TMI Blog2006 (4) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on the issue after relying on the decision rendered in the case of Hindustan Lever Ltd.[ 1996 (3) TMI 161 - ITAT BOMBAY-A] . We also rely on the decision of Hon ble Bombay High Court in the case of H.A. Shah Co. v. CIT/EPT [ 1955 (9) TMI 53 - BOMBAY HIGH COURT] that as a general rule the principle of res judicata is not applicable to decision of Income-tax Authorities. However, if there is a total lack of consistency, that would lead to chaos in judicial administration. Therefore, there can be circumstances where there may be a departure from the earlier held position. The Hon ble Bombay High Court had mentioned about fresh circumstances and material facts . The situation that the goods that were ordered by Bangladesh had to be routed through India to make it export will only end in creating more complication. In the global economy, where the goods from one part of the world are sent to the another part of the world against the directions of third party is very common. Ultimately, we are of the opinion that section 80HHC was specifically created to help export out of India and earn foreign. Unless the section is interpreted in this manner without causing any injustice, then thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to M/s. G.R. Textiles Mills, Dhaka (Bangladesh) without bringing them into Indian territory. The Assessing Officer was of the view that the machinery was not exported out of India and, therefore, the deduction in respect of the transfer of machinery from Germany directly to Dhaka was not covered by the provisions of section 80HHC. Accordingly, the Assessing Officer restricted the same to Rs. 89,225 in respect of the remaining export sales. 2.1 The matter was carried before the first appellate authority, wherein it was submitted that opinions obtained from Shri V.H. Patil, Advocate, Supreme Court, dated 30-9-1999 were also filed to claim that the assessee was entitled for deduction under section 80HHC and that the law does not require the goods to be physically exported out of India. It was also claimed that the case of assessee was covered by clause 154D of the Export and Import Policy, 1992-97, which permitted Merchanting International Trade. Various submissions raised before the CIT(A) are summarized as under : ( i ) The object of introducing deduction under section 80HHC was to give incentive to augment the foreign exchange by export of goods outside India. The foremost consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnataka High Court in the case of Chief CIT v. H.M.T. (International) Ltd. [1993] 203 ITR 573 . ( iv ) The assessee further submitted that the deduction under section 80HHC is self-contained code as the section states as under : 80HHC. Deduction in respect of profits retained for export business. (1) Where an assessee, being an Indian Company or a person (other than) a Company resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies there shall, in accordance and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise. The underlined words of extracts of section 80HHC, specifically stated that to which this section applies, there shall, in accordance and subject to the provisions of this section , it means that no external reference in interpreting this provision is permissible. The above proposition was also confirmed by D Delhi Bench of the Tribunal (Special Bench) in the case of International Research Park Laboratories Ltd. v. Asstt. CIT [1995] 212 ITR 1 (SB). Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country. In such transactions it is not necessary to physically import the goods into India and then re-export the same. RBI is the authority to grant general permission to Export House/Trading Houses/Star Trading Houses/Super Star Trading Houses to make advance payments for this purpose. It was submitted that under E IP 1992-97 under Chapter XIV in clause 154D a specific provision was made enabling the merchant trade to import and export goods which need not physically brought into India and exported thereafter. The above position clarifies that the assessee had imported goods from Germany and directly exported to Dhaka (Bangladesh), in which goods have not been brought into India and, therefore, did not go out of Indian custom boundary was an eligible export for the purpose of deduction under section 80HHC of the Income-tax Act, 1961. ( vi ) The import export have three main components which are as under : ( a ) Goods related aspect; ( b ) Import Export Finance, i.e., foreign exchange; ( c ) Payment of custom duty and custom clearance. The regulation of goods are regulated by FIRDA-92 and rules made thereunder as well as E IP - 92-97. ( vii ) So far as the import export finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Merchanting Trade Export in view of the specific provisions contained in FTRDA-92 with E IP - 92-97 the goods exported