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TMI Blog2019 (3) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... ions can be taken as directory is, therefore, liable to be rejected and the compliance of these conditions is, therefore, held to be mandatory. Since, admittedly, the assessee, in the present case before us, in none of the Assessment Years, has complied with these conditions, he is not entitled to deduction under Section 80HHC (1A) of the Act, at all. Reopening of assessment - Reopen on the basis of CIT(A) order in subsequent year - HELD THAT:- Coming to the issue of Reassessment under Section 147/148 of the Act, we not only find that pre-amendment, the time limit for issuance of notice was up to 10 years, as pointed out by the learned Standing Counsel for the Revenue, but, we also are of the view that once we come to the conclusion that in the absence of compliance with the mandatory conditions the Assessee is not at all entitled to the said deduction under Section 80HHC (1A) of the Act, the resort to Section 147/148 of the Act by way of Reassessment for disallowing the said deduction to the assessee or in the original assessment proceedings becomes academic and on the ground of limitation alone, the law, as interpreted by us, about the mandatory compliance of the conditions ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act for Assessment Years 1992-1993 and 1993-1994 beyond a period of four years of Assessment Years in question in the year 1999 by the Assessing Authority to disallow part of deduction under Section 80HHC (1A) of the Act to the extent of Export Premium was justified or not ? 3. The learned Tribunal, while passing the common order on 24.08.2004, disallowed the said claim of the Assessee under Section 80HHC (1A) of the Act, following the decision of the Hon'ble Supreme Court in the case of Sea Pearl Industries v . Commissioner of Income Tax , (2001) 247 ITR 578, with the following observations : 22. In the case before us, the assessee had not entered into any agreement with the foreign buyers and it had entered into an agreement with only M/s.Lloyds and in the agreement the assessee was called as The Processors and clause No.1 of the agreement shows that the assessee has exported the goods on behalf of M/s.Lloyds. The export orders were secured by M/s.Lloyds and the agreement refers the assessee as Processor only. Clause No.2 shows that all the shipping documents were arranged in the name of M/s.Lloyds and L.C. was opened in favour of M/s.Lloyds and all shipping d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivered by the assessee. The benefits under the export-import policy regarding REP licence will be obtained by the export houses . There is no merit in the contention of the assessee that it has exported its products by selling them to the export house after the goods had crossed the customs barrier as the question of title or property in the goods exported is not relevant to section 80HHC and the section does not in terms require the exporter to be the owner of the goods. 24. Under section 80HHC as it stood during the relevant period, only the exporter was entitled to claim the benefits and the export houses are the real exporters , who have got privity of contract with the foreign buyers. As per the contract with the foreign buyers, foreign exchange was receivable by the export houses. Only because of the contract between the export house and the assessee, the foreign exchange was later credited in the assessee's bank as instructed by the export houses. Only on behalf of the export houses, the assessee shipped the goods on account of the exporter and merely because of a statement in the contract that the title to the goods will pass only after the goods crossed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Counsel, appearing for the Assessee, has submitted that the Assessee made direct exports of the goods to the foreign buyers, namely, sea products, such as, shrimps, prawns, fish etc., on behalf of the Export House viz., M/s.Lloyds International Limited and M/s.Adani Exports Limited and received the convertible foreign exchange into his own accounts from the foreign buyers and though the Certificates, as envisaged in Sub-section (4A) of Section 80HHC of the Act were not produced by the Assessee, the other relevant documents, such as, Bill of Lading, would support the claim of the Assessee of the said deduction under Section 80HHC (1A) of the Act; the said conditions under Sub-section (4A) should be read as directory and the Assessee should be held entitled to the said deduction under Section 80HHC (1A) of the Act for Assessment Year 1997-1998. The learned Senior Counsel further submitted that as far as the Export Premium or Commission received from the Export House at the rate of 3.25% of the FOB value of exports is concerned, the controversy has been settled by the Hon'ble Supreme Court in the case of Baby Marine Exports (supra) and, therefore, to the extent of Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarations, which was mandatory, there was no question of allowing any deductions under Section 80HHC (1A) of the Act to the Assessee. 7. The learned Senior Standing Counsel has also submitted that even though in view of the decision of the Hon'ble Supreme Court in the case of Baby Marine Exports (supra), the Export Premium received by the assessee from the Export Houses to the extent of 3.25% of the FOB value could be treated as part of export turnover and could be entitled to deduction under Section 80HHC (1A) of the Act, but, in view of noncompliance of conditions in Sub-section (4A) of Section 80HHC of the Act, by virtue of non-furnishing of Declarations from Export Houses, even the said claim of the assessee to the extent of Export Premium or Commission received from Export Houses will not be eligible for deduction under Section 80HHC (1A) of the Act. The learned Senior Standing Counsel further submitted that only direct exports by the Exporters are eligible for deduction under Section 80HHC (1) of the Act, whereas, the Supporting Manufacturers, whose exports are eligible to get this deduction under Section 80HHC (1A) of the Act, shall be subject to compliance of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 01.04.1989 . The said provisions of Section 80HHC to the relevant extent are quoted below for ready reference : 80HHC.Deduction in respect of profits retained for export business .- (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of 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, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be,) issues a certificate referred to in clause (b) of subsection (4A) , that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has been correctly claimed on the basis of the profits of the supporting manufacturer in respect of his sale of goods or merchandise to the Export House or Trading House; and (b) a certificate from the Export House or Trading House containing such particulars as may be prescribed and verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section: Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law. xxxxx (d) Supporting Manufacturer means, a person being an Indian Company or a person (other than a company) resident in India, manufacturing (including processing) goods or merchandise and selling such goods or merchandise to an Export House or a Trading House for purposes of export 11. The purpose of providing the aforesaid twin conditions of Report of Accountant and Disclaimer Certificate from Export House is obviously to avoid the double claim of deductions in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat question was answered in favour of the assessee by the Apex Court. There is no dispute on the said proposition laid down by the Hon'ble Supreme Court, but the entitlement to get such deduction under Section 80HHC (1A) of the Act would depend upon the compliance with the mandatory conditions vide Sub-section (4A) of furnishing requisite Disclaimer Declaration from the Export House about the disclaimer and Report of Chartered Accountant and non-compliance of which would be fatal to the claim of the assessee under Section 80HHC (1A) of the Act altogether on the amount of FOB value as well as Export House Premium. 14. Coming to the issue of Reassessment under Section 147/148 of the Act, we not only find that pre-amendment, the time limit for issuance of notice was up to 10 years, as pointed out by the learned Standing Counsel for the Revenue, but, we also are of the view that once we come to the conclusion that in the absence of compliance with the mandatory conditions the Assessee is not at all entitled to the said deduction under Section 80HHC (1A) of the Act, the resort to Section 147/148 of the Act by way of Reassessment for disallowing the said deduction to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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