Deputy Commissioner of Vs. Mahajan Overseas (P.) Ltd. - Court Judgment

Excerpt:
1. the appeal filed by the department and cross-objection filed by the assessee against the order of the learned commissioner of income-tax (appeals) dated 19-4-1989 for assessment year 1985-86 are taken together for the sake of convenience.2. shri d.d. goyal represented the department and shri ashok malik, ca appeared on behalf of the assessee.3. we would take up the appeal of the department first. the sole contention raised in this appeal pertains to acceptance of assessee's claim for deduction under section 80hhc of the act. the facts in brief are that the assessee is an exporter who claimed deduction of rs. 10,38,359 on the export turnover made in the assessment year 1985-86.the assessee's accounting period ended on 31-12-1984. on scrutiny of the assessee's claim in respect of deduction under section 80hhc, it was found that on 1-12-1983 the assessee company entered into agreement with m/s. mahajan international - its sister concern. as per the terms of the contract the goods exported actually belonged to m/s. mahajan international and the orders were also obtained by it from the buyers.except for preparing the bills in its name, all the other activities were performed by m/s. mahajan international. even the benefits resulting from exports were also to be received by m/s. mahajan international. on these facts, the assessing officer after finding that the entire arrangement was made to circumvent caution list on which m/s. mahajan international was put by the reserve bank of india, held that the assessee being not a real exporter is not entitled to deduction under section 80hhc of the act. the learned cit(a) allowed the claim of the assessee after holding that as the prerequisite conditions for allowance of deductions under section 80hhc were satisfied the assessee was entitled to its claim as made. it is against this decision of cit(a) that the department has come before us.4. before us both the parties supported their claim - one relying on the order of the assessing officer and the other on the order of the learned cit(a). while according to the learned departmental representative the expression 'exporter' has to be understood in the meaning of a real exporter and not the ostensible one as is the case of the assessee, as per the learned counsel for the assessee, no such situation is envisaged in the section. relying on the decision of delhi high court in the case of ferro alloys corporation ltd. v. r.c, mishra, director, tax credit [1978] 114 itr 753, shri d.d. goyal argued against the assessee's right to deduction. as per shri malik, the wording of section being clear and unambiguous, the primary conditions viz., exports of goods and merchandise being made and sale of goods being receivable in convertible foreign exchange, being satisfied by the assessee, the relief was rightly allowed by the cit(a).5. we have considered the rival submissions and have also gone through the judgment of delhi high court in the case of ferro alloys corpn.ltd. (supra) cited before us. in the latter case the issue before their lordship was the interpretation of provisions of section 280zc of the i.t. act, added by the act no. 15 of 1965. we may refer to both the sections as they stood at the relevant period of time. section 80hhc reads as under: 80hhc. deduction in respect of export turnover.-(1) where the assessee, 'being an indian company or a person (other than a company)', who is resident in india, exports out of india during the previous year relevant to an assessment year 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, the following deductions, namely:- (a) a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year; and (b) a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding year. (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 receivable by the assessee in convertible foreign exchange. (b) the goods or merchandise referred to in clause (a) are the following, namely:- (i)agricultural primary commodities, not being produce of plantations; (iv) such other goods or merchandise as the central government may, by notification in the official gazette, specify in this behalf. (3) no deduction under clause (b) of sub-section(1) shall be allowed unless the assessee had, during the immediately preceding previous year, exported out of india goods or merchandise to which this section applies. (a) 'convertible foreign exchange', means foreign exchange which is for the time being treated by the reserve bank of india as convertible foreign exchange for the purposes of the foreign exchange regulation act, 1973 (46 of 1973) and any rules made thereunder; (b) 'export turnover' means the sale proceeds of any goods or merchandise exported out of india, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the customs act, 1962 (52 of 1962).provisions of section 280zc as they stood at the relevant period of time, read as under:- 280zc. tax credit certificate in relation to exports.-(1) subject to the provisions of this section, a person who exports any goods or merchandise out of india after the 28th day of february, 1965 and receives the sale proceeds thereof in india in accordance with the foreign exchange regulation act, 1947 (7 of 1947) and the rules made thereunder, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding fifteen per cent on the amount of such sale proceeds. explanation 1 : for the removal of doubt it is hereby declared that, the expression 'sale proceeds' in this sub-section does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the customs act, 1962 (52 of 1962). explanation 2 : for the purposes of this sub-section, a person who exports any goods or merchandise in respect of which the declaration in pursuance of rule 3 of the foreign exchange regulation rules, 1952, is required to be in form e.p., or form e.p.i, in the first schedule to the said rules, shall not in respect of such goods or merchandise be deemed to have received the sale proceeds in india in accordance with the foreign exchange regulation act, 1947 (7 of 1947) and the rules made thereunder unless he receives the same in india through an authorised dealer as defined in the said act. (2) the goods or merchandise in respect of which a tax credit certificate shall be granted under sub-section(1) (including the destination of their export) and the rate at which the amount of such certificate shall be calculated shall be such as may be specified in the scheme: provided that different rates may be specified in respect of different goods or merchandise. (3) in specifying the goods or merchandise (including the destination of their export) and the rates, the central government shall have regard to the following factors, namely.