Mayor and Co. Vs. Commissioner of Income-tax and anr. - Court Judgment

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- haryana urban(control of rent and eviction)act,1973[har.act no.11/1973] -- section 4(2)(b): [m.m. kumar, hemant gupta, ajay & kumar mittal, jj] determination of fair rent held, the fair rent of building under the section is to be determined on the basis of rent agreed between landlord and tenant preceding the date of application. in the absence of rent agreed between parties the basic rent is required to be determined on the basis of rent prevailing in locality for a similar building or rented land on the date of application. if on the date of filing of the application under section 4 of the act for determination of fair rent, the agreed rent was still in vogue thus, it has to be regarded as the basic rent and the same would be constituted as the basis for determining fair rent. thus, where rs.500/- was paid as rent by tenant to the landlord, the same would be regarded as agreed rate of rent and the agreed rate of rent has to be regarded as basic rent within the meaning of section 4(2)(b) of the act in the process of fixing fair rent irrespective of the fact whether the lease period stipulated in a lease deed has expired.g.s. singhvi j.1. in this petition filed under article 226 of the constitution of india, the petitioner has prayed for quashing of the order annexure p-17, dated december 22, 1998, passed by the commissioner of income-tax, jalandhar (respondent no. 1), under section 80hhc(2)(a) of the income-tax act, 1961 (for short, 'the act'), and also the order of assessment annexure p-16, dated december 10, 1998, passed by the joint commissioner of income-tax, special range, jalandhar (respondent no. 2), under section 143(3) of the act.2. the petitioner is manufacturing and exporting out of india sports goods like footballs, rugby balls, volley balls, etc. it is also exporting houseware items, such as stainless steel utensils after purchasing them from other manufacturers. in the assessment year 1996-97, the petitioner filed a return under section 139(1) of the act declaring its taxable income at rs. 3,85,010 and claimed deduction to the tune of rs. 2,06,03,389 under section 80hhc(1) in lieu of the export of sports goods and household utensils worth rs. 40,27,66,975.45 out of india. in terms of that section, the petitioner was entitled to claim deduction on the sale proceeds of the exported goods in convertible foreign exchange within a period of six months from the end of the previous year commencing from april 1, 1995, in contemplation of the delay in realisation of the proceeds of export sale by september 30, 1996. it submitted an application under section 80hhc(2)(a) before respondent no. 1, seeking extension of time up to march 31, 1997. the relevant portion of that application is extracted below:'the details of these bills along with the reasons for delay in the realisation is given below : bill no.datedparty nameamountreasons144220-10-95petgoods mfg. and imports, usa.rs. 50,86,851goods in respect of this invoicewere despatched with the terms 'documents against payment'. the buyer hassomehow taken the delivery of the goods from the shipping line-hapag lloyds,usa, without presenting the documents for the release of the goods. theshipping line--hapag lloyds has asked us to quantify our claim regardinggoods and the reply in this regard has been submitted by oursolicitor--zai-wala and company. copy of the documents referred to above areenclosed herewith at pages nos. 1 to 3. settlement of this dispute would take another time of 6 to 9months.147519-12-95royal distributors, california,usa.rs. 4,88,724goods in respect of thisinvoice have reached the buyer, but he is trying to get some discount byraising a dispute about damage to the goods and also regarding packaging ofthe goods, copy of the letter received from the buyer and subsequent fax messagessent by usasking for early payment an enclosed herewith at pages nos. 4 to 6.we may have to resort to litigation to enforce the payment.149617-1-96mayor international pvt. ltd.,australia.rs. 20.06,530goods in respect of thisinvoice reached late and due to this delay reason the season for the sale ofthe goods was over. the party has further requested us to extend the time formaking the payment since the goodsare not readilysaleable. they have requested for a further credit of 60 days in theircommunication dated september 26, 1996. messagereceived by the bank is enclosed at pages nos. 7 and 8.450229-1-96mitra sports.ukrs. 10,26,691the foreignbuyer has already made the payment of thisamount and the bankers advice as issued by the foreign bank is enclosed atpage no. 9. this amount has not been credited in our account because of fault of our bankers. the above explanation would amply show that delay in realisation of the export bill mentioned above is beyond our control.'3. respondent no. 1 partly accepted the application of the petitioner but granted extension under section 80hhc(2)(a) only up to february 28, 1997. this was conveyed to the petitioner vide letter annexure p2, dated december 10, 1996. before the expiry of the extended period, the petitioner submitted the application annexure p3, dated february 24, 1997, for extension of time up to september 