Loksons (P) Ltd. Vs. Asstt. Cit - Court Judgment

Excerpt:
- section 34: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on petition under section 34 of the act bombay court fees act (36 of 1959), schedule i, article 3, schedule ii, article 1(f)(iii) held, according to article 3 of schedule i, on any plaint, application or petition or memorandum of appeal for setting aside or modifying an award, same court fee is payable as is payable on a plaint or memorandum of appeal under article 1. thus, when an award is challenged by a plaint, application, petition or memorandum of appeal, court fee is payable on ad valorem basis. but from this requirement of payment of court fee on ad valorem basis, article 3 excludes an application or petition or memorandum of appeal filed in civil or revenue court challenging any award made under the arbitration act, 1940.thus, the provisions of article 3 of schedule 1 do not apply when an application is filed or appeal is filed challenging an award made under the arbitration act, 1940. thus the provisions of article 3 of schedule i do not apply when an application is filed challenging an award made under the arbitration act, 1940. the question, therefore, that arises for consideration is whether reference to the provisions of 1940 act found in article 3 of schedule i of the bombay court fees act can be said to include reference to the 1996 act. perusal of the provisions of section 8 of general clauses act shows that where by a central enactment any provision of a former enactment is repealed and re-enacted with or without modification then reference in any other enactment to the provisions so repealed shall, unless a different intention appears, be construed as references to the provisions so re-enacted. in the present case, it is common ground that the former enactment is the 1940 act, the new enactment is the 1996 act and any other enactment is the bombay court fees act, the only provision of the 1940 act referred to in article 3 of schedule 1 of the bombay court fees act is the provisions of section 33 of the 1940act and bare comparison of that provision with the provisions of sub-section (1) of section 34 of the 1996 act shows that the provision of section 33 of 1940 act is repealed and re-enacted in sub-section (1) of section 34 of the 1996 act with slight modification. therefore, reference to the provisions of section 33 of the 1940 act in article 3 of schedule-i of the bombay court fees act has to be construed, in view of the provisions of section 8 of the general clauses act, as reference to the provisions of section 34 of the 1996 act. so far as an appeal filed under section 37 of the 1996 act is concerned, perusal of section 37 shows that an appeal is provided to the appellate court against an order setting aside an arbitral award or refusing to set aside an arbitral award under section 34. thus, as the provisions of article 3 of schedule-i do not apply to an application or petition filed under section 34 of the 1996 act, they will also not apply to the memorandum of appeal filed to set aside or modify an award made by the arbitrator under the 1996 act. in other words nothing contained in article 3 of schedule-i of the bombay court fees act applies to an application, petition or memorandum of appeal to set aside or modify any award made under the 1996 act as it does not apply to an application or petition or memorandum of appeal to set aside or modify an award made under the arbitration act, 1940. perusal of the provisions of section 8 of the general clauses act shows that references in any other enactment to a provision in a former enactment is to be construed as reference to re-enacted provision in the new enactment unless a different intention appears. the different intention may appear either in the new enactment or in the other enactment. nothing was pointed out either in the 1996 act or in the bombay court fees act which can be construed as a different intention or which will show that it was not the intention of the maharashtra legislature to exclude an application or petition or memorandum of appeal filed in court to set aside or modify an award made under the 1996 act, from the provisions of article 3 of schedule-i of the bombay court fees act. it appears that the intention behind excluding an application made, challenging the award made under the 1940 act, from requirement of payment of ad valorem court fee which is required to be paid if the same litigant filed a suit on the same subject matter, was to encourage a litigant to go for arbitration instead of filing a suit. nothing has been pointed out to show that ther4e is any change in that legislative policy. on the contrary, from the preamble of the 1996 act it is clear that the policy of the legislature is to encourage people to adopt the mode of arbitration for resolving disputes. article 3 of schedule-i of the bombay court fees act does not apply to a petition, application or memorandum of appeal filed for challenging an award made under the 1996 act, and court fee on a petition filed under section 34 of the 1996 act challenging an award in high court is payable according to article 1(f)(iii) of schedule ii. section 37: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on appeal under section 37 of the arbitration & conciliation act, 1996 - held, court fee is payable according to article 