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TMI Blog1982 (12) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... essee neither performed any services outside India nor executed any contract for the supply outside India of any goods, services or facilities. Even if the assessee is regarded as an exporter of goods or services, according to the ITO, the assessee was not entitled to weighted deduction in respect of the expenses claimed since they were incurred in India. 4. On appeal the Commissioner (Appeals), upheld the order of the ITO. In so doing, he relied on his decision for the assessment year 1977-78 in the assessee's own case. 5. For the assessee the same points as made before the authorities below were repeated. According to the learned counsel for the assessee, the revenue failed to appreciate the fact that the assessee is doing valuable services to the exporters of goods in India by making enquiries as to the status of the foreign buyers and also guaranteeing payment in respect of goods sold and services rendered to foreign buyers on credit. The expenses, in respect of which the relief under section 35B was claimed, were incurred by the assessee wholly, necessarily and exclusively for the promotion of the export of goods and services outside India. Reference was made in this conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone in detail into the exact nature of the activities carried on by the assessee to come to a conclusion as to whether it is entitled to relief under section 35B in respect of the expenses incurred. A consideration of the allowability requires a detailed analysis of the activities of the assessee on the one hand, the expenses in connection with the relief is prayed for and their relevance to the provisions of section 35B on the other hand. In the absence of full details of the nature of the activities of the assessee, the assessee's representatives were asked to produce details. Several pamphlets, circulars, including a monograph on the 25 years of the Export Credit Guarantee Corporation Ltd. (ECGC) were produced before us by them. Even though with considerable labour, we should cull out something about the exact nature of the work done by the assessee. In our opinion, the departmental authorities have dismissed the claim of the assessee by a general statement to the effect that the assessee does not supply goods or services abroad and even though in an appropriate case the payments made to the assessee by other traders would entitle the latter to relief under section 35B, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer." By the time the ERIC was changed into ECGC in 1964, the organisation : ". . .recognised the problem of export finance as a constraint to export promotion and devised the Packing Credit Guarantee Scheme which was a forerunner of many other guarantees that came into being in later years. The guarantee, which is considered by export credit insurers as an important innovation, has not only generated substantial volume of business for the corporation but has also credited a climate in which banks could grant need-based credit facilities to exporters on a liberal basis." A pamphlet issued by the ECGC states that while general insurers take care of general risks, the ECGC protects the exporters against various types of export credit risks. In pursuance of the above objects of the ECGC, it had developed various activities on the insurance, re-insurance, guarantee and other lines of interest to exporters mainly. In the field of insurance it had developed standard policies to deal generally with risks. Specific policies are designed to protect Indian firms against the risk of not receiving payments in respect of : (a) exports on deferred payment terms ; (b) services r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protect the export activities of Indian traders. 10. The Packing Credit Guarantee is designed to protect the bank which grants packing credit advances to exporters from loss arising due to the insolvency or the protracted default of the exporter. Thus, protected banks could grant pre-shipment credit on a more liberal basis. Such pre-shipment advances cover purchase, manufacture and processing or packing of goods exported against firm contracts of sale. Advances given by banks to Indian firms engaged in export of services or those which undertake construction work abroad to meet preliminary expenses in this connection are also eligible for cover under this guarantee. There are variations of these guarantees specially to suit for post-shipment export, Export Finance, Export Production Finance, Export Performance and Transfer Guarantee. 11. The transfer guarantee seeks to safeguard Indian bank which add confirmation to letters of credit opened by banks abroad in favour of Indian exporters. The transfer guarantee covers both commercial and political risks, such as : (i) insolvency of the bank in the foreign country which has opened a letter of credit ; (ii) failure of the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al institutions and Government bodies." 13. Being a financial institution, the activities of the ECGC are more allied to the financial side of the exporting community. It provides primarily guarantee to the banks who finance exports and also directly provides varied types of insurance to the exporters themselves. Insurance cover such as under life or general insurance may involve an element of intelligent speculation based on the mortality rates, accidents, etc., but it is clear that even these activities involve a substantial study of the general situation in the country, the activities carried on, etc. Even such insurers do not conduct their business by equating the premia received to the likely losses to be paid for and counting the difference as chance would have it as profits. There is always a deliberate attempt to gather information and apply technical rules and formulae to work out the premium rates, the types of policies, the nature of risk involved, etc. In the case of a corporation like ECGC which specialises in risks connected with export activity, certainly it cannot do business by a mere equating of the premia received and the amounts to be paid for on risk. Like al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's officials and executives attend the Union meetings and also partake of all the activities relating to its business in other foreign countries. 15. The nature of the activities of the ECGC summarised in some respect above, thus, clearly indicates that it has immediate and direct connection with the export activities of the country. The work of the corporation is thus substantially associated with and in fact is an exquisite necessity in the case of several exporters. For the role of the ECGC in accelerating exports, the Government of India conferred on the corporation the highest national award for outstanding export efforts in 1973. We were, therefore, very much intrigued that an assessee whose activities formed the backbone of the country's export performance should be denied the exports markets development allowance even though other less active participants in the exports sphere, who make use of and at a remote stage the corporation's activities, should get the benefit. Even though the principal thrust of the corporation's activity relates to guarantee and insurance, this involves substantial work abroad, such as travelling, collecting information, etc., for which purpose s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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