30, 1997, by assigning reasons similar to those enumerated in the application dated september 27, 1996. in that application it was specifically mentioned that one of the buyers, namely, mitra sports, u.k., had remitted the amount due, but others have not done so far. the same was accepted by respondent no. 1, but this time also he granted extension up to june 30, 1997, instead of september 30, 1997.4. on june 28, 1997, the petitioner submitted the application annexure p-4 for extension of time under section 80hhc(2)(a) up to december 31, 1997, by making the following statement :'out of the three bills mentioned in our earlier letter, it has now become clear that the payment in respect of one bill no. 1475, dated 19-12-(sic) issued to royal distributors, california, usa, for rs. 4,88,724 will not be realised. we have even written to the reserve bank of india through bankers for permission to write off this amount. copy of the letter is enclosed at page 1. no extension is, therefore, required in respect of invoice. the position regarding the other two pending export bills is given below : bill no.datedpartynameamountreason144220-10-95petgoods mfg. and co.imports, usa.rs. 50.86,851the buyer had taken thedelivery of the goods from the shipping line - hapag lloyd without presenting documentsfor release of goods. we had filed a legal case againstthe shipping line in the german court and judgment was given in our favour. copy of the letter written to us by our lawyer and the copy of the judgment has already been filed along with the letter dated february 24, 1997. the party has now filed a case against us in usa court and we have engaged a lawyer in usa to tight the case and even to look into the possibility of settling it out of court provided the settlement amount is reasonable. the recent correspondence exchanged with our lawyer in usa in sup-port of our contention is enclosed at pages nos. 2 to 8. since the matter is now pending in usa court realisation of bill either through court or in out of the court settlement will take some time.449417-1-96matyor international pvt. ltd., tens australiars. 20.06,530 goods in respect of this invoice reached the customer late and due to this reason, the party was not in a position to sell the goods as the season for sate was over. we have been following up the matter with our buyer and requesting him to make the payment. the buyer has intimated us that he has received an offer for 50,000-60,000 australian dollars but a better offer is expected. the correspondence exchanged in this regard is at pages nos. 9 to 11. the above explanation would show that the realisation of the two export bills mentioned above is pending for the reasons beyond our control. we shall, therefore, request you that the time limit for the realisation of two export bills mentioned above may kindly be extended up to december 31, 1997.'5. vide letter annexure p6, dated july 22/23, 1997, the income-tax officer (technical) informed the petitioner that respondent no. 1 has granted extension up to august 31, 1997, with a stipulation that no further extension would be allowed because the assessment was likely to become time-barred.6. before the expiry of the extended period, the petitioner received the amount due from petgoods mfg. and co., usa, but the remaining buyer, namely, mayor international pvt. ltd., tens australia, did not remit the amount. therefore, vide letter (annexure p-7), dated august 29, 1997, it made a request to respondent no. 1 to grant extension up to december 31, 1997. respondent no. 1 acceded to the petitioner's request but extended time only up to november 30, 1997.7. vide application annexure p-9, dated december 1, 1997, the petitioner prayed for further extension of time by stating that the buyer, namely, mayor international pvt. ltd., had given assurance for remitting the amount due. this application was accompanied by a copy of the e-mail received from the buyer, mayor international pvt. ltd., showing that the payment was likely to be remitted in the near future.8. in response to the said application, the income-tax officer (technical), jalandhar, informed the petitioner vide letter annexure p-10, dated march 17, 1998, that respondent no. 1 had granted ex post facto extension up to december 51, 1997, with a rider that no further extension will be allowed.9. two days before the receipt of the said letter, the petitioner received 10,150 australian dollars equivalent to rs. 2,60,347 from mayor international pvt. ltd. and by citing the same as an evidence of the possibility of realisation of the remaining amount in the near future, it submitted application annexure p-11, dated march 28, 1998, to respondent no. 1 for extension of time up to july 31, 1998, by reiterating that delay in the realisation of the export bills was due to reasons beyond its control. along with that application, a certificate showing the remittance of amount by mayor international was also annexed. however, respondent no. 1 refused to entertain the same and vide letter annexure p-12, dated june 4, 1998, the income-tax officer (hq) technical, jalandhar, informed the petitioner that the decision of respondent no. 1 had already been communicated to it vide letter dated march 17, 1998. a similar request made by the petitioner vide