TMI Blog2003 (4) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee arising out of the order passed under section 163 of the Act. The material facts, in brief, as has been unfolded by the orders of the authorities below, statement of facts filed by the assessee before the first appellate authority and the papers filed in the form of a paper book before us, are that-By way of an order dated 19-3-1991 passed by the Assessing Officer, the assessee-company has been treated as an agent under section 163 of the Act for, amongst others, two foreign buyers, viz. M/s. State Establishment for Food Stuffs Trading, Baghdad, Iraq and M/s. MISR Import Export, Cairo, A.R.E.,UAR in respect of refund of duty drawback and Central Excise Rebate received in India by the assessee-company for and on behalf of the said two foreign buyers in terms of the contract for purchase of tea on their behalf and export thereof to them. Besides the aforesaid two foreign buyers, the assessee was also treated as an agent under section 163 of the Act, vide Assessing Officer's said consolidated order dated 19-3-1991, for SOJUZPLODO-IMPORT, USSR in respect of export benefits by way of duty rebate, custom duty drawback etc. and as well interest income on fixed deposits m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and on behalf of the foreign buyers. Situated thus, the Assessing Officer proceeded to assess the foreign buyers to income tax on such income by way of customs duty drawback and excise duty rebate which were actually received in India by the foreign buyers through the assessee-company. The Assessing Officer, therefore, treated the assessee-company as an agent of non-resident foreign buyers in respect of refund of duty drawback and central excise rebate in accordance with the provisions of sections 163(1)(b)/(c)/(d) of the Act read with provisions of section 5(2)(a) of the Act. On an appeal, the CIT(A) upheld the action of the Assessing Officer in treating the assessee-company as an agent under section 163 of the Act for, amongst others, the aforesaid two foreign buyers, viz., M/s. State Establishment for Food Stuffs Trading, Baghdad, Iraq, and M/s. MISR Import Export, Cairo, A.R.E., UAR. Stiall aggrieved, the assessee is in further appeal before the Tribunal. 3. The main contention put forward by the ld. counsel for the assessee-company assailing the order passed under section 163 of the Act would that unless and until it is found and held that non-resident is liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9(1) of the Act corresponding to section 42 of the 1922 Act and unless it is found and held that non-resident is liable to pay tax in respect of the refunded duty drawback and excise duty rebate, the question of appointing an agent under section 163 and making him liable to pay tax under section 9(1) cannot arise. Mr. N.K Poddar has very strongly relied upon the decision of the Hon'ble Bombay High Court in Abdullabhai Abdul Kadar v. CIT[1952]22 ITR 241 as well as other cases forming part of the compilation of 25 pages filed on behalf of the assessee before the Tribunal. 4. The Ld. D.R., on the other hand, supported the orders of the authorities below and reiterated the views and reasons as given by the Assessing Officer as well as CIT(A). It was submitted that the contention of the assessee has to be appreciated and considered only in terms of the provisions of section 9(1) of the Act, which refers to "Income deemed to accrue or arise in India" and all the sub-clauses of section 9 are the further clarification and elucidation of the meaning of "income deemed to accrue or arise in India." Beyond this deeming provision of accrual or arising of certain income in India, the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the amounts received on account of customs duty drawback and the excise duty rebate were not the real income of the assessee but the assessee-company was holding the same for and on behalf of foreign buyers. It is, therefore, settled that the amounts received in India by the assessee-company on account of customs duty drawback and the excise duty rebate are belonged to the foreign buyers. On a consideration of the provisions of the relevant agreements between the assessee and its foreign buyers, we find that the foreign buyers had been purchasing tea from India through the assessee-company since long, and the assessee-company had undertaken to effect the purchase of tea as per requirement of foreign buyer and as well undertaken the responsibility of buying, blending, re-packing, packetising, shipping, maintaining the quality and quantity etc. The assessee-company was also under an obligation to remit the amounts received on account of excise duty rebate and customs duty drawback to the foreign buyers after obtaining the permission from the Reserve Bank of India. 7. Now, the main question to be considered is whether the amounts received by way of excise duty rebate and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also all income which may be deemed to accrue or arise in India are brought to charge according to section 5(2) in case of a non-resident. The provisions of section 9 have been enacted to indicate as to what types of income, although actually accruing or receiving elsewhere, shall be deemed to accrue or arise in India for the purposes of income-tax levy. The provisions of section 9 of the Act have the effect of rendering persons liable to tax on income which do not accrue or arise or are not received in India but which are deemed to accrue or arise in India. The ambit of the expression "is deemed to accrue or arise to him in India" used in section 5 has been explained and defined in section 9. The concept of actual receipt of income in India is quite distinct and apart from the notion of deemed accrual or arising of the income in India. Similarly, the concept of actual accrual or arising of income in India, although not dependent upon the receipt of income in India, is quite distinct and separate from the notion of deemed accrual or arising of the income in India. The determination as regards actual accrual or arising of income in India follows the general principles of law wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed, under section 9(1)(i), to accrue or arise in India and does not apply to a case where the income actually does accrue or arise or is received in India. Therefore, in the case Of non-resident, income received or accrues or arises in India through or from operations which are confined to the purchase of goods in India for the purpose of export are chargeable to tax in India inasmuch as the Explanation (b) to section 9(1)(i) excludes only those income which are deemed to accrue or arise in India to non-resident through or from operations which are confined to the purchase of goods in India for the purpose of export. The provisions of Explanation (b) to section 9(1)(i) cannot be extended to apply to a case where the income actually does accrue or arise or is received in India. 