1983 (11) TMI 113 - AT - Income Tax

Summary

Issues:
1. Interpretation of section 92 of the Income-tax Act, 1961 regarding the addition towards export of machinery to a non-resident company.
2. Whether the Commissioner (Appeals) erred in deleting the addition of Rs. 7,39,528 in respect of the export of machinery to P.T. Kusum Products, Indonesia.

Analysis:
1. The case involved a limited company contributing capital by exporting machinery to a new company in Indonesia. The Revenue added Rs. 7,39,528 under section 92 of the Income-tax Act, 1961, alleging abnormal profits. The Income Tax Officer (ITO) found a recovery of Rs. 7,39,429 and disregarded the export incentive earned by the assessee. The Commissioner (Appeals) deleted the addition, considering the purpose of the export and the government's approval, which allowed export subsidy and duty drawback. The Commissioner held that the addition cannot be upheld due to the circumstances surrounding the transaction.

2. The department contended that there was a loss on the transaction and invoked section 92, citing a Supreme Court case. The assessee argued that section 92 was not applicable as the export was part of contributing capital, not a business deal for profit. The assessee emphasized the approval from RBI and Ministry of Commerce, Government of India, indicating the transaction's nature. The assessee maintained that the export incentive was directly related to the export, resulting in a surplus of Rs. 51,801. The Tribunal upheld the Commissioner's decision, stating that the ITO incorrectly invoked section 92 as the transaction was not for profit but for capital contribution.

3. The Tribunal analyzed the provisions of section 92, emphasizing that the transaction did not meet the criteria for invoking the section. It was established that the export was part of capital contribution, not a business deal for profit. The Tribunal concluded that the ITO's addition under section 92 was unjustified. The Tribunal dismissed the appeal, affirming the Commissioner's decision to delete the addition of Rs. 7,39,528.

This detailed analysis highlights the key arguments, legal interpretations, and the Tribunal's decision regarding the application of section 92 in the case of exporting machinery for capital contribution.