application annexure p-15, dated june 6, 1998, met with a similar fate and vide letter annexure p-14, dated july 14/15, 1998, the income-tax officer (technical), jalandhar, informed that respondent no. 1 has declined to entertain the application for extension.10. on receipt of the letter annexure p-14, the petitioner submitted representation annexure p-15, dated november 21, 1998, mentioning therein that the entire amount due from mayor international pvt. ltd., tens australia, had been received in three instalments on august 1, 1998, august 17, 1998 and september 28, 1998, and requested for grant of retrospective extension of time. the same was rejected by respondent no. 1 vide order annexure p-17, dated december 22, 1998. paragraphs 10 to 12 of the order annexure p-17 passed by respondent no. 1, which give an idea of the reasons recorded by the said respondent for declining the petitioner's prayer, read as under :'10. the assessee was again allowed an opportunity of being heard by fixing the case for december 8, 1998, when shri ravinder mahajan, c. a., attended on behalf of the assessee and stated that the delay is partly attributable to the delayed shipment by the assessee. he, however, requested that since the payments have been received, extension may be allowed. he also placed reliance to the bombay high court judgment reported in uttam corporation v. cit [1997] 95 taxman 552.11. the arguments put forth by the assessee have carefully been considered. in the case relied upon by the assessee, the payments of the bills of march, 1994, were received in november, 1994, and march, 1995, i.e., within a period of six months when the extension was refused. but, in the present case, as stated above, extensions have already been allowed from time to time for a period of fifteen months. it is also mentioned here that the assessment year involved is 1996-97, and according to the income-tax act, 1961, the assessment has to be finalised during the 1998-99 financial year. the assessee has been applying for extension time and again and he has already been allowed sufficient time.12. in the case of d. b. exports (india) v. cit , it has been held by the punjab and haryana high court that the assessment cannot be kept pending for an indefinite period. while respectfully following the decision of the jurisdictional high court i am satisfied that this is not a fit case for further extension of period, and the assessee's petition is accordingly rejected.'11. in the meanwhile, respondent no. 2 issued notice dated august 4, 1998, under section 143(2) of the act for finalisation of assessment and vide annexure p-16, dated december 10, 1998, he completed the assessment by making an addition of rs. 1,78,612 to the declared income of the petitioner.12. the petitioner has challenged the order annexure p-17, dated december 22, 1998, on the ground that it is vitiated due to non-application of mind by respondent no. 1 to the factors relevant to the exercise of power under that section. it has also challenged the order of assessment on the ground that the same is based on a patently illegal order passed by respondent no. 1 refusing to grant extension in terms of section 80hhc(2)(a) of the act.13. in the written statement filed on behalf of respondent no. 1 it has been averred that the petitioner's requests for extension of time had been accepted from lime to time, but there was no justification to grant extension for art indefinite period and, therefore, the request made on its behalf vide applications dated march 28, 1998, and november 30, 1998, was declined. as regards the order of assessment, respondent no. 1 has averred that it is appealable and, therefore, the high court should decline to entertain the petitioner's prayer for its invalidation.14. we have heard learned counsel for the parties.15. section 80hhc (1) and (2xa) (as it stood before being amended by the finance act, 1999) read as under :'80hhc. (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 of the profits 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 sub-section (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 by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods . . .(2)(a) this section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of india are received in or brought into india by the assessee other than the supporting manufacturer in convertible foreign exchange, within a period of six months from the end of the previous year or, where the chief commissioner or commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the chief commissioner or commissioner may allow in this behalf.'16. an analysis of the provisions quoted above shows that under sub-section (1) of section 80hhc an assessee engaged in the business of export out of india of goods or merchandise to which the provisions of that section apply is entitled to deduction of profits derived from the export of such goods or merchandise in computing his total income. clause (a) of sub-section (2) of section 80hhc lays down that the assessee is entitled to claim deduction of the profits derived by him from the export of specified goods out of india, if the sale proceeds of such goods or merchandise exported out of india received in, or brought into, india in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the