1994 (9) TMI 133 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under section 80HHC of the Income Tax Act.
2. Validity of the appeal filed by the department.

Issue-wise Detailed Analysis:

1. Deduction under section 80HHC of the Income Tax Act:

The primary contention in the department's appeal was the acceptance of the assessee's claim for deduction under section 80HHC of the Act. The assessee, an exporter, claimed a deduction of Rs. 10,38,359 on the export turnover for the assessment year 1985-86. The Assessing Officer found that the goods exported actually belonged to M/s. Mahajan International, a sister concern of the assessee, which was on the caution list of the Reserve Bank of India. The arrangement was perceived as a way to circumvent this caution list. The Assessing Officer concluded that the assessee was not the real exporter and thus not entitled to the deduction under section 80HHC. However, the CIT(A) allowed the deduction, stating that the prerequisite conditions for the allowance were satisfied.

The Tribunal considered the rival submissions and the decision of the Delhi High Court in the case of Ferro Alloys Corpn. Ltd. v. R.C. Mishra, Director, Tax Credit [1978] 114 ITR 753. The Tribunal noted that the facts of the present case were almost identical to those in the Ferro Alloys case, where the real exporter was the petitioner, despite the external appearance suggesting otherwise. The Tribunal observed that M/s. Mahajan International procured the materials, bore all related expenses, and received all benefits from the exports, while the assessee merely lent its name and received a 3% commission.

The Tribunal emphasized the intention of the Legislature, which was to provide incentives to the real exporter, not the ostensible one. The Tribunal concluded that the CIT(A) was not justified in allowing the deduction under section 80HHC and thus set aside the CIT(A)'s order, restoring that of the Assessing Officer.

2. Validity of the appeal filed by the department:

The assessee raised a cross-objection, arguing that the appeal was defective because it was signed by two different officers-the Deputy Commissioner signed Form No. 36, and the Commissioner of Income-tax signed the grounds of appeal. The Tribunal referred to the decision in CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC), which held that the Tribunal should not be unduly influenced by trivial procedural technicalities and should liberally entertain the memo of appeal if the necessary grounds have been taken. Consequently, the Tribunal rejected the assessee's cross-objection.

Conclusion:

The departmental appeal was allowed, and the cross-objection filed by the assessee was dismissed. The Tribunal held that the assessee was not entitled to the deduction under section 80HHC, as the real exporter was M/s. Mahajan International.