TMI Blog1991 (6) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rn and textiles. Export of textiles from Pondicherry also formed part of the activities of the assessee and the entire business operations of the assessee are confined to the territory of Pondicherry, where the operations regarding the manufacture of textiles, sale and export of textiles are conducted. For the assessment years 1960-61, 1961-62 and 1962-63, assessments were made on the assessee, in the status of non-resident and for the assessment year 1963-64, as a resident. The previous years were the calendar years 1959 to 1962, respectively. Proceedings under section 147 read with section 148 of the Act were initiated by the Incometax Officer with the prior permission of the Commissioner of Income-tax against the assessee, as, in the opinion of the Income-tax Officer, the assessee had taxable income, but had failed to furnish a return of income. The income earned by the company, according to the Income-tax Officer, was by way of premium for surrender of import, entitlements for the import of foreign cotton. Responding to the notice, the assessee filed " Nil " returns, but the Income-tax Officer subjected to tax the income by way of premium earned by the assessee for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce outside Pondicherry and in India and that the mere quantification of the amount of incentive, outside Pondicherry, cannot be regarded as accrual of income to the assessee outside Pondicherry and the incentive accrued the moment the export sale was completed and at Pondicherry. Considering the question from the viewpoint of receipt, the Tribunal found that the assessee wanted the payment to be made at Pondicherry, and, under those circumstances, the posting of the cheque made the post office the agent of the payer and not the agent of the assessee. Following the decision of the Tribunal on this aspect in respect of the assessment years 1964-65 to 1969-70, which is the subject matter of reference in T. C. Nos. 42 to 47 of 1982, the Tribunal ultimately held that since no income arose or was received in India other than in Pondicherry, the assessments could not be supported and dismissed the appeals. That is how the following common question of law in respect of the assessment years 1960-61 to 1963-64 has arisen in T. C. Nos. 1058 to 1061 of 1979 : " Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in law in holding that the income from expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existed outside Pondicherry and the income received automatically accrued in India and outside Pondicherry, which were determined and paid outside Pondicherry and the relief available under paragraph 8 of the Concession Order was not available to the assessee on its entire income. In that view, the assessment orders were affirmed and the appeals preferred by the assessee for the assessment years 1967-68 to 1969-70 were dismissed. In respect of the assessment years 1964-65 to 1966-67, the Revenue appealed to the Tribunal, while the assessee preferred appeals against the order of the Appellate Assistant Commissioner in respect of the assessment years 1967-68 to 1969-70. The Tribunal found that the export incentive receipts and the income therefrom accrued or arose only in Pondicherry and that the provisions of the Concession Order do not make a difference between income of the assessee accruing inside or outside Pondicherry. In that view, the Tribunal, while dismissing the appeals preferred by the Revenue for the assessment years 1964-65 to 1966-67, allowed the assessee's appeals for the assessment years 1967-68 to 1969-70. That is how the following three common questions of law have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er be utilised for the use of the exporter or may be sold to other needy mills or surrendered to the Federation. The import entitlements of an exporter were based upon the monthly statement of exports sent to the Indian Cotton Mills Federation, Bombay, which advised the exporter about the amounts due for each month's export. The assessee had surrendered its raw cotton import and machinery import entitlements and received payments clearly specifying that the payments should be made in Pondicherry and there is no dispute regarding the quantum of the payments received during the relevant assessment years. It is in the above factual background that the question whether the receipts by the assessee accrued or arose to it in Pondicherry or outside Pondicherry has to be considered. While the Department maintains that the income referable to the import entitlements arose or accrued to the assessee outside Pondicherry, the assessee reiterates its stand that such receipts were only in Pondicherry. That question has to be decided on an overall consideration of all the facts and circumstances. Learned counsel for the Revenue contended that the export incentive entitlements accrued to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s should be deemed to accrue or arise in India. We are, however, unable to accept this contention, for, in order to deem that income has accrued or arisen in India, such income must have accrued or arisen, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, etc. It cannot be stated that the assessee had any business connection in India as there should be a relation between the business carried on by the assessee at Pondicherry which yielded profits or gains and some activity in India which contributed either indirectly or directly to the earning of those profits. A close connection between the activity carried on outside India and the trading or business activity within India is contemplated and, in its absence, it cannot be said that there was any business connections as contemplated under section 9(1) of the Act. Equally, it is difficult to regard the import entitlements as a source of income which should be looked at from a practical view-point and not merely as an abstract legal concept. We are, therefore, unable to agree with the contention of lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not, on the facts of this case, be treated as an agreement on the part of the assessee to receive the amount at Bombay, treating the post office as its agent. Though the cheques were discounted and collected at Pondicherry, the total absence of any activity outside Pondicherry and the express request made by the assessee for payment to be made in Pondicherry, would certainly support the stand of the assessee. Further, in cases dealing with payment of money, either by cheque or by draft, at the point of despatch of the cheque or draft, something tangible would have been received, such as goods, etc., by the person who paid for it, by the issue of a cheque or draft, but in this case, there is no sale of commodities or rendering of services by the assessee to the person who issued the cheques. The payment cannot, therefore, be regarded as quid pro quo for something done by the assessee. In view of the foregoing considerations, we are of the view that the proceeds of the import entitlements were not received by the assessee outside Pondicherry. We agree with the conclusion of the Tribunal on this aspect. In relation to such receipts by the assessee for the assessment years 1960-61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined as provided there under. In this case, we have earlier found that the accrual or arising or even receipt of the income by the assessee was at Pondicherry and the Appellate Assistant Commissioner and the Tribunal have also referred to the prior orders of assessment on the assessee under the French law for the assessment years 1960-61 to 1963-64, and under paragraph 4 of the Concessions Order, it would not be open to the Income-tax Officer to assess the income again under the provisions of the Act. We, therefore, hold that the Tribunal was right in its conclusion in this regard That takes us on to a consideration of the availability to the assessee of the benefit of the concession provided in paragraph 8 of the Concessions Order in respect of the assessment years 1964-65 to 1969-70. On this question, though the two Appellate Assistant Commissioners who had dealt with the appeals in respect of the assessment years 1964-65 to 1969-70 have differed, the Tribunal had stated that the assessee would be entitled to the benefit of paragraph 8 of the Concessions Order as, in its view, there is no restriction whatever with regard to the availability of the concession to so muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union Territories. reference to the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions ) Order, 1964, may be made to appreciate the difference between the scope of the concessions in the two Concessions Orders. Paragraph 3(1) of the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions ) Order, 1964, runs as follows : " 3. Scope of the main concessions in relation to income-tax. - (1) Subject to the provisions of sub-paragraph (2) (i) the provisions of paragraphs 4, 5 and 6 of this Order shall apply in the case of every assessee (a) who resided or maintained a dwelling place in Dadra and Nagar Haveli, for the period or periods amounting in all to one hundred and eighty-two days or more during the calendar year 1961, or carried on any business or profession in Dadra and Nagar Haveli, before the appointed day, and is assessable as a person resident in India in the previous year but would not have been so assessable if the Income-tax Act, 1961, had not been extended to Dadra and Nagar Haveli ; or (b) who is not a resident in the previous year relevant to the assessment year, to so much of his income included in his total income as accrues or arises i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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