- (a) the cost of manufacture or production of such goods or merchandise and prices of similar goods in the foreign markets; (b) the need to develop foreign markets for such goods or merchandise; (4) the amount shown on a tax credit certificate granted to any person under this section shall, on the certificate being produced before the income-tax officer, be adjusted against any liability of that person under the indian income-tax act, 1922 (11 of 1922), or this act, existing on the date of which the certificate was produced before the income-tax officer and where the amount of such certificate exceeds such liability, or where there is no such liability, the excess or the whole of such amount, as the case may be, shall, notwithstanding anything contained in chapter xix, be deemed, on the said date, to be refunded due to such person under that chapter and the provisions of this act shall apply accordingly.both the sections refer to the benefit in respect of exports. in both the sections the expression 'exporter' has not been defined - while in case of section 280zc, the foreign exchange has to be received by the exporter, in case of section 80hhc it has to be receivable by the exporter. after having read the sections, we now come to the facts as available in both the cases. as regards the cited case the facts as reported are that ferro alloys corpn. ltd.'s case (supra) was manufacturing and exporting ferro-manganese and chrome concentrates to different foreign buyers. during the years 1964 and 1965 it entered into different contracts with number of foreign buyers foi the sale of two commodities. these contracts provided for the substitution by fresh contracts between a government trading corporation and the foreign buyers by which it was obligatory for the foreign buyers to open the letter of credit in favour of the corporation. the party continued to be responsible to the buyers. these contracts were then approved by the corporation in terms of scheme of barter. in the actual shipment of goods for which arrangement were made by the party, the name of the corporation was introduced and the bills of lading in some cases mentioned the exporter being a corporation. the letters of credit were transferable/assignable and the commission of the corporation was separately remitted after the sale proceeds had been realised through their bankers. the question arose as to who was entitled to the tax credit certificate in relation to the export under section 280zc of the income-tax act, 1965, the party, ferro alloys corpn. ltd. or the government trading corporation. their lordships after examining the provisions of section 280zc, in the light of the barter scheme and the intention of the government in providing incentive for export trading held that it was the petitioner, i.e., ferro alloys corpn. ltd. who was entitled to tax credit certificate under section 280zc and not the trading corporation. this was on the ground that there was no concluded contract of such of the commodities which were eventually exported by the party ferro alloys corpn. ltd. the exports were routed through the corporation though it was the petitioner who was the real exporter. it had made the commodity available, made all the investments required, was responsible for the quality and quantity to be exported and also earned the foreign exchange. this was subject to the payment of commission to the corporation. it was also the petitioner who entered into contract with the foreign buyers. the arrangement entered into was on account of executive compulsion or to avail of certain benefits arising out of the government policy with regard to export. the exports were routed through the corporation in such a way that while for external appearances the corporation was given out as the exporter, the real exporter was the petitioner. it was clear that the parties did not intend to transfer the title to the corporation and the shipping documents by themselves would not be determinative of the situs of the true title in the goods. it was also held that even if it be assumed that the arrangement between the parties had the legal effect of transferring title in the goods in favour of the corporation, the petitioner would still be the real exporter for the purpose of section 280zc and be entitled to the tax credit certificate.6. the facts in the case of the assessee are almost identical to the ones available in the cited case. this is evident from the contract entered into by the assessee, the relevant terms of which are cited by the assessing officer in his order as under: (i) that mahajan international will procure all the material for which pit holds the orders for sale, (ii) mahajan international will invoice the goods to the assessee coy.exactly of the value of the sale orders. (iii) the assessee coy. will charge a commission 3% on the invoice value from mahajan international. if any commission is paid by the assessee coy. to the foreign buyers this commission will be reimbursed by mahajan international. (iv) the difference of exchange on account of fluctuations in the change rate of dollar/sterling at the time of negotiations of the documents or on realisation of the dues from the foreign parties shall also belong to mahajan international. (v) all the charges recovered from the assessee coy. by the bank in the course of exports shall also be reimbursed by mahajan international, (vi) that all the transportation charges from the place of procurement to the place of shipment in india and all expenses of shipment