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TMI Blog1986 (1) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975. The assessment was done under section 143(3)/ 144B of the Income-tax Act, 1961 (' the Act '). The method of accounting was noted to be mercantile. He pointed out that on 30-9-1975 the assessee debited, gunny export sale account with Rs. 7,91,079.60 with a corresponding credit to account styled amount refundable to parties on account of customs duty reduction'. He noted that for payment of customs duty and cess expenses, the assessee debited its trading account with Rs. 38,86,757, which represented actual payment of customs duty and cess to the Government on the export sales during the year. He pointed out also that during the year the assessee received four orders for sale of jute goods to the General Organisation for supply of goods, Cairo (Egypt) and the orders were received through the State Trading Corporation of India (STC), which in turn negotiated such orders through the Trade Centre of Arab Republic of Egypt, Calcutta Centre. The details of those four orders were narrated by the ITO in the assessment order. 5. The goods to be supplied to the foreign buyer consisted of hessian cloth, hessian bags, etc., of different sizes. During the year the customs duty on such hes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the abolition of the customs duty as mentioned above. 7. The assessee submitted in his letter dated 7-11-1978 on that basis of the terms of the sale, the customs duty recovered from the buyer was a liability on the date of the closing of the relevant year and hence it was shown as such in the accounts and that, however, the consequent to the negotiation the assessee was not required to refund and the amount was accordingly credited to the profits and loss account for the assessment year 1975-76. The ITO could not appreciate such contention of the assesses so as to justify the claim made for the year under consideration. He was of the view that as an exporter the assessee was responsible for payment of customs duty and the question of recovery from the buyer did not arise at all. He pointed out that the contracts for sale were entered into at the stipulated FOB, Calcutta and the importer had no concern with the payment of customs duty by the exporter to the Government. He inferred that the claim of the assessee was without any basis and that there was no liability ascertained during the year as there was no claim made by the Egyptian party, nor there was any enforceable legal lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was delayed for reasons beyond the seller's control, to be on the buyer's account. 11. The Commissioner (Appeals) also took note of the clause 17 in which it was stipulated that any claim has to be made within 115 days from the landing goods at destination. It was noted that as the goods were shipped after 1-6-1975, the limitation period of 115 days ended after 30-9-1975. The assessee made such provision for the legal liability to export duty refundable as on 30-9-1975. The assessee relied on the decisions as in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) and Shrikant Textiles v. CIT [1971] 81 ITR 222 (Bom.). 12. The Commissioner (Appeals) considered different submissions made before him with which he disagreed. He pointed out that in the case of the assessee, STC was the exporter of Jute goods of the Egyptian party and the STC purchased goods from the assessee as per the STC's certificate dated 5-12-1978. He also mentioned that as per STC's certificate dated 3-3-1980, the assessee exported the above goods to the foreign buyer of the STC on behalf of the STC and on STC's instruction. 13. The Commissioner (Appeals), therefore, did not accept that the Egyp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner (Appeals), is also brought to our notice in order to emphasise that the export duty charges, etc., in force on the relevant date would be as per the conditions defined in that contract and any alteration therein would be on the buyer's account. The assessee's learned counsel draws our attention also to clause 17 of the above terms and conditions in which it has been specified that any claim must be made within 150 days from the landing of the goods at destination. It is also emphasised by the assessee's learned counsel that the transaction in question was back to back contracts through STC. It is submitted that the Commissioner (Appeals) erred in stating that it was the STC which exported the goods to the foreign buyers and not by the assessee. It is also submitted that the Commissioner (Appeals) erred in stating that the assessee failed to produce the contract agreement for examination by the Commissioner (Appeals). As such, contract, etc., were not available with the assessee and the STC authorities declined to part with the original contract which they would make available for examination by the Commissioner (Appeals) if properly requisitioned. It is, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Egyptian party has subsequently confirmed the point that they had no claim against the assessee relating to the export in question. It is emphasised before us that the export was done by the STC and not by the assessee, as mentioned in the certificate dated 3-3-1980 issued by the STC. It is submitted that these facts established that the assessee shipped the goods to the Egyptian buyer on behalf of the STC and, therefore, if there was any liability to refund any amount to the foreign buyer, it would the liability of the STC and not of the assessee. It is also submitted that section 69A would have no application to the case of the assesses. 