under merchant trade export need not physically go out of Indian Territory. ( x ) As already submitted that the Customs Act, 1962 is neither an enactment governing all the aspects of import export trade, but only an operating Act for the purpose of collection of duty. The concept of Customs Act derived from the ancient custom that whenever a merchant entered a Kingdom with his merchandise, he had to make suitable offering of gifts to the King. In the course of time, the modern State formalized this Custom into Custom Duty, which the State collects in respect of goods imported into or occasionally, exported out of its frontiers. This concept was enacted into an Act as Customs Act, 1962/Customs Tariff Act, 1975 etc. which enabled the state to collect custom duty and prevent import/export of goods listed in so-called negative list. Therefore, it was submitted that the Customs Act, 1962 etc. has no role to play as the merchanting trade transactions as they are beyond its jurisdiction. ( xi ) The export effected by the assessee is governed by clause 154D of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreigners purchasing goods in India on payment of the consideration in foreign exchange and taking the goods along with them to be taken outside India, the customs clearance is not required as defined under the Customs Act, 1962. In such cases only a declaration has to be made which cannot be equated to the customs clearance as is required in the case of exporters. 2.4 The CIT(A) observed that for claiming deduction under section 80HHC of the Act, any assessee has to show that he had made export out of India , as defined in the Explanation ( aa ) of that section. It is necessary condition that the goods should be cleared at any customs station, as defined in the Customs Act, 1962. The assessee s goods should be cleared at any customs station. Accordingly, the assessee did not export out of India any machinery or plant. The CIT(A) further observed that where a Legislature gave a special meaning to a particular word in particular statute, then the meaning has to be given to that word CIT v. J.K. Cotton Spg. Wvg. Mills Co. Ltd. [1987] 164 ITR 18 (All.) 2.5 With regard to the decision rendered by the Hon ble Bombay High Court in the case of Bombay Burmah Trading Corpn. Ltd. ( supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,960, without bringing its plant and machinery into Indian territory. According to the learned Authorised Representative of the assessee the assessee has filed a Paper Book containing contract for procurement entered into between assessee and buyer, sales bills in the name of assessee, purchase bills showing purchase of machinery from M/s. Textllmaschinen u. Service, GmbH, Germany, and various other bank documents related to the sale of this machinery to buyer M/s. G.R. Textiles Mills, Dhaka, Bangladesh. The abovesaid transaction according to learned Authorised Representative of the assessee is not under dispute. The assessee claimed deduction under section 80HHC on profit of Rs. 1,81,42,968 in above transaction. 3.2 The Assessing Officer held that since the assessee had sold machinery directly from Germany to Bangladesh and not from India, could not be stated for machinery was exported out of India. Hence, assessee-company was not entitled to benefit under section 80HHC. The Assessing Officer therefore, did not grant deduction under section 80HHC as claimed. In appeal, the action of Assessing Officer was upheld. 3.3 Before us it was submitted on behalf of assessee that section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions does not require that the export should be ex-India. It was further explained that although section 35B of the Act under which the above decisions were rendered, was expenditure-based and section 80HHC of the Income-tax Act, 1961, was turnover-based, the objective was the same, viz., to augment the foreign exchange reserves through exports. 3.6 Our attention was also drawn towards the object of the enactment as appearing in the Fifth Edition Volume 2. Page 3553 of Chaturvedi and Pithisaria . In neither of the two sections, pointed by the learned Authorised Representative of the assessee, was there any clause stating that the exports should originate from India. The learned Authorised Representative of the assessee pleaded that it appeared from the reasoning of the lower authorities that the Assessing Officer would have allowed the deduction under section 80HHC of the Act, if the goods shipped from Germany had touched the shores of India even for a few days before being shipped to Bangladesh. The commercial expediency in a direct shipment to save time and money should not be an impediment to the granting of deduction under section 80HHC. The assessee had brought in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80HHC, the interpretation as offered by the CIT(A) was not tenable. 