agents till the goods are put on the board of the ship shall be borne by m/s. mahajan international. (iiv) that mahajan international will be entitled to all the cash assistance, duty draw back, claims or octroi refunds on the goods exported by the assessee coy.as per above it is m/s. mahajan international who were to procure the material for which it held the orders for sale. in addition to bearing the transportation charges from the place of procurement to the place of shipment, the other expenses on account of difference in fluctuation of foreign exchange, bank charges, commission payable to the foreign buyers, were to be borne by m/s. mahajan international. the goods were to be invoiced at exactly the value of the sale orders procured by m/s.mahajan international. the assessee company was only entitled to commission at 3% of the invoice value from m/s. mahajan international whereas the party was to receive all the cash assistance, duty draw back, claims or octroi refunds on the goods exported. the arrangement so entered into was explained to be on account of caution list on which m/s. mahajan international was put by the reserve bank of india. in substance, while the real exporter was m/s. mahajan international, the assessee was allowed commission at 3% for lending its name to m/s.mahajan international. the facts are almost identical to those of the ones available in the case of ferro alloys corporation ltd. (supra).while in the cited case, the arrangements were on account of the statutory provisions because of which the goods were to be routed through corporation, in the case of the assessee it was outcome of an arrangement made to overcome the restriction placed on the assessee by the reserve bank of india. there is nothing on record to indicate an express contract between m/s. mahajan international and the assessee which may otherwise expressly transfer title in the goods in favour of the assessee. clause (2) of the contract which reads as under however shows that apparently title was not transferred to the assessee : mahajan international while invoice the books to the assessee company exactly on the value of the sale orders.the relation does not appear to be that of a principal to principal.the profit/loss incurred in the entire transaction was to be borne by m/s. mahajan international and not by the assessee. even if the shipping documents were entered in the name of the assessee, for which no evidence is available before us, the intention of the parties was clear inasmuch as the arrangement was entered into to overcome the disability on account of instruction of reserve bank. at this juncture we may also look into the intention of the legislature to find out whether the incentive was intended for the real exporter or for the ostensible exporter. for this we may refer to the speech of the hon'ble finance minister which reads as under : "in respect of exports the scheme announced by me last year provided some tax relief to exporters whose export turnover for any year exceeded that of the immediately preceding year by more than 10 per cent. the total relief available under last year's scheme was also subject to a maximum of 10 per cent of tax payable. i now propose to simplify and liberalise the scheme and remove both the minimum qualifying amount and limit of relief.exporters will be entitled to deduct 5 per cent of their incremental turnover in computing their taxable income. thus, under the new scheme all increments in export turnover will be entitled to relief. exports of all goods will qualify for this concession excepting a few specified items. as the new provision will take effect from the assessment year 1983-84, the provision made last year is proposed to be deleted." [extracted from 140 itr 29-statutes] this speech in turn refers to the scheme announced in the budget speech of the hon'ble finance minister for 1982-83. the relevant part reads as under : i will now come to some proposals regarding foreign exchange earnings. i propose to provide some tax relief to exporters whose export turnover for any year exceeds that of the immediately preceding year by more than 10 per cent. the tax relief, to be calculated at a specified percentage of such excess turnover, would be limited to 10 per cent of the income-tax otherwise payable on export profits. the rate at which the tax relief will be calculated and the goods qualifying for the purpose of this concession will be notified by the central government. [extracted from 134 itr 26-statute] from above it is clear that the object with which the provisions were brought on the statute was to allow the incentive to the real exporter and not to the ostensible one. if it were not so, then the incentive would not have been linked with the deduction allowable from the profit earned by the assessee.7. as the facts available in the cited judgment are almost identical to that of the assessee's case, we hold that the cit(a) was not justified in allowing the claim of the assessee under section 80hhc of the act.we, therefore, set aside the order of the cit(a) and restore that of the assessing officer. the appeal is defective as the same has been signed by two different officers that is form no. 36 has been signed by the deputy commissioner and the grounds of appeal has been signed by the commissioner of income-tax. therefore, same is required to be dismissed.while no specific arguments were raised in support of the cross-objection taken by the assessee, in view of the decision in the case of cit v. calcutta discount co. ltd. [1973] 91 itr 8 (sc), the assessee's plea is not accepted. in the aforesaid case it was clearly held that the tribunal while deciding a case should not be unduly influenced by trivial procedural technicalities. the memo of appeal should be liberally seen and entertained. in case the necessary grounds have been taken in the appeal memo, there is no specific formula which is necessary for seeking relief in the hands of the tribunal. in view of above, the assessee's cross-objection is rejected.9.in the result, the departmental appeal is allowed whereas the cross-objection filed by the assessee is dismissed.

