9911796707
TMI Blog1982 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... item of each moving machinery should be allowed at 30 per cent as against 10 per cent allowed by the Income-tax Officer." At the hearing it was an admitted position that the factual position regarding these two grounds is similar to that in the appeal of the assessee for the assessment year 1976-77 bearing IT Appeal No. 569 (Delhi) of 1980 decided by us today. The arguments canvassed in this behalf are also on the same lines as were canvassed before the Tribunal in the aforesaid appeal. For the reasons stated therein, with which we agree, we uphold the order of the Commissioner (Appeals) on the points involved in the above two grounds of appeal. 3. The ITO, in the course of assessment proceedings of the assessee for the year under consideration, noticed that in Schedule 12, the foot-note to purchase account reads Rs. 8.65 crores transferred to Central Government/Government Companies out of net surplus. He further noticed that the said amount of Rs. 8.65 crores was composed of the following : (i) Rs. 5.43 crores paid to Coal India Ltd., and (ii) Rs. 3.22 crores paid to the Central Government. The ITO, following his assessment order in the case of the assessee for the earlier ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h profits for public purposes is a Government function. If Government decided to fix the price of stainless steel imported by the assessee it did so, not in its capacity as a shareholder of the assessee-corporation, but in discharge of its other responsibilities. If it was also decided that any surplus realised on the sale of stainless steel items over and above the landed cost and service charges should be directly credited to the Consolidated Fund of India, the decision was taken in the exercise of the eminent domain of the Govt. for the national interest : it will be noticed that the surplus so credited to the Consolidated Fund of India was used by the Government for distribution of subsidies to encourage exports resulting in the earning of valuable foreign exchange for the country. The assessee-corporation had no choice but to part with such surplus in obedience to the orders of the Govt. and the payment was a necessary condition under which it had to carry on its business. The payment has, therefore, to be considered as expenditure laid out for the purpose of the assessee's business which has to be allowed as a deduction. Further, the deduction can be regarded as a kind of ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al representative highlighted the facts that the Government of India was allotting diverse market quotas in various fields and these import quotas are allotted not only to public sector undertakings but in the private sector. The fact that the assessee imported the stainless steel under the direction of the Government of India is thus of no consequence more so when the price at which the imported stainless steel was to be sold was fixed by the Pricing Committee appointed by the Central Government in this behalf and at the time of the import, the extent of the profit, if any, was unknown. It was quite possible that the sale of the imported stainless steel may or may not have resulted in any profit. The profit, if any, to be earned was variable. 6. These arguments of the departmental representative are controverted by the learned counsel for the assessee, Mr. O. C. Tandon, who, in support of the order of the Commissioner (Appeals), has relied on the ratio of the following decisions : CIT v. S. Arumugham Pillai [1969] 73 ITR 382 (Mad.), CIT v. Travancore Sugars Chemicals Ltd. [1973] 90 ITR 307 (Ker.), CIT v. Tollygunge Club Ltd. [1977] 107 ITR 776 (SC) and Udayan Chinubhai v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argin of 4 per cent only. The difference between the release price per metric tonne and the landed cost plus the aforesaid assessee's margin of 4 per cent thereon was to be credited by the assessee-corporation to the Consolidated Fund of India so as to facilitate grant of compensatory cash support for certain export products announced by the Government of India, Ministry of Commerce, in September/October 1975. The facts stated hereinafter in this paragraph are clear from the letter of Government of India, Ministry of Commerce, dated 20-10-1975, addressed to DC(SSI), New Delhi, with a copy of the assessee-corporation besides others. The copy of the said letter is at pages 63 and 64 of the paper book. In the endorsement to the assessee-corporation it is stated that : "The MMTC may kindly make necessary application to the Ministry of Finance for release of foreign exchange for Rs. 4.0 crores. As already decided, the MMTC will levy a service charge of only 4 per cent on the landed cost of stainless steel imported under the Scheme. This will include L. C. opening charges, interest and other handling charges and incidentals. The MMTC will also be allowed interest, in addition if the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l also forward statement of account in duplicate duly audited by internal audit along with the transfer memo latest by 15th of the following month to which the same relates. In order to facilitate preparation of account statement and certification by internal audit a subsidiary register incorporating all transactions of these imports and sales would be maintained. 3. Since the amount payable to the Government will be reflected in the accounts as 'Purchase' a suitable financial note to the accounts will be appended as in the case of stainless steel/jute barter deal. The note in question will be given at Head Office, and may even be given in the regional balance sheet. However, the total amount debited and transferred to Head Office on this account may be indicated in your covering note to the accounts. 4. Copies of the statement of accounts will also be sent by the Regional Offices to GM (Steel) and CFM (Steel) on a monthly basis." 10. On the above facts, the short point for consideration is as to whether the profit, which has been credited by the assessee-corporation to the Consolidated Fund of India, represented merely an application of profit which accrued to the assessee-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof become enforceable in the eye of law including taxing statutes resulting in the diversion of the income earned before it reaches the assessee---S. Arumugham Pillai. 12. Applying the above test to the facts of the present case as brought out in the above paragraphs 8 and 9, the assessee-corporation, as is clear from the said facts, should not have imported the stainless steel unless so permitted by the Government of India, Ministry of Commerce, vide their letter dated 20-10-1975 at pages 63 and 64 of the paper book filed by the assessee. As such the source for making the profit has been provided not by the assessee-corporation but by the Government of India, Ministry of Commerce, with a contemporaneous stipulation that the source of imported stainless steel should be used by the assessee-corporation to earn the profit and that such earned profits should be shared between the assessee-corporation and the Government of India which was responsible to provide the source, in the manner indicated in the said letter dated 20-10-1975. That being the position, the amount of the profit which has been deposited every month by the assessee-corporation into the Consolidated Fund of India i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