13 of schedule ii of the bombay court fees act. schedule i, article 3 & schedule ii, article 1(f)(iii): [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on petition under section 34 of the arbitration & conciliation act, 1996 - held, when a petition under section 34 is to be filed before a principal civil court of original jurisdiction which is not a high court, the question arises which article of either first schedule or second schedule would apply. in so far as the challenge to an award made under the 1940 act is concerned, an application under section 33 of that act could be made to a civil court and therefore, payment of court fee was governed by article 1(a) of schedule ii. this was so because the application was to be presented to the court of civil judge which was not a principal civil court of original jurisdiction. but now because of change of definition of term court in the 1996 act, a petition has to be presented, challenging an award made under the 1996 act in terms of the provisions of section 34 thereof, before the principal civil court of original jurisdiction. no entry either in the first schedule or in the second schedule was pointed out which applies to an application or petition to be made before the principal civil court of original jurisdiction, and therefore, when a litigant wants to file petition before a principal civil court having original jurisdiction which is not high court, challenging an award made under the 1996 act, no court fee under bombay court fees act is payable because of absence of a general or specific provision. therefore, it can be said that no court fee under the bombay court fees act is payable when a petition under section 34 challenging an award is filed before any principal civil court of original jurisdiction which is not high court. schedule ii, article 13: [d.k. deshmukh, s.j. vazifdar & j.p. devadhar, jj] court fee on appeal under section 37 of the arbitration & conciliation act, 1996 - held, court fee is payable according to article 13 of schedule ii of the bombay court fees act. - ultimately, on complete failure to export the goods in the year 1985 and after obtaining necessary permission from the rbi, the assessee had dispatched the entire amount to the foreign company. under the aforesaid facts and circumstances of the case, we are clearly of the view that the assessee had no control over the excess payment that ought to be made to the foreign company due to the fluctuation in the rate of foreign exchange. obviously a good businessman will have to maintain certain amount of credibility and specially in a foreign market.s. radhakrishnan, j.1. by this reference, the tribunal, bombay has referred the following substantial question of law:whether on the facts and circumstances of the case, the tribunal was justified in upholding the disallowance of the claim of the assessee for deduction on account of exchange loss of rs. 65,54,930 incurred on remittance of advance received for supply of goods holding that the sum was paid by the assessee was not on account of commercial expediency and was not incurred wholly and exclusively for the purpose of business?2. the above question of law pertains to assessment year 1989-90. the brief facts are, that the assessee is a private limited company carrying on a business of trading and also export of goods and for the assessment year 1989-90, the assessee had filed a return of income showing net loss of rs. 56.03,630. however, the assessing officer had determined the net taxable income of the assessee at rs. 8,06,729 and while passing the aforesaid assessment order dated 28-2-1992, the assessing officer had disallowed a sum of rs. 65,54,930 being the amount of loss occurred due to fluctuation of foreign exchange rate while remitting back the advance received for supply of goods by the assessee.3. it appears that the assessee had entered into two contracts with m/s globe trading agency ltd., dubai in july. 1979 for the supply/export of 7,000 kgs. of copper/silver wire containing 47 per cent silver for a total value of rs. 66,10,000. by the aforesaid contracts, the assessee had to effect shipment latest by september, 1979. in pursuance of the said contracts, the assessee had received a sum of 32,09,895 uae dirhams as an advance for supply of the aforesaid goods. unfortunately, before the goods could be shipped by the assessee, the government of india had issued a notification 3-8-1979, whereby a total ban was imposed on export of silver from india. in view thereof, the assessee could not export the aforesaid copper/silver wire as per the contracts. the assessee had approached this court by filing a writ petition and initially an ad interim relief was obtained whereby the assessee was allowed to export 50 per cent of the contracted goods. however, the said ad interim relief was set aside by the division bench of this court and subsequently an appeal seems to have been preferred to the hon'ble supreme court of india, but the record does not indicate as to what transpired thereafter. however, the assessee could not dispatch the aforesaid 7,000 kgs. of copper/silver wire, as contracted to m/s globe trading agency ltd., dubai, in view of ban imposed by government of india. ultimately, the purchaser had cancelled the contracts by his letter dated 29-9-1985 and by the said letter the said purchaser had demanded