Judgment:
1. The appeal filed by the department and cross-objection filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals) dated 19-4-1989 for assessment year 1985-86 are taken together for the sake of convenience.

2. Shri D.D. Goyal represented the department and Shri Ashok Malik, CA appeared on behalf of the assessee.

3. We would take up the appeal of the department first. The sole contention raised in this appeal pertains to acceptance of assessee's claim for deduction under Section 80HHC of the Act. The facts in brief are that the assessee is an exporter who claimed deduction of Rs. 10,38,359 on the export turnover made in the assessment year 1985-86.

The assessee's accounting period ended on 31-12-1984. On scrutiny of the assessee's claim in respect of deduction under Section 80HHC, it was found that on 1-12-1983 the assessee company entered into agreement with M/s. Mahajan International - its sister concern. As per the terms of the contract the goods exported actually belonged to M/s. Mahajan International and the orders were also obtained by it from the buyers.

Except for preparing the bills in its name, all the other activities were performed by M/s. Mahajan International. Even the benefits resulting from exports were also to be received by M/s. Mahajan International. On these facts, the Assessing Officer after finding that the entire arrangement was made to circumvent caution list on which M/s. Mahajan International was put by the Reserve Bank of India, held that the assessee being not a real exporter is not entitled to deduction under Section 80HHC of the Act. The learned CIT(A) allowed the claim of the assessee after holding that as the prerequisite conditions for allowance of deductions under Section 80HHC were satisfied the assessee was entitled to its claim as made. It is against this decision of CIT(A) that the department has come before us.

4. Before us both the parties supported their claim - one relying on the order of the Assessing Officer and the other on the order of the learned CIT(A). While according to the learned Departmental Representative the expression 'exporter' has to be understood in the meaning of a real exporter and not the ostensible one as is the case of the assessee, as per the learned counsel for the assessee, no such situation is envisaged in the section. Relying on the decision of Delhi High Court in the case of Ferro Alloys Corporation Ltd. v. R.C, Mishra, Director, Tax Credit [1978] 114 ITR 753, Shri D.D. Goyal argued against the assessee's right to deduction. As per Shri Malik, the wording of section being clear and unambiguous, the primary conditions viz., exports of goods and merchandise being made and sale of goods being receivable in convertible foreign exchange, being satisfied by the assessee, the relief was rightly allowed by the CIT(A).

5. We have considered the rival submissions and have also gone through the judgment of Delhi High Court in the case of Ferro Alloys Corpn.

Ltd. (supra) cited before us. In the latter case the issue before their Lordship was the interpretation of provisions of Section 280ZC of the I.T. Act, added by the Act No. 15 of 1965. We may refer to both the sections as they stood at the relevant period of time. Section 80HHC reads as under: 80HHC. Deduction in respect of export turnover.-(1) Where the assessee, 'being an Indian Company or a person (other than a company)', who is resident in India, exports out of India during the previous year relevant to an assessment year 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, the following deductions, namely:- (a) a deduction of an amount equal to one per cent of the export turnover of such goods or merchandise during the previous year; and (b) a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding year.

