1991 (8) TMI 138 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction u/s 80HHC for export agency commission.
2. Penalty u/s 271(1)(c) for making a false claim.

Summary:

Issue 1: Entitlement to Deduction u/s 80HHC for Export Agency Commission

The primary issue in ITA No. 5674 (Delhi) of 1988 was whether the assessee was entitled to a deduction u/s 80HHC of the Income-tax Act for the export agency commission. The assessee-company derived income from the export of ready-made garments and agency commission against such exports. The Assessing Officer allowed deductions for export sales but denied the deduction for export agency commission, which was upheld by the Commissioner of Income-tax (Appeals). The Tribunal examined the terms of the buying agency agreement and concluded that the assessee acted merely as an agent for the foreign principal and not as a principal itself. The Tribunal held that the commission received by the assessee could not be treated as part of the export turnover, as the property in the goods exported did not vest with the assessee. Therefore, the assessee was not entitled to relief u/s 80HHC on the export agency commission of Rs. 22,27,118. The appeal was dismissed.

Issue 2: Penalty u/s 271(1)(c) for Making a False Claim

In ITA No. 6537 (Del.) of 1988, the issue was the imposition of a penalty u/s 271(1)(c) for making a false claim regarding the deduction u/s 80HHC. The Commissioner of Income-tax (Appeals) had initiated penalty proceedings on the ground that the assessee made a false claim. The Tribunal noted that the assessee had made the claim in a bona fide manner and had disclosed all relevant facts. The Assessing Officer had examined the claim and rejected it without initiating penalty proceedings. The Tribunal held that the mere rejection of a claim did not amount to concealment of income or a false claim. The assessee's belief that it was entitled to the deduction was genuine, and there was no motive to conceal income. Consequently, the penalty imposed by the Commissioner of Income-tax (Appeals) was deleted, and the appeal was allowed.