2004 (11) TMI 27 - HC - Income Tax

Non-extension of time in respect of the late payment received from foreign buyers - sale proceeds of the goods exported by the petitioner amount due as outstanding from foreign buyers - application filed for extension of time as required under section 80HHC(2)(a) - non-extension of time by little more than six months in the present case cannot be said to be justified otherwise it would be defeating the very purpose conferring such power on the authority concerned. The petitioner has done what it could do in the matter and in the absence of any other relevant material, mere fall of value of Indian rupee in terms of foreign exchange would not lead to the conclusion that there was deliberate action on the part of the petitioner not to bring the convertible foreign exchange into India within the specified time hence we are of the view that respondent has acted arbitrarily in not extending the time to bring convertible foreign exchange into India - Respondent is commanded by a writ of mandamus to grant extension of time under section 80HHC(2)(a)

Summary

Issues Involved:
1. Non-extension of time for late payment received from Prime Leather Enterprises, USA.
2. Non-extension of time for late payment received from Horseman, USA.

Issue-wise Detailed Analysis:

1. Non-extension of time for late payment received from Prime Leather Enterprises, USA:

The petitioner, a partnership firm engaged in exporting saddlery leather and brass items, sought a writ to quash the order dated August 6, 1999, by the Commissioner of Income-tax, Kanpur. The order partially denied the extension of time for receiving late payments from Prime Leather Enterprises, USA, amounting to Rs. 77,121. The petitioner argued that the Commissioner did not appreciate the true meaning and purport of section 80HHC(2)(a) of the Income-tax Act, 1961, which allows for an extension of time to bring convertible foreign exchange into India under certain conditions.

The court noted that the petitioner had exported goods worth Rs. 1,07,80,835 for the assessment year 1997-98, with Rs. 3,53,000 outstanding from three foreign buyers as of March 31, 1997. The petitioner filed an application for an extension of time under section 80HHC(2)(a), which was partially granted. The Commissioner extended the time for payments from Andersen, Germany, but not for Prime Leather Enterprises and Horseman, USA.

The court observed that the petitioner received the payment from Prime Leather Enterprises on November 4, 1997, just 34 days beyond the specified period. The Commissioner's refusal was based on the view that the petitioner did not make sincere efforts to realize the sale proceeds within the permissible time and might have delayed the receipt to benefit from the fall in the value of the Indian rupee. However, the court found this reasoning unjustified, noting that the petitioner had exported goods of an aggregate value of Rs. 1,07,80,853, and the unrealized amount was a small fraction. The court concluded that the Commissioner's decision was arbitrary and failed to consider the relevant circumstances, such as the aggregate export sales and the proportionate unrealized convertible foreign exchange.

2. Non-extension of time for late payment received from Horseman, USA:

The petitioner also sought an extension of time for receiving Rs. 1,88,860 from Horseman, USA. The payments were received in two installments on April 13, 1998, and June 16, 1998. The petitioner argued that its partner had personally visited the USA and sent multiple reminders for the payment. The Commissioner, however, concluded that the petitioner did not make sincere efforts to realize the sale proceeds within the specified period and suggested that the delay might have been due to the expectation of a higher yield from the fall in the value of the Indian rupee.

The court found that the Commissioner failed to record any finding that the delay was not beyond the petitioner's control. The court noted that the petitioner had made efforts, such as personal visits and reminders, to secure the payment. The Commissioner's decision was based on the supposition that the petitioner delayed the receipt to benefit from the devaluation of the Indian rupee, without considering the aggregate export and the proportionate unrealized amount.

Conclusion:

The court held that the Commissioner acted arbitrarily in not extending the time for the two export transactions. The order dated August 6, 1999, was quashed to the extent that it denied the extension for payments from Prime Leather Enterprises and Horseman, USA. The court issued a writ of mandamus directing the Commissioner to grant the extension of time under section 80HHC(2)(a) for these transactions. The writ petition was allowed, with no order as to costs.