chief commissioner or commissioner may allow in this behalf on being satisfied that the assessee was unable to do so within the said period of six months due to reasons beyond his control. for exercise of this power, the chief commissioner or commissioner, as the case may be, has to record reasons in writing. this means that the power vested in the competent authority to grant extension of time, which necessarily includes the power to refuse extension of time beyond the period of six months, is quasi-judicial in nature. the statutory embodiment of the requirement of recording reasons in writing is clearly indicative of the legislature's intention that the power vested in the chief commissioner or commissioner to grant or refuse extension of time must be exercised reasonably and fairly and must not be exercised arbitrarily and the order passed by the concerned authority must reflect objective application of mind to the factors relevant to the determination of the issue as to whether the assessee could not bring or receive the sale proceeds of the exported goods due to reasons beyond his control. the expression 'reasons beyond his control' has not been defined in the act. therefore, we shall have to interpret the same keeping in view the context in which it appears and by adopting that mode of interpretation, it can easily be said that the assessee can seek extension of time beyond six months only by showing that he had acted with due diligence and had taken the necessary steps for bringing the sale proceeds within the stipulated period but could not do so due to reasons on which he did not have any control. the expression 'such further period' has also not been defined in the act. however, keeping in view the limitation prescribed under section 153 of the act for passing of the order of assessment, i.e., two years from the end of the assessment year, there is no difficulty in holding that the extension contemplated by section 80hhc(2)(a) can be granted for the period ending with the expiry of two years from the end of the assessment year. in other words, if the sale proceeds of the goods or merchandise exported out of india, are received, or brought into india by the assessee in convertible foreign exchange within the period of two years from the end of the assessment year and he shows that the amount could not be brought or received earlier on account of reasons beyond his control, then the chief commissioner or the commissioner, as the case may be, is obliged to grant extension of time. the discretion conferred upon the chief commissioner or the commissioner under section 80hhc(2)(a) is not unbridled or unguided. rather it is limited to the consideration of the plea of the assessee that the sale proceeds could not be brought into or received in india within six months due to reasons not attributable to him and once the assessee satisfies the chief commissioner or the commissioner that the sale proceeds could not be brought within the stipulated period, due to reasons beyond his control, the extension contemplated by section 80hhc(2)(a) has to be granted as a matter of course, unless there are other cogent reasons for not doing so. this interpretation of sub-section (2)(a) of section 80hhc is consistent with the object sought to be achieved by incorporating section 80hhc, i.e., to encourage export of goods and merchandise out of india for earning foreign exchange.17. in the light of the above, it is to be seen whether the order dated december 22, 1998 (annexure p-17), passed by respondent no. 1 is in accordance with section 80hhc(2)(a) and the reasons assigned therein are legally correct. it has not been disputed before us that under section 153 of the act, the assessment could be framed in the petitioner's case up to march 31, 1999, i.e., two years from the end of the previous year, and much before that date, the petitioner had received the amount due from the buyers. it had submitted applications from time to time seeking extension of the period stipulated in section 80hhc(2)(a) by giving detailed reasons to show that the amount of sale proceeds could not be received in or brought into india due to reasons beyond its control. respondent no. 1 accepted the reasons put forward by the petitioner and granted extensions from time to time, but vide letter annexure p-6 future extensions were sought to be declined on the ground that the assessment was likely to become time-barred and vide annexures p-10, p-12 and p-14, respondent no.1refused to grant further extension without assigning any reason. the application annexure p-15, dated november 21, 1998, submitted by the petitioner, was rejected by respondent no. 1 on the following two grounds :1. the assessee has already been allowed sufficient ,time in the form of extensions granted from time to time.2. the assessment cannot be kept pending for an indefinite period. in our opinion, both the reasons assigned by respondent no. 1 for declining the petitioner's prayer for extension are extraneous and irrelevant to the parameters which should govern the exercise of power under section 80hhc(2)(a). the mere fact that the extensions were granted from time to time could hardly be a reason for declining the petitioner's request for further extension because no outer limit has been