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TMI Blog1991 (8) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80HHC as under : (a) 1% of export sales of Rs. 16,47,474 Rs. 16,474 (b) 5% of incremental export sales of Rs. 15,79,224 (Rs. 16,47,479 minus Rs. 68,250) Rs. 78,961 (c) 1% of export agency commission of Rs. 22,27,118 Rs. 22,271 (d) 5% of incremental export agency commission of Rs. 18,03,337 Rs. 90,166 (Rs. 22,27,118 minus Rs. 4,23,780) ---------------------------- Total Rs. 2,07,874 ---------------------------- This was restricted to 70 per cent on pre-incentive total income of Rs. 1,18,978 [Rs. 1,13,227 (gross total income) plus Rs. 5,751 (investment allowance = Rs. 83,284]. Thus, reducing the aforesaid amoumt to Rs. 83,284 from the gross total income, the total income was shown by the assessee at Rs. 29,942. 4. The Assessing Officer allowed deductions of Rs. 16,474 and Rs. 78,961 under section 80HHC as claimed by the assessee and restricted the same to 70 per cent of Rs. 1,20,812 under section 80VVA to Rs. 84,568. The assessee's claim for deduction under section 80HHC in respect of agency commission was negatived by the Assessing Officer. 5. The assessee appealed to the learned Commissioner of Income-tax (Appeals) who after examining the matter at grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on the Tribunal's decision dated7-2-1990in the case of Chinar Exports (P.) Ltd. [IT Appeal No. 2732 (Delhi) of 1988] for assessment year 1984-85 (copy of the decision is available at pages 54 to 73 of the assessee's compilation). It was submitted that, in fact, the facts in the instant case were on a better footing then those in the case of M/s. Chinar Exports Pvt. Ltd., in which the Tribunal had allowed deduction under section 80HHC. Reference was also made to the reasoning given in an order passed by the Commissioner of Income-tax (Appeals) a copy of which is available at pages 74 to 84 of the assessee's paper book. It was vehemently argued that the assessee was entitled to deduction of the whole claim made by it under section 80HHC. 7. The learned Departmental Representative, on the other hand, submitted that the facts in the cases decided by the Tribunal and the Commissioner of Income-tax (Appeals) were altogether different. It was pointed out that in those cases the assessees were the actual exporters whereas in the present case the assessee was a mere agent. The learned Departmental Representative emphasised that so far as its own exports were concerned the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation, has been shown as principal and the assessee-company as an agent of the principal. Clause No. 1 of the agreement is regarding appointment of the agent and clearly stipulates that the assessee would be the principal's buying agent in India for the purchase of wearing apparel and such other merchandise for the principal's account. That means that the assessee-company would be purchasing goods on behalf of the principal and not in its own right. Clause 3 stipulates the services to be rendered by the assessee-company being the agent. Clause 4 authorises the assessee-company to retain the services of sub-agent or independent contractors as the circurmstances may require but to remunerate such sub-agent or independent contractors from the commission paid to the Agent by the principal. Clause 5 deals with payments for the services rendered by the assessee which are @ 8 per cent as per this agreement. This payment has to be made at 8 per cent of the FOB value for all merchandise purchased for the account of the principal. This is very material because it will have a bearing on the issue at hand which will be discussed presently. 10. Clause 6 deals with payment for imported me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 per cent of the FOB value for all merchandise purchased for the account of the principal. Section 80HHC as it then stood defined "export turnover" which meant the sale proceeds of any goods or merchandise exported out of India, but did not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station. In other words, the assessee-company as an agent was entitled to 8 per cent commission on the export turnover. Thus, the commission received by the assessee would not be treated as part of the export turnover because by virtue of the definition itself it was based on the export turnover. 13. Before deduction under section 80HHC could be claimed certain conditions have to be met. The assessee, in the first instance, has to be a resident inIndia. Secondly, the assessee has to export out ofIndiaany goods or merchandise to which the section applies. Thirdly, the sale proceeds of such goods or merchandise exported out ofIndiaare receivable by the assessee in convertible foreign exchange. These conditions clearly show that the assessee must export goods in his own right and must receive the consideration in foreign exchange as sale pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had made a false claim with regard to deduction under section 80HHC. The learned CIT (Appeals) imposed penalty of Rs. 61,840 by his impugned order which is the subject matter of appeal before us. 17. Shri C.S. Aggarwal submitted that the learned CIT (Appeals) had no jurisdiction to initiate the penalty proceedings for concealment of income when no concealment had been discovered by him. It was submitted that there was no enhancement of income by the learned Commissioner of Income-tax (Appeals) and that all the facts and circumstances of the case had been gone into by the Assessing Officer who had thought it fit only to reject the claim of the assessee, but not to initiate the penalty proceedings for concealment of income. The learned counsel submitted that the assessee had made a genuine claim and had placed all the cards on the table and that the Assessing Officer had negatived its claim by placing a particular interpretation on section 80HHC. The learned counsel further submitted that even if the assessee did not claim deduction under section 80HHC in respect of export agency commission of Rs. 22,27,118, it would have made no difference to the income assessed. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the order of the Assessing Officer. In the quantum appeal we have confirmed the finding of the learned CIT (Appeals) and held that the assessee was not entitled to deduction under section 80HHC in respect of export agency commission of Rs. 22,27,118. This confirmation, however, does not mean that the assessee's claim, in the first instance, was surreptitious or false. The Assessing Officer had the entire evidence before him before he rejected the assessee's claim, but did not find it necessary or proper to initiate penalty proceedings for concealment of income. In our opinion, on the same facts and without anything more and without making any enhancement to the income of the assessee the learned Commissioner of Income-tax (Appeals) could not initiate penalty for concealment of income by holding that the claim of the assessee was false. The assessee had offered an explanation which was not found acceptable by the Assessing Officer and has not even been accepted by us. That, however, does not mean that the assessee could not make a claim or the assessee's claim was based on false premises. In our opinion, the assessee had a bona fide belief that it was entitled to relief under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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