TMI Blog1991 (4) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... s derived by it from its export within the meaning of the Notification S. O. No. 3210, dated August 8, 1969, and, therefore, the assessee would be entitled to enjoy the exemption from the operation of the provisions of section 104 of the Income-tax Act, 1961 ?" The assessee is a private limited company exporting lignite chrome ores and other minerals. These three tax cases relate to the three assessment years 1972-73, 1973-74 and 1974-75. The Income-tax Officer found that, for the assessment years 1972-73 and 1974-75, adequate profits were available and there had been no distribution of dividend by the assessee company which is a company in which the public are not substantially interested. In those circumstances, the Income-tax Officer initiated proceedings under section 104 of the Act and, with the previous approval of the Inspecting Assistant Commissioner of Income-tax, passed orders under section 104(1) of the Act calling upon the appellant to pay additional income-tax of Rs. 1,09,019 and Rs. 82,836 for the assessment years 1972-73 and 1974-75, respectively. In the course of the proceedings under section 104 of the Act, the assessee contended that, as the assessee-company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of the actual users nominated by the assessee, there was no question of trading in import licences by the assessee. The Appellate Assistant Commissioner accepted the assessee's contention that the Barter Scheme of the Central Government was an integrated scheme covering the export performance including the exports as such and the issue of import licences and held that the profits arising out of sale of import licences were attributable to the exports and they have to be classified as earnings arising out of exports. The Appellate Assistant Commissioner further held that, while the actual export may be made in a particular year, the proceeds could be derived in a subsequent year and the notification in question does not require that the exports and the receipts of the sale proceeds on behalf of the exporting company should be in the same year. The Appellate Assistant Commissioner further found that the second proviso to the notification requiring that the sale proceeds from export should exceed 50% of gross receipts was satisfied in the assessee's case and, accordingly, held that the assessee which had made profits out of exports was entitled to the benefit of Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary or expedient in the public interest so to do, it may, by notification in the Official Gazette and subject to such conditions as may be specified therein, exempt. any class of companies to which the provisions of this section apply from the operation of this section." Notification No. S. O. 3210 dated August 8, 1969, issued by the Government under section 104(3) of the Act reads as follows: "In exercise of the powers conferred by sub-section (3) of section 104 of the Income-tax Act, 1961 (43 of 1961 ), and in partial modification of the Ministry of Finance (Department of Revenue and Insurance), Notification No. S. O. 2007, dated June 6, 1967, the Central Government, being of the opinion that it is necessary and expedient in the public interest so to do, hereby exempts every Indian company (not being an investment company as defined in clause (ii) of section 109 of that Act), from the operation of the said section 104, in respect of the previous year relevant to the assessment year commencing on the 1 St day of April, 1970, and any subsequent year : Provided that such Indian company, in the course of its business, (a) exports any goods or merchandise out of India; or (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but, for the assessment year 1973-74, the assessee had exported goods worth Rs. 31,000. With regard to condition No. 3 prescribed by the notification and referred to above, it is common ground that, if the realisation from the transfer of the assessee's import licences are considered as sale proceeds derived from exports, they would constitute more than 50 per cent. of the aggregate amount of the sale proceeds and all other gross receipts of the business during the previous year credited to the profit and loss account of the assessee-company. Therefore, the main question we have to examine is, whether the assessee has satisfied the second condition prescribed in the Notification No. S. O. 3210, dated August 8, 1969, viz. ; whether the realisation from the transfer of the assessee's import licences can be considered as sale proceeds derived from exports and received in or brought into India by the assessee or on its behalf in accordance with the Foreign Exchange Regulation Act of 1947. Learned counsel for the assessee submitted that, in respect of all the three assessment years, the amounts realised by the assessee from the transfer of its import licences must be considered as sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act, 1966, the profits and gains derived from the export of any goods or merchandise referred to in section 2(5) (a) (i) of the Finance Act have to be ascertained in accordance with the Income-tax Act, 1961 and, if so ascertained, the two amounts referred to will necessarily constitute business receipts referable to, or derived from the export of cycle rims and hence the assessee was entitled to the rebate under section 2(5)(a) of the Finance Act, 1966, on the two amounts. The above decision is clearly distinguishable on facts and the principle laid down in that decision will not apply to the facts of the present case. In the decision of CIT v. Wheel and Rim Co. of India Ltd. [1977] 107 ITR 168 (Mad), this court was not concerned with the interpretation of the Notification No. S. O. 3210, dated August 8, 1969, but had considered only the combined effect of section 2(5)(a)(i) and 2(5)(d) of the Finance Act, 1966, and rule 2(2) of the Income-tax (Determination of Export Profits) Rules, 1966. The assessee would get the benefit of Notification No. S. O. 3210 dated August 8, 1969, only if it exported goods out of India and received the sale proceeds of the exports in India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 8, 1969. The language of Notification No. S. O. 3210, dated August 8, 1969, does not support the conclusion of the Tribunal that import licences realisation by the assessee will constitute sale proceeds derived by it from its export within the meaning of the notification particularly when the sale proceeds are not brought into India in accordance with the Foreign Exchange Regulation Act, 1947, and, therefore, the conclusion of the Tribunal is clearly erroneous. Therefore, the Tribunal is not right in holding that the amounts realised by the assessee from the transfer of its import licences constituted sale proceeds derived by it from its export within the meaning of the Notification No. S. O. 3210, dated August 8, 1969; that the assessee would be entitled to enjoy the exemption from the operation of the provisions of section 104 of the Act and that the assessee was not liable to pay additional tax under section 104 of the Act for-any of the assessment years from 1972-73 to 1974-75. In the result, we answer both the questions referred to us in the negative and in favour of the Revenue. The Revenue is entitled to costs. Counsel's fee Rs. 500 (one set). - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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