3.9 In response to a query from the Bench, the learned Authorised Representative of the assessee stated that there was a decision of the Mumbai Bench of the Tribunal in the case of Hindustan Lever Ltd. v. IAC [1996] 58 ITD 555 where relying upon section 2( 18 ) of the Customs Act, 1962, the Tribunal held that to qualify for deduction under section 80HHC, the exports must be from India. It was submitted that when this decision was given the Tribunal did not have the benefit of the judgment of the Hon ble Supreme Court in the case of Bombay Burma Trading Corpn. ( supra ). Besides, even the judgment of the Hon ble High Court was not cited. Further, relying upon the case of Coca Cola Export Corpn. v. ITO [1998] 231 ITR 200 (SC), it was pointed out that just as the Hon ble Supreme Court held that the Income-tax Act and the FERA operated indifferent fields, so did not Customs Act. Some words in a statute cannot be automatically imported for the interpretation of the same words in another statute. 3.10 The learned Authorised Representative of the assessee took us through Para-4.4 of the order of the CIT(A) where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be by way of sale or otherwise in a shop emporium or establishment situated in India, and the sale does not involve clearance in any customs station, had to be cumulatively fulfilled so as to exclude the transaction from the definition of export out of India . This was endorsed by the Hon ble Apex Court in the case of CIT v. Silver Arts Palace [2003] 259 ITR 684 and was further relied upon in the case of Abdulgafar A. Nadiadwala v. Asstt. CIT [2004] 267 ITR 488 (Bom.). 3.11 Our attention was also drawn towards the decision in the case of CGT v. N. S. Getti Chettiar [1971] 82 ITR 599 wherein the Hon ble Supreme Court held that whenever a word in a statute is given a specified meaning, the ordinary or dictionary meaning of the word is neither diluted or lost unless specifically excluded by the definition. Accordingly, it was pleaded that even assuming that the expression Export out of India appearing at Explanation ( aa ) were to be given a meaning that the Revenue Authorities have attempted to give, it would not take away the ordinary meaning of the word Export . As defined in Black s Law Dictionary ( supra ), export simply means transporting goods from one country to another. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned Departmental Representative, further, added that the words export out of India in section 80HHC meant that the export should be made from the territory of India. He also stated that the main intention of augmenting foreign exchange reserves would not be fulfilled in a transaction where foreign exchange was spent to import goods. He relied upon the following decisions: (i) Abdulgafar A. Nadiadwala s case ( supra ) (ii) ITO v. Taj Trade Transport Co. Ltd. [1992] 41 ITD 60 (Bom.) (iii) Sanjeev Malhotra v. Dy. CIT [2004] 91 ITD 76 (Delhi) (TM) (iv) Indian Delco (P.) Ltd. v. Dy. CIT [1996] 59 ITD 268 (Delhi) (v) Hindustan Lever Ltd. s case ( supra ) (vi) Ram Babu Sons case ( supra ) (vii) CIT v. Rajendra Kasliwal [2004] 271 ITR 448 (Raj.) (viii) Silver Arts Palace s case ( supra ) The learned Departmental Representative stated that in all the above mentioned cases, it was held that there had to be evidence in the form of customs clearance for claiming deduction under section 80HHC. 5. In his rejoinder, the learned Authorised Representative of the assessee stated that none of the decisions cited by the learned Departmental Representative applied to the assessee as none refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to go through customs clearance for obtaining the benefit under section 80HHC, as explained in Explanation ( aa ) . In the case of Sanjeev Malhotra ( supra ), there was primarily a strong doubt whether there was a genuine export made by him, whereas in the case of Indian Delco (P.) Ltd. ( supra ) the goods never went outside the country either through UNICEF or its designated consignees who were all stationed in India. The case of Abdulgafar A. Nadiadwala ( supra ) questioned whether beta-cam tapes constituted good . It was the contention of the Revenue in that case that the films recorded on the beta-cam tapes do not qualify either as goods or merchandise. The beta-cam shell (cassette) is only a medium of transfer for the sake of convenience. Hence, the Revenue argued that even though customs clearance was obtained the export of these tapes could not entitled the assessee to deduction under section 80HHC as the tapes did not constitute goods . The contentions of the Revenue was struck-down by the Hon ble Bombay High Court, who held that the proceeds in foreign exchange were received in India and thus entitling the assessee to deduction under section 80HHC. In the cases of Abdul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany and, therefore, Indian Company was the owner of the goods and exercising