fixed under section 80hhc(2)(a) for grant of extension and even by applying the rule of implied limitation with reference to the period stipulated in section 153, within which the assessment could be completed in the petitioner's case, extension could have been granted up to march 31, 1999, and much before that date the tenure of extended time would have expired. the fact that the petitioner had received the remaining amount from mayor international pvt. ltd., australia, much before the expiry of the time limit for completing the assessment has not been controverted by the respondents, but this aspect has been totally ignored by respondent no. 1 while declining the petitioner's request for extension. moreover, while deciding the petitioner's applications for extension of time, respondent no. 1 did not apply his mind to the crucial aspect of the matter, i.e., whether the reasons assigned by the petitioner for its being unable to bring the amount of sale proceeds in india, were beyond its control. therefore, we have no hesitation to hold that the order dated december 22, 1998, is vitiated by an error of law apparent from the face of the record.18. we are further of the view that the impugned order is liable to be invalidated on the ground that the rejection of the petitioner's prayer for extension of time up to july 31, 1998, is vitiated by arbitrariness. the respondents have not disputed that various extensions were given by respondent no. 1 by accepting the petitioner's plea that it had not been able to receive the amount of the sale proceeds due to reasons beyond its control. in the backdrop of these facts, there was no justification, legal or otherwise, to decline the petitioner's prayer for extension backed by similar reasons.19. the decision of the division bench of this court in d. b. exports (india) v. cit , to which reference has been made in the impugned order, and on which reliance has been placed by shri sawhney, is clearly distinguishable on the facts. in that case, extensions were allowed to the petitioner for more than two years to bring convertible foreign exchange into the country. during this period, civil as well as criminal proceedings had started between the petitioner and the defaulting party, which were not likely to conclude soon and on that ground the extension had been declined on the premise that it would cause loss to the revenue. this court accepted the reasons put forward by the respondents to justify the decision of the competent authority not to grant further extension by making the following observations (page 840) :'in the present case, the commissioner of income-tax granted five extensions spreading over more than two years to the petitioner to bring convertible foreign exchange into the country. finding that civil as well as proceedings under section 138 of the negotiable instruments act, 1881, had started between the petitioner and the defaulting party, which was not likely to conclude soon, further extension in time was declined. extension has not to be given on the mere asking. rather the section provides that extension can be given only after recording reasons for doing so. the commissioner of income-tax was satisfied that any further extension of time would be futile causing loss to the revenue. in the facts and circumstances of the case, it cannot be held that the discretion exercised by the commissioner of income-tax was arbitrary or unjust. in our view, the commissioner exercised his discretion in a very fair manner. for grant of extension of time, reasons have to be recorded whereas there is no such requirement for declining the same. but in this case while declining the request, due opportunity was provided to the petitioner and the same was declined after recording reasons.' 20. in the case in hand, no litigation had commenced between the petitioner and the buyer and the entire amount of sale proceeds had been received almost three months before the passing of the impugned order and the time limit prescribed for completing the assessment had also not elapsed. thus, there was no valid reason to decline extension to the petitioner.21. in view of the above conclusion, we do not consider it necessary to deal with the argument of shri b.s. gupta that section 80hhc(2)(a) does not contemplate submission of an application by an assessee for extension of time and the competent authority is bound to grant extension as a matter of course. for the same reason, we do not deem it necessary to comment upon the proposition laid down in the azad tobacco factory (p.) ltd. v. cit : [1997]225itr1002(all) and geekay exim (india) ltd. v. cit : [1998]234itr560(cal) , on which reliance has been placed by learned counsel for the petitioner, and leave this point to be decided in some other case.22. for the reasons mentioned above, the writ petition is allowed. the order annexure p-17 is declared illegal and quashed with the direction to respondent no. 1 to pass an order extending the period stipulated in section 80hhc(2)(a) up to september 30, 1998. the petitioner shall get all consequential benefits. we also direct that if the assessment has been completed in the meantime, adversely affecting the rights of the petitioner, then it shall be free to seek appropriate legal remedy for redressal of its grievance.