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TMI Blog2010 (1) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. While framing the assessment order, the Assessing Officer noticed that there was a credit balance of Rs.9,77,29,798.77 being Trade Advance from Uniglobe General Trading Company, UAE (UGTC for short). AO noticed the opening balance in the said account was Rs.10,23,09,092.22 and after debiting the export made during the year for Rs.49,89,801.00 and crediting Rs.4,10,507.55 towards foreign exchange rate fluctuation; the closing balance was of Rs.9,77,29,798.77. When questioned, assessee vide letter dated 11-09-2007 stated that the assessee has exported liquor and kitchen utensils to UGTC and the export proceeds had been received as advance in the preceding year. On request, assessee furnished additional details of account copy of UGTC for the financial year 2003-04 and export transactions for the year under consideration. On perusal, it was noticed that for the period 11-4-2003 to 16-01-2004, assessee received Rs.20,19,89,209 being export trade advance. Against the above advance, assessee exported worth Rs.10,00,91,185 during the financial year 2003-04 and goods worth Rs.49,89,801 for the financial year 2004-05 relevant to the assessment year under consideration, leavin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide their regulation referred to above and assessee was periodically withdrawing the amount for other purposes, such as investment in the real estate property and assessee had not obtained the necessary permission from the RBI top return the advance, nor taken the steps to repatriate the amount, assessee was asked as to why the amount should not be added as assessee's income. 3.4 In reply, assessee acknowledged the receipt of Rs. 20,19,89,209 as trade advance from UGTC for the purpose of supply of various products. Assessee had arrangement for export price quotations, with M/s. Suntan Trading Co. Ltd., Bombay. It was further acknowledged that the assessee could not export the goods for the price agreed with UGTC as M/s. Suntan Trading Co. Ltd. could not supply the goods for price acceptable to the other party. Assessee requested UGTC to extend the contract period from time to time so as to get market stabilized and prices to become affordable. Under these circumstances, assessee could not export substantial goods against the advance received. The assessee further acknowledged that since the funds received as export advance was lying idle, it was utilized and the same was informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be confirmed later. In other words, the rates were not quoted. 3.7 From the above, the Assessing Officer concluded that assessee's claim that assessee had contracted with M/s. Suntan Trading Co. and there were price fluctuation between the rates to be obtained from this company and the one to be exported is incorrect. 3.8 Assessee's further contention that to ensure value addition, assessee has to enhance export price than import price was also to be rejected for the reason that the assessee company has not entered into any price agreement with the foreign buyer either. 3.9. Thus, Assessing Officer concluded the following facts emerge in the instant case: (i) The outstanding credit balance of Rs.9,77,29,799 as at 31-3-2005 in the Uniglobe General Trading a/c. in the assessee's books represent part of the trade advance received during the year ended 31-3-2004; (ii) The assessee has not done the exports within the stipulated one year period or as of now; (iii) The assessee is barred from remitting the advance amount; (iv) The various excuses offered by the assessee for not discharging the sale obligations, such as that the assessee could not procu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved by the impugned addition, the assessee carried the matter in appeal before the CIT(Appeals). The CIT(Appeals) called for the remand report of the assessing authority on the basis of the following documents and evidences produced by the assessee before him. "(a) Copy of RBI letter dated 3-3-2008 to Catholic Syrian Bank Ltd., Ernakulam (appellant's banker) issuing no objection to the appellant company to refund GBP 1248197.91 to Uniglobe General Trading Company, UAE; (b) Copy of the letter of the appellant dated 3-3-2008 to Catholic Syrian Bank Ltd. Requesting for repatriation of GBP 1248197.91 to Uniglobe General Trading Company, UAE; (c) Copy of Debit Voucher dated 10-3-2008 remitting the above amount; and (d) Copy of letter dated 15-3-2008 issued by Uniglobe General Trading Company, UAE to the appellant company acknowledging receipt of Rs. GBP 1248197.91." Accordingly, Assessing Officer made verifications and found that the assessee has refunded the balance trade advance as claimed by it through Catholic Syrian Bank Ltd., after obtaining the permission of the RBI. The Assessing Officer accordingly requested the CIT(Appeals) to decide the matter on merit. 4.1. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars has no relevance as far as the present year is concerned. In view of this difference of opinion, the above question has been referred to the Third Member. 7. Dr. Babu Joseph, ld. Sr.D.R. submitted that assessee received Rs. 20 crores as a trade advance from the foreign party. There were exports to the tune of Rs.10 crores in the assessment year 2003-04. During the subsequent years there were exports, but only for name sake claiming that there were difficulties of meeting the obligation because of the price fluctuation and instability in the market. At the same time during this lull period assessee withdrew huge amounts and utilized it for investment in immovable property, i.e. other than for the business purposes of the assessee. The ld. DR submitted that there was no enforceable liability against the assessee by the foreign party, as without RBI sanction the assessee cannot repay the amount to foreign party. What happened during the subsequent years have no bearing as to whether the amount is taxable or not during the year under consideration. Each year is independent. The foreign party who advanced the money never asked about the fate of the advances. RBI prohibits repatriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before the Hon'ble High Court, it has been clearly explained the circumstances under which assessee could not make the export. It is stated, because of assessee's inability to comply the export obligations assessee expressed its willingness to repatriate the balance amount to UGTC but to discharge the liability, assessee has to bear an additional burden to the tune of Rs. One crore because the conversion rate had lost to this extent. This fact was brought to the notice of UGTC and they permitted the assessee to retain the money till the situation improves. Assessee was allowed to retain the money in order to maintain the cordial business relation. Ld. CA brought my attention to page 60 of the paperbook, a letter from assessee's counsel addressed to RBI dated 13-2-2008 through which counsel informed the RBI that Hon'ble High Court directed the bank to dispose of Exhibit P-9, i.e. assessee's letter dated 7-1-2008, with regard to the repatriation of export advance received by the assessee company. It was after the receipt of the lawyer's letter dated 13-2-2008, RBI permitted the assessee to make the payment vide their letter dated 3-3-2008 and consequently assessee made the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as construction and operation of Star Hotels in prime locations, construction and marketing of commercial complex and residential villas in prime locations and to undertake various projects under BOT Scheme from Government agencies etc. It means even when the amount was advanced, foreign party intended to permit the assessee to use this amount for other purpose, which actually, later, the Assessing Officer found as used for, that is to make the investment in immovable property. 10. I have heard rival submissions. I have also gone through the orders of the Revenue authorities as well as the order of the ld. AM and ld. JM. I have also gone through the detailed written arguments filed by the ld. C.A. and so also through the paper book filed by the assessee. 11. There is no dispute about the facts of the case, i.e. assessee received certain amounts as trade advance and also made substantial exports during the year under consideration. During the subsequent years, due to various reasons there were not much export and during this lull period, assessee withdrew substantial portions of trade advance and invested good portion in immovable property. Three years later, after getting RBI p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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