the right of ownership of the goods. The plant and machinery was directly shipped to Bangladesh. The direct shipment of goods to another country without touching base in India should not be an impediment to the assessee from claiming the benefits of section 80HHC, if it was otherwise entitled to do so. The ratio of Hon ble Supreme Court in the case of J.B. Boda Co. (P.) Ltd. ( supra ) help the case of the assessee. In the case of J.B. Boda Co. (P.) Ltd. ( supra ); ONGC had insured all their operations with an Indian Insurance Co., J.B. Boda Co. were reinsurance brokers. They contacted a London Company who were brokers for placement of reinsurance business who, in turn, informed J.B. Boda Co. about the reinsurance coverage. J.B. Boda Co. sought permission of the RBI to remit a certain amount of money after deducting their own brokerage. They also sought the approval of the CBDT for deduction under section 80-O of the Act on the ground that the reinsurance brokerage retained by J.B. Boda Co. in India amounted to receipt of income in convertible foreign exchange. The CBDT refused the approval sought by J.B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as appearing in sub-section (1) of section 80HHE. It is worth mentioning that section 80HHC was brought in view to help all export of goods outside India. India was in definite trouble due to shortage of foreign exchange. By sending goods to outside India or helping India in getting foreign exchange, which was at a premium at that time, has to be taken into consideration. Regarding export out of India, the Hon ble Supreme Court in the case of Bombay Burma Trading Corpn. ( supra ) at page 301 observed as under:- The Tribunal s reading of the section that the export should be ex-India is not supported by the language of the provision or any authority. The High Court has, therefore, rightly concluded that to avail of the benefit of weighted deduction the provision does not require that the export should be ex-India. It must be observed in fairness to Mr. M.L. Verma, learned senior counsel appearing for the Revenue, that he does not seriously dispute this proposition. Once this position is accepted, the order under challenge has to be sustained. We also find that Hon ble Madras High Court, in the case of CIT v. Gimpex (P.) Ltd. [2004] 268 ITR 377 has observed that to avail of the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal did not have occasion to consider the Bombay High Court decision in the case of Bombay Burma Trading Corpn. ( supra ), which was lateron affirmed by the Hon ble Supreme Court. In any case, the Hindustan Lever Ltd. s case ( supra ) dealt with assessment year 1983-84. We are of the opinion that the reference by the CIT(A) to the Customs Act to define export was misplaced if he could rely on the Customs Act for the definition of export for interpreting section like section 80HHC which was brought into existence with a view to export goods so that good foreign exchange was earned then he should have taken into consideration the various provisions of other Government of India Rules and Regulations like Import and Export Policy, Context of RBI Manual and other circulars. By not doing so, he restricted his view only to the Customs Act and denied the benefit of section to the assessee. The section has discussed above was specifically brought in to expedite exports and earn foreign exchange. There is tremendous development on the issue after relying on the decision rendered in the case of Hindustan Lever Ltd. ( supra ). 6.5 We also note that the following observations appear in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation from that decision unless there are fresh circumstances to warrant a deviation from the previous decision. So what this decision of the Madras High Court has emphasized is fresh circumstances being present to justify a departure from the earlier decision. Fresh circumstances are not necessarily the same as fresh facts brought before the Tribunal considering revising the earlier, decision, and in our opinion, fresh circumstances is a much wider expression than merely fresh fact brought before the authority .... In our opinion even if there are no fresh facts, if material facts have not been taken into consideration on the earlier occasion, it could not be said of the later decision that it is an arbitrary interference with the earlier decision. 6.9 The Hon ble Bombay High Court had mentioned about fresh circumstances and material facts . The situation that the goods that were ordered by Bangladesh had to be routed through India to make it export will only end in creating more complication. In the global economy, where the goods from one part of the world are sent to the another part of the world against the directions of third party is very common. 6.10 Ultimately, we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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