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Interpretation of provisions for export profits entitlement under Finance Act for assessment years 1963-64 to 1966-67. Analysis: The High Court of Madras was tasked with determining whether profits earned by an assessee in the export of hides and skins for the assessment years 1963-64 to 1966-67 were entitled to rebate under the Finance Act. The assessee, a renowned exporter of tanned hides and skins, had arrangements with foreign firms to represent them in foreign markets. The Tribunal found that the assessee entered into agency agreements with foreign firms, where a selling commission of 2 per cent on sales of hides and skins was payable to the foreign representatives. The goods were shipped by local dealers on behalf of the assessee to the foreign representatives. The assessee claimed a 1 per cent discount received on exports as export profits eligible for rebate under the Finance Act. The Income-tax Officer initially disallowed the claim, stating that the exports were not made on the assessee's account. However, the Appellate Assistant Commissioner ruled in favor of the assessee, emphasizing the substantial role played by the assessee in the export transactions. The department appealed to the Tribunal, arguing that the earnings were attributable to services rendered to the foreign principal, not to the export of goods. The Tribunal held that the assessee was the buyer and seller of hides and skins in the foreign market through its representatives, constituting export, and dismissed the department's appeals. The High Court analyzed the relevant statutory provisions, particularly Section 2(5)(i) of the Finance Act, 1963, which allowed deductions for profits and gains derived from the export of goods. The Court reiterated the Tribunal's findings that the assessee purchased goods from local dealers and exported them in the names of these dealers, but on the assessee's account and at its risk. The Court emphasized that the assessee was responsible for ensuring the quality and proper shipment of goods. It concluded that the 1 per cent earned by the assessee on the export of hides and skins constituted profits derived from the export transactions. The Court highlighted that the very question referred to the High Court assumed the earnings as profits derived from the export of hides and skins. Therefore, the Court answered the question in the affirmative and in favor of the assessee. In conclusion, the High Court's judgment clarified that the assessee's earnings from the export of hides and skins, despite being received through agency agreements and shipments by local dealers, constituted export profits eligible for rebate under the Finance Act. The Court's decision was based on the assessee's substantial involvement in the export transactions and the ultimate ownership and exportation of the goods under its name.
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