TMI Blog1990 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... ,09,739 should not constitute the Sale Promotion expenses so as to fall within the ambit of section 37(3A) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the ITO was not justified in making addition of ₹ 34,198 out of export of machineries to P.T. Kusum Products, Indonesia, by invoking the provision of section 92 of the Income-tax Act, 1961? It is not in dispute that the first question is now concluded by the decision of this Court in the case CIT v. Hindusthan Motors Ltd. (IT Reference No. 134 of 1985, dated 23-2-1990]. Following the said decision we answer the first question in this reference in the affirmative and in favour of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) and the Tribunal also following its order for the assessment years 1977-78 and 1978-79 in the assessee's own case upheld the order of the Commissioner (Appeals). 5. The question which calls for determination is whether section 92 has any application to the facts of this case. 6. Mr. Moitra, the learned counsel appearing for the revenue, has contended that the Tribunal has not considered section 9(1) of the Act which is relevant as there is a business connection; since the Tribunal did not advert to this aspect of the matter, the matter may be remanded to the Tribunal for fresh consideration. 7. We are affraid that this argument is based on misconception of the facts. There is no dispute in this case that the assessee being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies shall subscribe and pay for, at par, the shares to be issued by the new company in the following ratio: (a)KPL-assessee - 50 per cent (b)West German company - 30 per cent (c)Indonesian company - 20 per cent. 10. On incorporation, 200 shares of US $ 100 each will be subscribed by the promoters on which 10 per cent shall be paid up initially. The promoters shall arrange for the subscription of the remaining capital of the company and the amount to be called up on the shares shall be determined by the promoters as and when required for the purpose of the company. The authorised capital of US $ 10,00,000 shall be fully paid up in accordance with the decisions of the Board of Commissioners but within two years from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively, of the share capital. The assessee-company was thus to subscribe US $ 5,00,000 towards the capital of the new company which was going to be established in Indonesia. The RBI did not allow the assessee- company to drain out foreign exchange and vide its letter dated 28-7-1975 directed the assessee-company to invest the required capital by export of plant and machinery and equipment. This was also approved by the Ministry of Commerce, Government of India. Pursuant to the agreement dated 13-3-1975 and the approval of the RBI and Ministry of Commerce, Government of India, the assessee participated in the new company by contributing its capital by way of exporting plant and machinery and equipment. The assessee was entitled for export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there are five ingredients of this section which are as follows: (i)The transaction may be between a resident and a non-resident. (ii)It should be a business transaction. (iii)The business may be with the motive of profit. (iv)The profit earned by the assessee may not be fair due to the close relation. (v)The ITO in such a situation may estimate the fair profit. 15. There is no dispute that it was a transaction between a resident and a non-resident but other ingredients of this section are not applicable to the facts of this case. As rightly contended by Mr. Bajoria, that there is no business transaction between the assessee and the non-resident company. The assessee did not export machines as a seller to a buyer. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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