concern. As per the terms of the contract the goods exported actually belonged to M/s. Mahajan International and the orders were also obtained by it from the buyers. Except for preparing the bills in its name, all the other activities were performed by M/s. Mahajan International. Even the benefits resulting from exports were also to be received by M/s. Mahajan International. On these facts, the Assessing Officer after finding that the entire arrangement was made to circumvent caution list on which M/s. Mahajan International was put by the Reserve Bank ofIndia, held that the assessee being not a real exporter is not entitled to deduction under section 80HHC of the Act. The learned CIT(A) allowed the claim of the assessee after holding that as the prerequisite conditions for allowance of deductions under section 80HHC were satisfied the assessee was entitled to its claim as made. It is against this decision of CIT(A) that the department has come before us. 4. Before us both the parties supported their claim - one relying on the order of the Assessing Officer and the other on the order of the learned CIT(A). While according to the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being produce of plantations; (ii) mineral oil; (iii) minerals and ores; and (iv) such other goods or merchandise as the Central Government may, by notification in the Official Gazette, specify in this behalf. (3) No deduction under clause (b) of sub-section (1) shall be allowed unless the assessee had, during the immediately preceding previous year, exported out ofIndiagoods or merchandise to which this section applies. Explanation: For the purposes of this section,--- (a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (b) 'export turnover' means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962)." Provisions of section 280ZC as they stood at the relevant period of time, read as under:--- "280ZC. Tax Credit Certificate in relation to exports.---(1) Subject to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act, existing on the date of which the certificate was produced before the Income tax Officer and where the amount of such certificate exceeds such liability, or where there is no such liability, the excess or the whole of such amount, as the case may be, shall, notwithstanding anything contained in Chapter XIX, be deemed, on the said date, to be refunded due to such person under that Chapter and the provisions of this Act shall apply accordingly." Both the sections refer to the benefit in respect of exports. In both the sections the expression 'Exporter' has not been defined - while in case of section 280ZC, the foreign exchange has to be received by the exporter, in case of section 80HHC it has to be receivable by the exporter. After having read the sections, we now come to the facts as available in both the cases. As regards the cited case the facts as reported are that Ferro Alloys Corpn. Ltd.'s case was manufacturing and exporting ferro-manganese and chrome concentrates to different foreign buyers. During the years 1964 and 1965 it entered into different contracts with number of foreign buyers for the sale of two commodities. These contracts provided for the substitution b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even if it be assumed that the arrangement between the parties had the legal effect of transferring title in the goods in favour of the corporation, the petitioner would still be the real exporter for the purpose of section 280ZC and be entitled to the tax credit certificate. 6. The facts in the case of the assessee are almost identical to the ones available in the cited case. This is evident from the contract entered into by the assessee, the relevant terms of which are cited by the Assessing Officer in his order as under: "(i) That Mahajan International will procure all the material for which it holds the orders for sale. (ii) Mahajan International will invoice the goods to the assessee coy. exactly of the value of the sale orders. (iii) The assessee coy. will charge a commission 3% on the invoice value from Mahajan International. If any commission is paid by the assessee coy. to the foreign buyers this commission will be reimbursed by Mahajan International. (iv) The difference of exchange on account of fluctuations in the change rate of dollar/sterling at the time of negotiations of the documents or on realisation of the dues from the foreign parties shall also belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books to the assessee company exactly on the value of the sale orders." The relation does not appear to be that of a principal to principal. The profit/loss incurred in the entire transaction was to be borne by M/s. Mahajan International and not by the assessee. Even if the shipping documents were entered in the name of the assessee, for which no evidence is available before us, the intention of the parties was clear inasmuch as the arrangement was entered into to overcome the disability on account of instruction of Reserve Bank. At this juncture we may also look into the intention of the Legislature to find out whether the incentive was intended for the real exporter or for the ostensible exporter. For this we may refer to the speech of the Hon'ble Finance Minister which reads as under: "In respect of exports the scheme announced by me last year provided some tax relief to exporters whose export turnover for any year exceeded that of the immediately preceding year by more than 10 per cent. The total relief available under last year's scheme was also subject to a maximum of 10 per cent of tax payable. I now propose to simplify and liberalise the scheme and remove both the minimu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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