back the aforesaid 32,09,895 uae dirhams which was paid towards an advance under the said contracts. the assessee thereafter had approached the rbi for refunding the said amount of 32,09,895 uae dirhams and the rbi granted three permissions dated 1-11- 1988 to the assessee for sending the aforesaid32,09,895 uae dirhams the said three permission numbers are:----------------------------------------------------------------------------------sr. no. permit no uae dirhams date----------------------------------------------------------------------------------1. dc byx (iii)/39/l-60/1988-89 24,35,750 1/11/1988----------------------------------------------------------------------------------2. dc byx (iii)/40/l-60/1988-89 4,84,700 1/11/1988----------------------------------------------------------------------------------3. dc byx (iii)/41/l-60/1988-89 2,89,445 1/11/1988----------------------------------------------------------------------------------32,09,895----------------------------------------------------------------------------------4. accordingly, after obtaining the said permission, the assessee had forwarded 32,09,895 uae dirhams to m/s globe trading agency ltd., dubai during the assessment year 1989-90. the value of uae dirhams had gone up substantially during the aforesaid lapse of 10 years since the amount was received in july/august, 1979 and it came to be refunded only in the asst. yr. 1989-90. as a result of fluctuation in foreign exchange rates, to constitute the said 32,09,895 uae dirhams, the assessee had to pay in excess of rs.65,54,930 during the assessment year 1989-90 over and above the rate which was prevailing in july/august, 1979 when the amount was received by the assessee.5. the assessee had claimed the aforesaid excess amount in terms of rupees paid to the foreign purchaser, by way of loss, as the said additional amount was paid to the purchaser, in view of fluctuation in foreign exchange rates.6. mr. pardiwala, the learned counsel appearing for the assessee pointed out that what was refunded in the assessment year 1989-90 pursuant to the permission granted by the rbi was exactly the same 32,09,895 uae dirhams and the assessee had no control over the fluctuating foreign exchange rate and in view of the lapse of almost 10 years the excess amount of rs. 65,54,930 was paid. mr. pardiwala, in this behalf refers to one of the terms of contract, on which the tribunal had also relied upon. the said term reads as 'alteration in rates or freight or insurance shall be on buyer's account'. the tribunal has interpreted the word appearing in the said term of contract 'rates' to mean fluctuation in foreign exchange rates. however, mr. pardiwala pointed out that here the 'rates' would mean rates of silver and not rates of foreign exchange. mr. pardiwala also contended that the assessee had returned only the exact uae dirhams which he had received in the year 1979, i.e., after a lapse of almost 10 years, since all the efforts of the assessee came to a nought. mr. pardiwala contended that the aforesaid interpretation by the tribunal is totally erroneous. the rates here should only be with regard to the price of silver. to put it in other words, in the event by the time the silver was to be dispatched the rates had gone up, it will be on the buyer's account and it had nothing to do with the foreign exchange. mr. pardiwala also contended that the tribunal had erroneously concluded that the price was settled at indian currency @ rs. 950 per kg. fob and that the payment has to be made on}y in terms of indian rupee. mr. pardiwala strongly contended that no indian exporter could receive payment from a foreign party directly in indian rupee and if that be so it would be a serious violation under the then provisions of foreign exchange regulation act. mr. pardiwala contended that in payment by a foreign party to an indian party, a bank will always accept foreign currency and the same bank will convert the same in indian rupee and pay to the indian party. accordingly, when the amount of 32,09,895 uae dirhams was received from m/s globe trading ltd., dubai, the assessee's bank had converted it into indian rupee. similarly, the assessee had refunded the said 32,09,895 uae dirhams. the assessee had to spend that much of indian rupee to obtain 32,09,895 uae dirhams and to pay the purchaser by way of refund. mr. pardiwala pointed out that this obviously was a loss due to fluctuating rate in foreign exchange and the appellant had no control over the same.7. mr. pardiwala contended that with regard to the second aspect that the tribunal had disagreed that the appellant/assessee had to refund the amount due to 'commercial expediency' the learned counsel submitted that if the party dealing with the foreign entity obtains advance for supply of certain goods, such a party is bound to refund the same and if the indian entity were not to refund the same, the entire credibility of the indian entity will be lost. hence, to maintain the commercial expediency the assessee had to refund at least the amount received from the foreign purchaser. mr. pardiwala. pointed out that in fact the foreign party had demanded a further amount of 17,77,656 uae dirhams in addition to 32,09,895 uae dirhams towards damages. in fact, the assessee had not forwarded any inmount towards damages but had forwarded the only amount which it had