9911796707
TMI Blog2002 (6) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... co Overseas 14,50,149 11,74,964 5. Foreign Exchange difference 14,11,153 - 6. L.M. Buying Ltd. - 31,250 3. The learned Commissioner was of the view that since no services outside India is rendered and no payment was received by the assessee for supply of any information etc., the Assessing Officer in his order dated 20-12- 1995, under section 143(3) of the Act, for the assessment year 1993-94 and order dated 24-5-1996, under section 143(3), for the assessment year 1994-95, wrongly allowed deduction under section 80-O of the Act. The learned Commissioner further found that in assessment for the assessment year 1993-94, the Assessing Officer treated an amount of import licence of ₹ 28,26,450 as part of export of goods. He was of the view that the same cannot be premium on sale of import licence receipt against export of goods of ₹ 18,30,37,421 during the year. The deduction under section 80HHC allowed at 90% of premium amount i.e., ₹ 25,43,805 is, therefore, inadmissible as being not obtained from exports. In the assessment year 1994-95, the learned Commissioner further found that the assessee claimed excess deduction under section 80HHC of the Act by art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had correctly been allowed. 7. In its reply on the point of deduction under section 80-O of the Act in assessment year 1994-95, the assessee contended that the claim of allowability of deduction under section 80-O has been considered by the learned Commissioner of Income-tax (Appeals) in his appellate order, dated 22-10-1996, and accordingly following the principle of merger, the provision of section 263 cannot be invoked. 7.1 With a view to explain the nature of business and the activities carried on by the assessee-firm, a 'Note' was submitted to the learned Commissioner, whose attention was invited to the qualification, experience and skill possessed by the firm, for rendering the services as mentioned in the respective agreements with the parties. It was also explained that the firm is engaged in the business of exports and rendering buying services to certain foreign firms and companies. The assessee is also equipped with requisite infrastructure to render the aforesaid services. It was also explained that the agreements in respect of the services rendered to the overseas firms and companies had been submitted to the Assessing Officer which are on his record. It was also st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 80HHC in the assessment year 1993-94, it was contended that the assessee had rightly claimed deduction for the reasons that section 28(iiia) specifically include profit on sale of import licences granted against export earnings; that the import licences/Exim Scrips have been received by the assessee in its own name issued by the Director General of Foreign Trade; that the said import Licences/Exim Scrips have been surrendered in accordance with the Scheme announced by the Reserve Bank of India to State Bank of India and the payments have been received from State Bank of India; that the firm has not bought any import licence or exim scrips from any other party for dealing therein. Lastly, what is excluded for grant of deduction under section 80HHC read with proviso thereto is only profit on sale of licences acquired from any other person, meaning thereby that when a person acquires licences for the purpose of trading, the profit therefrom has to be excluded for the said purpose. However, in the assessee's case there is no such profit earned by it, which has been claimed for deduction under section 80HHC(3) of the Act. 7.3 Regarding deduction under section 80HHC in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner observed that the issue before the learned Commissioner (Appeals) was whether the deduction should be granted at the rate of 50% on gross amount received from foreign enterprises. According to the learned Commissioner, there was neither any issue regarding allowability of claim under section 80-O before the learned Commissioner (Appeals) nor did he adjudicate upon it. Therefore, the Assessing Officer's order is not merged with the order of the learned Commissioner (Appeals) so far as allowability of deduction under section 80-O is concerned. For these reasons the learned Commissioner held that the order of the Assessing Officer about the deduction under section 80-O in both the years is erroneous and prejudicial to the interest of the Revenue. Accordingly, the assessment on the issue of deduction under section 80-O was cancelled in both the years to be finalised de novo as per law. 8.1 As regards deduction granted under section 80HHC of the Act at the rate of 90% of premium amount i.e., ₹ 25,43,805 in the assessment year 1993-94, the learned Commissioner reiterated his stand as taken in notice under section 263 in this regard. In the assessment year 1994-95, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he kind of services rendered by the assessee to Mondial India Ltd., and Target Australia PTY. Ltd., and finally reached the conclusion on consideration of facts and the nature of services rendered by the assessee that 66.67% of commission received from Mondial India Ltd., Cardex Services India Ltd., and Target Australia PTY Ltd. and 100% from Indexco Overseas UAE is eligible for deduction under section 80-O. He, however, rejected the assessee's claim of deduction under section 80-O on gross receipts. Shri Y.P. Trivedi submitted that on merits the claim of the assessee for deduction under section 80-O attained finality as his order for the assessment year 1992-93 has not been disturbed. In the impugned assessment order for the assessment years 1993-94 and 1994-95, the Assessing Officer followed his order aforesaid for the assessment year 1992-93. Shri Trivedi further submitted that in appeal for the assessment year 1993-94, the assessee had challenged the Assessing Officer's findings on admissibility of deduction under section 80-O on the basis of net receipts which claim was rejected. The learned Commissioner (Appeals), however, held that the issue was covered against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Paper Book-II. Regarding deduction under section 80HHC in the assessment year 1994-95, Shri Trivedi submitted that as per calculation under section 80HHC(3) there was loss of ₹ 75,342 in the assessment order, for the assessment year 1994-95, following the direction of the learned Commissioner (Appeals) in the appellate order for the assessment year 1992-93 the Assessing Officer observed that loss from the exports of trading goods amounting to ₹ 75,342 is set off against the deduction of ₹ 11,07,636 claimed by the assessee and deduction of ₹ 10,32,294 is granted under section 80HHC. He, therefore, submitted that there is no error in the order of the Assessing Officer, as he had followed the directions of the learned Commissioner (Appeals) contained in the appellate order for the assessment year 1992-93 which has become final, as the Revenue did not contest the findings of the learned Commissioner (Appeals) in that year. The learned Commissioner could not, therefore, exercise his revisionary powers under section 263 of the Act on this issue. 