18. We have heard both the sides and have perused the orders of the authorities below for our consideration. We have also gone through the order of the Tribunal for the subsequent year which has been placed by the assessee's learned counsel before us, for our consideration. At the outset we have to mention that the ITO declined to allow deductions of the above amount from the total sales account as in his view, the amount represented customs duty collected by the assessee from the buyer as per the terms of the contract and in the meanwhile the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Allahabad High Court in Pioneer Consolidated Co. of India Ltd. v. CIT [1972] 85 ITR 410. But in the instant case before us and from the materials available, we find that there was no amount due to the third party, i.e., the Egyptian importer as payable by the assessee during the year. In fact, the period of 115 days was stated to have expired after the close of the accounting year relevant to the assessment year 1976-77. Crediting an amount to an account ' amount refundable to parties on account of customs duty reduction ' was a unilateral act on the part of the assessee as we find that there was no claim for refund of amount supposed to have been paid by the Egyptian party on account of customs duty. Actually that fact was confirmed by the Egyptian authority's letter dated 10-3-1976 which is at page 4 of the paper book. 21. If there was any liability by the assessee to refund any amount of customs duty to the buyer, such liability would not come to an end by the unilateral act of the debtor. There can be a cessation of liability by bilateral acts by both the creditor and the debtor or by the refusal of the debtor to honour his liability. This is the view of the Hon'ble Calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trading or business receipts although the assessee credited the amount so received under the head ' Amount refundable to parties on account of customs duty reduction ' which would make no material difference. The nature of the amount collected by the assessee on account of customs duty in our opinion was trading or business receipt of the assessee. As stated earlier, the assessee would be entitled to deduction as and when such customs duty is paid to the Government. For this proposition, we may refer to another decision of the Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. 25. The above amount of Rs. 7,91,080 had not been claimed by the assessee as an ascertained liability for payment of customs duty in view of that the customs duty on that particular type of goods exported by the assessee, was abolished with effect from 1-6-1975. 26. As mentioned earlier, the assessee's learned counsel submits that the Commissioner (Appeals) went wrong in stating that it was the STC which exported the goods and not the assessee and as such the liability to the Egyptian party would lie with the STC and not with the assessee. The contention of the assessee is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m at all. As such a unilateral act of the assessee would not create a liability as the accounting system followed by the assessee would not be conclusive or decisive keeping in view the ratio of the decision in the case of Chowringhee Sales Bureau (P.) Ltd. 29. In a slightly different situation in the case of CIT v. Bijli Cotton Mills (P.) Ltd. [1970] 76 ITR 625, the Hon'ble Allahabad High Court noted that the assessee' collected excise duty in March 1948, which was not paid to the Government. Part of the excise duty was refunded to the customers concerned in the year 1950 and credited the balance of the account collected, to the capital reserve account of the assessee. It was held on the facts of that case that there was force in the contention of the revenue that the receipt in March 1948 was in the nature of a trading receipt but would not be taxable in the year when the assessee credited later on the balances of the unpaid amount to the capital reserve account. In this decision the Hon'ble Allahabad High Court has also noted the provisions of section 64A relied on by the assessee in the present case before the ITO. It was noted in that judgment that the seller may add so much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the assessee in view of the last paragraph of the certificate of STC dated 3-3-1980 copy of which is at page 10 of the paper book in which it has been stated that that contracts and sales were governed by the terms and conditions of the standard contracts of the CJFSA and the entire claims against the foreign party were on account of Duncan International Ltd., i.e., the assessee. But as indicated earlier, we are of the view that there was no such liability for the assessee to meet during the year under consideration which would entitle the assessee to claim for deduction. 31. At the time of hearing it is submitted by the assessee's learned counsel that the same issue has came up for the succeeding assessment year in which the Tribunal allowed the claim of the assessee in respect of the deduction of the same amount of Rs. 7,91,080 which was added in the assessment by the ITO. Copy of the orders of the Tribunal dated 8-8-1984 is placed in our file on the facts of the case, it is argued by the assessee's learned counsel that the Tribunal allowed the claim of the assessee though as a matter of fact, it should not have been done as the liability to refund the amount of custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rejecting the claim of the assessee. The subject-matter before us is the same. As such the order of the Commissioner (Appeals) impugned before us requires to be sustained. 34. As far as the decision of the Tribunal for the assessment year 1977-78 is concerned, we are of the view that as stated earlier, such order has become final. In the circumstances, we find no justification or material to concede to the claim of the assessee for the year under consideration. 35. The next ground of appeal by the assessee is that the Commissioner (Appeals) erred in directing the ITO to allow the weighted deduction under section 35B of the Act relating to salary of employees engaged entirely on export business to only 75 per cent of such salary. It is also the appeal by the assessee that the Commissioner (Appeals) should have seen that once it is held that these employees were engaged exclusively for the export business, there is no ground for restricting the relief to 75 per cent only. 36. We have heard both the sides and have perused the orders of the authorities below for our consideration. It is seen that the Commissioner (Appeals) noted that the proportionate salary for export was s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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