received towards advance for the supply/export of the copper/silver wire. mr. pardiwala strongly contended that the petitioner's act of refund of the aforesaid purchase price back to the foreign party was a 'fair trade practice' and it was a clear case of 'commercial expediency'. under the aforesaid facts and circumstances of the case, mr. pardiwala pointed out that the aforesaid question referred to by the tribunal ought to be answered in favour of the assessee and against the revenue, in the sense, the said amount of rs. 65,54,930 ought to have allowed as a loss during the assessment year 1989-90 and the order of the tribunal. mumbai disallowing deduction on account of exchange loss of rs. 65,54,930 ought to be set aside.'8. mr. vimal gupta, the learned counsel appearing on behalf of the revenue could not controvert that the assessee could not dispatch/export the silver to m/s globe trading agency ltd., dubai because of the ban imposed by the government of india on 3-8-1979 from exporting silver from india. mr. gupta also could not controvert that in reality, what is refunded was exactly 32,09,895 uae dirhams. however, mr. gupta sought to justify the order of the tribunal contending in view of the abovementioned term of contract, i.e., 'alteration in rates or freight or insurance shall be on buyer's account'. in the sense, here the 'rates' would mean rate with regard to foreign exchange. mr. gupta also sought to contend that there is no commercial expediency involved in refunding the amount received to the foreign party and in fact the assessee need not have returned the aforesaid amount and incurred the said foreign exchange loss.9. after hearing both the parties, we find that there are two issues in the aforesaid questions of law. the first being, whether the amount of rs. 65,54,930 can be claimed by the assessee on account of foreign exchange loss by way of loss in the it return for the assessment year 1989-90? with regard to the said question, the record is very clear that when the amount was received in the year 1979 by way of advance from the foreign party, the value of uae dirhams in terms of rupee was less compared to when the same amount of 32,09,985 uae dirhams was refunded to m/s globe trading agency ltd., dubai after a lapse of almost 10 years. to put in other words, the assessee had received 32,09.895 uae dirhams as an advance from the said foreign company and the very same amount, i.e., 32,09,895 uae dirhams was refunded back by the assessee to the said company after a lapse of almost 10 years, over which he had no control and in fact there is no dispute from the it department that the assessee could not export the goods because of the notification issued by the government of india imposing ban on the export of silver from india. there is no dispute that the assessee had made all attempts even by approaching this court and seeking permission to export. ultimately, on complete failure to export the goods in the year 1985 and after obtaining necessary permission from the rbi, the assessee had dispatched the entire amount to the foreign company. the interpretation sought to be put by the tribunal with regard to 'alteration in rates or freight or insurance shall be on buyer's account' is that it deals with foreign exchange rate. 'rates' obviously here would mean rates of silver otherwise rates in foreign exchange makes no sense in the said clause because the price was agreed as per the indian rupee at rs. 950 per kg. therefore, what is contemplated here, is the rate of silver and by the time supply was to be made to the buyer and in the event of any fluctuating in the rate of silver, the buyer will bear the additional burden. under the aforesaid facts and circumstances of the case, we are clearly of the view that the assessee had no control over the excess payment that ought to be made to the foreign company due to the fluctuation in the rate of foreign exchange. second aspect in the above is, that whether the aforesaid payment can be said to be for commercial expediency? obviously a good businessman will have to maintain certain amount of credibility and specially in a foreign market. there is no dispute that the assessee had received the aforesaid 32,09,895 uae dirhams by way of advance and the assessee cannot turnaround and say that he will not refund or pay back the same to the foreign company. this also would come under 'commercial expediency'. had the assessee not refunded the entire amount received by him as an advance towards the contracts, the entire credibility of the assessee would have gone in the foreign market, and the said refund was obviously for commercial expediency.10. under the aforesaid facts and circumstances of the case, in both the aspects, we find the arguments of the assessee to be sound for the aforesaid reasons. hence, we answer the aforesaid question of law in favour of the assessee and against the revenue and hold that the disallowance of claim of assessee for deduction on account of exchange loss of rs. 65,54,930 incurred on remittance of advance received for supply of goods and the same paid by the assessee ought to be allowed and also it was due to commercial expediency wholly and exclusively for the purpose of business. accordingly, the reference is answered in favour of the assessee and against the revenue. the reference stands disposed of accordingly.