1970 (12) TMI 29 - HC - Income Tax

Rebate for export - application under section 154 claiming rebate on the turnover pertaining to exports to foreign countries and the commission transactions handled on commission basis

Summary

Issues:
1. Interpretation of provisions for rebate under section 2(5) of the Finance Act, 1962.
2. Eligibility of an assessee for rebate on commission transactions derived from the export of goods.
3. Determination of the source of profits and gains for claiming rebate under section 2(5).
4. Distinction between profits derived from direct export and commission sales in the context of rebate eligibility.

Detailed Analysis:

1. The judgment pertains to a reference by the Income-tax Appellate Tribunal regarding the eligibility of an assessee for rebate under section 2(5) of the Finance Act, 1962. The Tribunal allowed the rebate on commission transactions, prompting a challenge from the Revenue, contending that the provision does not entitle the assessee for such rebate. The court analyzed the legislative intent behind the provision, emphasizing its purpose to encourage export trade by granting rebates on profits derived from exporting goods out of India.

2. The central issue revolved around whether the assessee, a private limited company, was entitled to a rebate on commission transactions amounting to Rs. 25.96 lakhs under section 2(5). The assessee argued that since the source of the commission earned was the export of tobacco, it qualified for the rebate. However, the Revenue disputed this claim, leading to a legal dispute over the interpretation of the provision and the nature of profits eligible for the rebate.

3. The court delved into the interpretation of the phrase "derived from the export of any goods or merchandise out of India" in section 2(5). It emphasized that for an assessee to qualify for the rebate, the profits or gains must originate from the actual activity of exporting goods outside India. The judgment highlighted that the profits must be earned through the export process itself, either directly or through an intermediary involved in the export transaction, to meet the criteria for claiming the rebate under the provision.

4. A critical distinction was drawn between profits derived from direct export activities and commission sales. The court scrutinized the nature of the transactions in question, emphasizing that the assessee's role as a commission agent did not equate to being an exporter of the goods. It was clarified that the commission earned on transactions within the country, even if the goods were eventually exported, did not qualify as profits derived from the export of goods out of India. The judgment underscored that the rebate provision was intended for those directly involved in the export process and not for commission agents with no ownership or direct export involvement.

In conclusion, the court held that the assessee was entitled to a rebate only on the turnover directly exported, not on commission transactions. The judgment clarified the scope of the rebate provision, emphasizing the need for profits to be directly linked to the export activity to qualify for the rebate under section 2(5) of the Finance Act, 1962.