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TMI Blog1986 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ,71,787. He further held that in respect of expenditure on foreign offices, of Rs. 1,07,50,777 assessee was entitled to weighted deduction on expenditure of Rs. 73,36,083 being in the ratio of export turnover of 666 to the total turnover of 976 crores. The IAC (Asst.) for computing the said figure followed the formula evolved in the asst. yr. 1976-77. Regarding commission paid on exports of Rs. 17,82,995 held that the commission paid to foreign parties of Rs. 12,11,729 was entitled to weighted deduction but not the commission of Rs. 5,71,266 paid to the Indian parties. (This is subject matter of ground No. 3 to be discussed later. Regarding the administrative expenses of Rs. 3,61,47,456 the IAC disallowed the assessee s claim and this is the main bone of contention before us. 4. The CIT(A) noted that in asst. yrs. 1975-76 and 1976-77 the assessee had produced before the ITO costing report of the actual expenditure relating to exports by computing such expenditure at Rs. 43,91,550 for asst. yr. 1975-76 and Rs. 64,69,857 for asst. yr. 1976-77 and that on the basis of the said costing report, Tribunal had directed that weighted deduction be allowed on 75 per cent of such expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) where it was held that assessee was not entitled to weighted deduction on payment of commission for procuring orders from foreign buyers because procuring of orders does not amount to obtaining information regarding markets outside India as required by cl. (ii) of s. 35B(1)(b) or to maintaining outside India of a branch, etc., within the meaning of cl. (iv) or performance of services outside India in connection with or incidental to the execution of any contract for supply outside India of such goods within the meaning of cl. (viii). 9. At the hearing before us the ld. counsel for the assessee relied on Tribunal, Special Bench, Madras deduction in ITO vs. Bharath Skin Corporation (1984) 18 TTJ (Mad) 87 : (1983) 6 ITD 320 (Mad), where the said Corporation paid to STC commission because STC rendered services by way of information about foreign markets and fixing of the prospective buyers. That case thus clearly was covered by cl. (ii) of s. 35B(1)(b). The Special Bench had further noted that CBDT had directed that similar payments made to STC by Oil Vegetable Export Association was entitled to weighted deduction. 10. The question thus rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration had received security deposits, advance deposits, earnest money deposits alongwith tenders of offers of sale received from buyers or parties on whose behalf the goods were imported and if the parties failed to receive the goods offered for sale for which they had tendered or they fail to comply with other conditions as proposed, then the advance deposits/earnest money was forfeited. The IAC (Assessment) further noted that the assessee-Corporation had shown the aforesaid forfeited amount of Rs. 9,97,998 as miscellaneous income in its profit and loss account and this showed the assessee s conduct that the said amount was its revenue receipt. He observed that the said security deposits were received during the course of the assessee-Corporation s normal business activities and we, therefore, its trading receipt and hence assessable as income. 15. The CIT(A) in the order for asst. yr. 1977-78 noted the assessee s reliance on Tribunal s order for asst. yr. 1975-76 and 1976-77 where it was held that security deposit forfeited in respect of sale of imported cars was not taxable and that the Tribunal had followed its earlier order for asst. yr. 1972-73 and that the Tribunal had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Motor and General Finance was no longer good law. 16. At the hearing before us our attention was drawn to the Tribunal s order dt 28th Feb., 1986 in the assessee s case for asst. yr. 1981-82 where following the order CIT vs. Alchemic Pvt. Ltd. (1981) 20 CTR (Guj) 83 : (1981) 130 ITR 168 (Guj) it was held that benefit or perquisite received in cash would not come within the ambit of s. 28(iv), and the said sub-section will apply only when the benefit or perquisite was not in cash. The Bench had also followed its earlier decision for asst. yr. 1972-73 where it has relied on CIT vs. Motor General Finance Ltd. where it was held that quality and nature of receipt for income-tax purposes was fixed once for all when it was received and if the amount in question at the time of receipt was not in the nature of income, then it was not taxable. The Bench observed that the Revenue had not shown that the receipts in question had any relation to the price of goods to be supplied. It was, therefore, held that the aid receipts were in the nature of borrowed money. 17. We have already noted above that the major item forfeited in the year under consideration (asst. yr. 1977-78) was of Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchasers of nylon yarn was a deposit or was part of the trading receipts can be determined only by examining the contract between the assessee-Corporation and the purchasers of nylon yarn. 19. Supreme Court in Punjab Distilling Industries Ltd. vs. CIT (1959) 35 ITR 519 (SC)followed the aforesaid decision in Lakshmanier and Sons, when they were dealing with the care of a distillery who besides charging the price for liquor also charged price for the bottles in which liquor was supplied and further took a security deposit from the purchaser of liquor which security was returned as and when bottles are returned. Supreme Court held that the said security received was a part of the assessee s trading receipts and it was immaterial that the said security was entered under the held Empty bottles return deposit account. Thus, the ratio laid down by the Supreme Court in the said case will have to be considered for application while examining the assessee-Corporation s contract with the purchasers of nylon yarn in respect of security received for the cops. 20. We further feel that the controversy raised is unnecessary regarding the applicability of s. 28(iv) because the receipts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi Bench `D s order for asst. yr. 1971-72 in the case of Modipon Ltd. In both these orders, it was noted that the property in the cops vested in Modipon Ltd. and was not transferred to the purchasers of nylon yarn and that Modipon Ltd. obtained either a Bank guarantee or a guarantee bond or obtained a fixed sum by way of security deposit per cop. However, in the case before us we do not have the facts and, therefore, cannot ascertain whether the property in the cops continued to vest in S.T.C. or the cops were sold alongwith the yarn to the purchasers of nylon yarn. 22. The above observations would apply mutatis mutandis regarding the assessee s agreement with the purchasers of vanaspati and the purchasers of imported cars. 23. We have given facts only for asst. yr. 1977-78 but the facts are similar in asst. yr. 1978-79 when Rs. 9,06,238 were forfeited, in asst. yr. 1979-80 when Rs. 77,275 were forfeited and in asst. yr. 1980-81 when Rs. 6,61,306 were forfeited. 24. We would accordingly restore the matter to the file of the ITO for the aforesaid years when he will examine the matter afresh regarding the assessability of forfeited amounts in the years in question. 25. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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