10.2 Shri Trivedi further submitted that the learned Commissioner has exercised his powers under section 263 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner as well all the requisite evidence regarding rendering of services along with copies of agreements with foreign parties had been submitted. These have been ignored on considerations which are not relevant for the purpose of deciding the issue of admissibility or otherwise of the assessee's claim of deduction under section 80-O of the Act. Placing reliance on the decision of the Hon'ble High Court of Bombay in the case of CIT v.Gabriel India Ltd. [1993] 203 ITR 1081, Shri Trivedi submitted that resort to section 263 cannot be had because this section did not visualise a case of substitution of the judgment of the learned Commissioner for that of the Assessing Officer. 13. We have considered the arguments advanced by the learned Representatives of the parties. The learned Commissioner has exercised his revisionary powers under section 263 of the Act on the issue of the assessee's claim of deduction under sections 80-O and 80HHC in both the years. The first question for consideration which arises in these appeals is whether the order of the Assessing Officer on the issue of deduction under sections 80-O and 80HHC in both the years is erroneous in so far as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uot;This issue has been discussed at length in the assessment order for assessment years 1992-93 in the assessee's own case. For the reasons discussed therein, 66.67% of commission received from M/s. Mondial India, Cardex Services and Target Australia PTY Ltd. and 100% from Indexco Overseas is considered eligible for deduction under section 80-O." With almost identical observations in assessment order for the assessment year 1994-95, the Assessing Officer in his order dated 24-5-1996 calculated deduction allowable under section 80-O at ₹ 16,19,154. The assessment of both the assessment years was framed by Shri S.K. Dash, Deputy Commissioner of Income-tax, Special Range-9, Mumbai. It is pertinent to note that in both the assessment years, the Assessing Officer has observed that the issue of deduction under section 80-O has been discussed at length in the assessment order for the assessment year 1992-93 in the assessee's own case. Let us see what has been discussed on this issue in assessment order for the assessment year 1992-93. The same Assessing Officer had passed the assessment order dated 20-3-1995 for the assessment year 1992-93. On Page-2 of the assessment order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re shall be allowed a deduction of an amount equal to 50% of the income so received or brought into India, in convertible foreign exchange. For the purposes of the section 80-O clause (iii) of Explanation was inserted w.e.f. 1-4-1992 providing therein that "services rendered or agreed to be rendered outside India" shall include services rendered in India. If we peruse the assessment orders passed by the same Assessing Officer, Shri S.K. Dash, the then Deputy Commissioner of Income-tax, Special Range-9, Mumbai, for the assessment years 1992-93, 1993-94 and 1994-95, it would be obvious that on the issue of claim of deduction under section 80-O of the Act he brought on record all requisite information/details and after due application of his mind, he adjudicated the assessee's claim in the light of the provisions of section 80-O. He recorded a specific finding that the assessee is engaged in the business of rendering technical services including commercial and managerial services to foreign companies/enterprises and in a summary manner described the nature of services rendered by the assessee. He also recorded a very significant finding that as part of the activities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of the Revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interest of the Revenue. For example, when an Assessing Officer adopted one of the course permissible in law and it has resulted in loss of the Revenue or where two views are possible and the Income-tax Officer has taken one view with which the learned Commissioner has not agreed, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. In the case at hand, on the same set of the facts the learned Commissioner has taken a view different from that of the Assessing Officer. As stated earlier, the view taken by the Assessing Officer appears to be in consonance with the law laid down under section 80-O of the Act. It cannot, therefore, be said that the orders of the Assessing Officer on the issue of deduction under section 80-O in both the years are erroneous inasmuch as these are prejudicial to the interest of the Revenue. 16. On the issue of claim of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of trading goods amounting to ₹ 75,342 set off against the deduction of ₹ 11,07,636 claimed by the assessee and deduction of ₹ 10,32,294 is granted under section 80HHC." 18. It would, thus, be obvious that while examining the assessee's claim of deduction under section 80HHC of the Act for the assessment year 1994-95, the Assessing Officer followed the direction of the learned Commissioner (Appeals) contained in his appellate order in the assessee's own case for the assessment year 1992-93, which has been accepted by the Department. The effect was that the assessee's claim was reduced by the amount of ₹ 75,342 representing loss from the export of trading goods. Thus, as against the claim of ₹ 11,07,636 made by the assessee, the Assessing Officer allowed the claim to the extent of ₹ 10,32,294 only. The order of the Assessing Officer cannot be said to be erroneous, if the Assessing Officer merely follows the decision of the learned Commissioner (Appeals) in the case of the assessee itself. In fact, the appellate order of the learned Commissioner (Appeals) is binding upon the Assessing Officer since the Assessing Officer acts in a quasi-jud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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