(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 receivable by the assessee in convertible foreign exchange.

(b) The goods or merchandise referred to in Clause (a) are the following, namely:- (i)agricultural primary commodities, not being produce of plantations; (iv) such other goods or merchandise as the Central Government may, by notification in the Official Gazette, specify in this behalf.

(3) No deduction under Clause (b) of Sub-section(1) shall be allowed unless the assessee had, during the immediately preceding previous year, exported out of India goods or merchandise to which this section applies.

(a) 'convertible foreign exchange', means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any rules made thereunder; (b) 'export turnover' means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962).

Provisions of Section 280ZC as they stood at the relevant period of time, read as under:- 280ZC. Tax Credit Certificate in relation to exports.-(1) Subject to the provisions of this section, a person who exports any goods or merchandise out of India after the 28th day of February, 1965 and receives the sale proceeds thereof in India in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947) and the rules made thereunder, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding fifteen per cent on the amount of such sale proceeds.

Explanation 1 : For the removal of doubt it is hereby declared that, the expression 'sale proceeds' in this sub-section does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962).

Explanation 2 : For the purposes of this sub-section, a person who exports any goods or merchandise in respect of which the declaration in pursuance of Rule 3 of the Foreign Exchange Regulation Rules, 1952, is required to be in Form E.P., or Form E.P.I, in the First Schedule to the said Rules, shall not in respect of such goods or merchandise be deemed to have received the sale proceeds in India in accordance with the Foreign Exchange Regulation Act, 1947 (7 of 1947) and the rules made thereunder unless he receives the same in India through an authorised dealer as defined in the said Act.

(2) The goods or merchandise in respect of which a tax credit certificate shall be granted under Sub-section(1) (including the destination of their export) and the rate at which the amount of such certificate shall be calculated shall be such as may be specified in the scheme: Provided that different rates may be specified in respect of different goods or merchandise.

(3) In specifying the goods or merchandise (including the destination of their export) and the rates, the Central Government shall have regard to the following factors, namely.- (a) the cost of manufacture or production of such goods or merchandise and prices of similar goods in the foreign markets; (b) the need to develop foreign markets for such goods or merchandise; (4) The amount shown on a tax credit certificate granted to any person under this section shall, on the certificate being produced before the Income-tax Officer, be adjusted against any liability of that person under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, existing on the date of which the certificate was produced before the Income-tax Officer and where the amount of such certificate exceeds such liability, or where there is no such liability, the excess or the whole of such amount, as the case may be, shall, notwithstanding anything contained in Chapter XIX, be deemed, on the said date, to be refunded due to such person under that Chapter and the provisions of this Act shall apply accordingly.

Both the sections refer to the benefit in respect of exports. In both the sections the expression 'Exporter' has not been defined - while in case of Section 280ZC, the foreign exchange has to be received by the exporter, in case of Section 80HHC it has to be receivable by the exporter. After having read the sections, we now come to the facts as available in both the cases. As regards the cited case the facts as reported are that Ferro Alloys Corpn. Ltd.'s case (supra) was manufacturing and exporting ferro-manganese and chrome concentrates to different foreign buyers. During the years 1964 and 1965 it entered into different contracts with number of foreign buyers foi the sale of two commodities. These contracts provided for the substitution by fresh contracts between a Government Trading Corporation and the foreign buyers by which it was obligatory for the foreign buyers to open the letter of credit in favour of the corporation. The party continued to be responsible to the buyers. These contracts were then approved by the corporation in terms of scheme of barter. In the actual shipment of goods for which arrangement were made by the party, the name of the corporation was introduced and the bills of lading in some cases mentioned the exporter being a corporation. The letters of credit were transferable/assignable and the commission of the corporation was separately remitted after the sale proceeds had been realised through their bankers. The question arose as to who was entitled to the tax credit certificate in relation to the export under Section 280ZC of the Income-tax Act, 1965, the party, Ferro Alloys Corpn. Ltd. or the Government Trading Corporation. Their Lordships after examining the provisions of Section 280ZC, in the light of the Barter Scheme and the intention of the Government in providing incentive for export trading held that it was the petitioner, i.e., Ferro Alloys Corpn. Ltd. who was entitled to tax credit certificate under Section 280ZC and not the Trading Corporation. This was on the ground that there was no concluded contract of such of the commodities which were eventually exported by the party Ferro Alloys Corpn. Ltd. The exports were routed through the Corporation though it was the petitioner who was the real exporter. It had made the commodity available, made all the investments required, was responsible for the quality and quantity to be exported and also earned the foreign exchange. This was subject to the payment of commission to the Corporation. It was also the petitioner who entered into contract with the foreign buyers. The arrangement entered into was on account of executive compulsion or to avail of certain benefits arising out of the Government Policy with regard to export. The exports were routed through the corporation in such a way that while for external appearances the corporation was given out as the exporter, the real exporter was the petitioner. It was clear that the parties did not intend to transfer the title to the corporation and the shipping documents by themselves would not be determinative of the situs of the true title in the goods. It was also held that even if it be assumed that the arrangement between the parties had the legal effect of transferring title in the goods in favour of the corporation, the petitioner would still be the real exporter for the purpose of Section 280ZC and be entitled to the tax credit certificate.