8. At this juncture, we may observe that there might be a case where the Assessing Officer may bring to tax in the hands of a non-resident, a portion of the profits from the overseas sale of goods purchased in India through agent, as profits deemed to accrue or arise in India on the reasoning that the operations confined to the purchase of goods in India has contributed to the earning of income by the non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond that. Thus, placing the reliance on the provisions of Explanation (b) to section 9(1) of the Act and Board's Circulars mentioned above by the Ld. Counsel for the assessee to contend that refunded duty drawback and central excise rebate actually received in India by the assessee-company for and on behalf of non-resident overseas buyers cannot be brought to tax, is totally misplaced and untenable. 9. Coming now to the question as to whether the amounts received in India for and on behalf of non-resident on account of duty drawback and central excise rebate is an income chargeable to tax within the meaning of the Income-tax Act, we may observe that excise rebate and custom duty drawback belonging to the foreign buyers has actually been received in India as incidental to the business activities of the foreign buyers, who have thereby got substantial relief of revenue in nature. The purchase price, inclusive of duties payable thereupon, of the tea has already been realised from the non-resident by the assessee-company at the time of purchase of goods and the assessee-company has also received thereafter the refunded excise rebate and custom duty in India for and on behalf of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of the Explanation to section 9(1)(i) of the Act. The assessee's case does not fall within this category. The assessee's case is of income actually received in India by and for and on behalf of the non-resident foreign buyers in the nature of refunded such rebate and duty drawback, which are taxable by virtue of section 28(iiic) read with section 2(24)(vc) of the Act. 11. It can, therefore, now, be safely held that there being income in the nature of refunded custom duty drawback and excise duty chargeable to tax in the hands of the non-resident foreign buyers, the assessee-company could be lawfully treated as the agent under section 163 of the Act for the assessment year under consideration to assess the said refunded central excise rebate and duty drawback, which were received in India and were accordingly held by the assessee-company for and on behalf of non-resident foreign buyers. On the facts and circumstances of the case, and in view of the fact that there being a continuous business activity of the non-resident in India of purchasing tea through the assessee-company, the non-resident being in receipt of income from or through the assessee-company and there bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding to section 9 of 1961 Act) are of no assistance to the assessee as distinguishable on facts and circumstances of the case in hand. We may further observe that we have borne in mind the principles laid down in all these decisions while deciding the issue in hand. We would also like to clarify here that the assessee's case does not fall within the ambit of section 160(1)(i) of the Act as the assessee-company has not been treated as an agent under section 163 in respect of the deemed accrual or arising of income of a non-resident specified in sub-section (1) of section 9 of the Act but has been treated as an agent under section 163 in respect of the income received in India by or on behalf of the non-resident foreign buyers as specified under the provisions of section 5(2)(a) of the Act. We further observe that no other point has been argued on behalf of the assessee-company in these appeals. 13. It is pertinent to mention here that the Hon'ble Supreme Court in the case of CIT v. R.D. Aggarwal Co. [1965] 56 ITR 20 has held that the fiction embodied in section 9 of the Act corresponding to section 42 of 1922 Act does not apply to the income which actually accrues or arises to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 811(Cal.)/1997 filed by the department, we find that the CIT(A) has held that no income would arise on the amounts received by way of central excise rebate or duty drawback relating to purchases made by the concerned foreign buyers as section 9(1)(i)(b) provides that "no income shall be deemed to have accrued or arisen in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export" and it would go to reduce the cost of purchase to the foreign parties. However in view of our discussion and decision given in foregoing paragraphs while deciding the matter arising out of an order passed under section 163 of the Act, we hold that the CIT(A) has erred in relying upon the provisions of section 9(1)(i)(b) of the Act as the income, on account of central excise rebate or custom duty drawback actually received in India by the assessee-company for and on behalf of non-resident foreign buyers is includible in the total income of the non-resident under the provisions of section 5(2)(a) of the Act and not as income deemed to have accrued or arisen in India within the meaning of section 9(1)(i) of the Act. The Explanation (b) to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been filed in respect of non-resident viz., State Establishment Food Stuff Trading, Baghdad, Iraq. We may further observe that the department had initially enclosed a copy of assessment order pertaining to another foreign buyer of USSR along with the Memorandum of Appeal filed before the Tribunal resulting in to a mistake in Tribunal's order dated 19-10-2001 passed in this appeal, which was later set aside and recalled by the Tribunal on a petition filed by the assessee-company under section 254(2) of the Act by directing the department to file a copy of correct assessment order and to fix the appeal for fresh and de novo hearing. Now, the department has filed a copy of assessment order in respect of foreign buyer, viz. State Establishment for Food Stuffs Trading, Baghdad, Iraq, in respect of which, inter alia, the CIT(A) has passed the impugned order and which is the subject-matter of this appeal. Both the parties have also submitted their contentions in the light of assessment order pertaining to said foreign buyer i.e., State Establishment Food Stuff Trading, Baghdad, Iraq. Hence, this appeal is treated in respect of only one of two non-residents, viz. State Establishment Food S ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
