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TMI Blog1998 (6) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance the export house has not purchased the goods ? (iii)export process has been actually done by the assessee and not the export house ? (iv) both are entitled to the benefit ? As the assessment orders considered in both the cases are relating to 1983-84 with similar set of facts and the real question to be considered is regarding application of section 80HHC of the Income-tax Act, 1961 ( the Act ) as requested by the parties, both the reference cases are answered by this common judgment. 2. The assessees are processors of frozen sea foods. Some of their processed goods are exported directly to the foreign buyers. Part of their turnover is exported by the export houses. With regard to the direct exports by them to the foreign buyers there is no dispute. The question is whether they are entitled to the benefit of section 80HHC for the relevant year for the exports done through the export houses. It is not disputed that foreign buyers had contracts only with the recognised export houses. In their turn, they have independent agreement with the processors (the assessees). As per the agreement with the assessees and the export houses, the assessees would export ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. It is also not disputed that the benefit of section 80HHC during the relevant year was claimed by the export houses and they obtained the same. But according to the Tribunal, that will not prevent the assessees from taking the benefit and the assessees being the real exporters are entitled to take the benefit of section 80HHC. 4. During the relevant time section 80HHC was as follows: Deduction in respect of export turnover.-(1) Where the assessee, being an Indian company or a person (other than a company), who is resident in India, exports out of India during the previous year relevant to an assessment year any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, the following deductions, namely:- (a )a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year; and (b)a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Export House or Trading House has not claimed the deduction under this section : Such disclaimer certificate was insisted upon only when the supporting manufacturers claim the benefit. When export houses are directly claiming, such certificates from the supporting manufacturers or processors were not necessary. During the relevant assessment year 1983-84, there was no specific provision for enabling the supporting manufacturers to claim this benefit. The scheme of the Act is clear that the benefits can be availed only by one party and simultaneously cannot be claimed by export houses and processors or supporting manufacturers. 6. The Tribunal after going through the agreement was of the opinion that the real exporters are the assessees, the processors, and export is done through the export houses and the benefits under section 80HHC can be claimed by the assessees even though such benefits were received by the export houses also. The Tribunal relied on the decision of the Delhi High Court in Ferro Alloys Corpn. Ltd. v. R.C. Mishra [1978] 114 ITR 753. The above judgment was subsequently reversed by the Supreme Court when an appeal was filed from the above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court in the above case after relying upon the decision in Bhopal Sugar Industries Ltd. v. Sales tax Officer [1977] 40 STC 42 held that while interpreting the terms of the agreement, the Court has to look into the substance rather than the form of it and found that the real exporter in the above case is not State Trading Corporation but the C.T. Ltd. itself even though the documents were prepared on account of the State Trading Corporation. But the facts of the case were different. It was found by the Supreme Court in the above case that under the terms of the contract between the appellant and STC, STC was merely an agent and there was no sale of tea by the appellant to the STC and sale of tea was directly by the appellant, therefore, sale done by the appellant was penultimate sale. Therefore, clear finding on the basis of the agreement was that there was no sale by the appellant to the STC and transfer of property was never done in favour of the STC. The tea export licence for the tea was that of appellants. The invoice of the appellants showed the Iranian buyer against the column sold to . It was also held by the Supreme Court that the typing of the words A/c. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act. The majority of the Constitution Bench speaking through Ray, C.J., upheld the decision of the High Court against the assessee. In this connection we also refer to the decision of a Constitution Bench of the Supreme Court in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 15 STC 753. 10. In the cases before us, the assessees had not entered into any agreement with the foreign buyers. There was no privity of contract between foreign buyers and the assessees. They could not sell any goods in their own name to the foreign buyers, since as per the agreement between the export houses and the assessees the goods were to be boarded on the ship by them. The documents were prepared on account of the export houses as the export houses alone have contract to export goods to the foreign buyers. Contracts were not endorsed in favour of the assessees. If the foreign buyers fail to pay the price, the assessees had no cause of action against the foreign buyers as the assessees are not parties to the agreement with the foreign buyer. Even as per the agreement with the export houses the assessees were only processors and export houses are the exporters. As found by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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