6. The facts in the case of the assessee are almost identical to the ones available in the cited case. This is evident from the contract entered into by the assessee, the relevant terms of which are cited by the Assessing Officer in his order as under: (i) That Mahajan International will procure all the material for which pit holds the orders for sale, (ii) Mahajan International will invoice the goods to the assessee coy.exactly of the value of the sale orders.

(iii) The assessee coy. will charge a commission 3% on the invoice value from Mahajan International. If any commission is paid by the assessee coy. to the foreign buyers this commission will be reimbursed by Mahajan International.

(iv) The difference of exchange on account of fluctuations in the change rate of dollar/sterling at the time of negotiations of the documents or on realisation of the dues from the foreign parties shall also belong to Mahajan International.

(v) All the charges recovered from the assessee coy. by the bank In the course of exports shall also be reimbursed by Mahajan International, (vi) That all the transportation charges from the place of procurement to the place of shipment in India and all expenses of shipment agents till the goods are put on the board of the ship shall be borne by M/s. Mahajan International. (iiv) That Mahajan International will be entitled to all the cash assistance, duty draw back, claims or octroi refunds on the goods exported by the assessee coy.

As per above it is M/s. Mahajan International who were to procure the material for which it held the orders for sale. In addition to bearing the transportation charges from the place of procurement to the place of shipment, the other expenses on account of difference in fluctuation of foreign exchange, bank charges, commission payable to the foreign buyers, were to be borne by M/s. Mahajan International. The goods were to be invoiced at exactly the value of the sale orders procured by M/s.

Mahajan International. The assessee company was only entitled to commission at 3% of the invoice value from M/s. Mahajan International whereas the party was to receive all the cash assistance, duty draw back, claims or octroi refunds on the goods exported. The arrangement so entered into was explained to be on account of caution list on which M/s. Mahajan International was put by the Reserve Bank of India. In substance, while the real exporter was M/s. Mahajan International, the assessee was allowed commission at 3% for lending its name to M/s.

Mahajan International. The facts are almost identical to those of the ones available in the case of Ferro Alloys Corporation Ltd. (supra).

While in the cited case, the arrangements were on account of the statutory provisions because of which the goods were to be routed through corporation, in the case of the assessee it was outcome of an arrangement made to overcome the restriction placed on the assessee by the Reserve Bank of India. There is nothing on record to indicate an express contract between M/s. Mahajan International and the assessee which may otherwise expressly transfer title in the goods in favour of the assessee. Clause (2) of the contract which reads as under however shows that apparently title was not transferred to the assessee : Mahajan International while invoice the books to the assessee company exactly on the value of the sale orders.

The relation does not appear to be that of a principal to principal.

The profit/loss incurred in the entire transaction was to be borne by M/s. Mahajan International and not by the assessee. Even if the shipping documents were entered in the name of the assessee, for which no evidence is available before us, the intention of the parties was clear inasmuch as the arrangement was entered into to overcome the disability on account of instruction of Reserve Bank. At this juncture we may also look into the intention of the Legislature to find out whether the incentive was intended for the real exporter or for the ostensible exporter. For this we may refer to the speech of the Hon'ble Finance Minister which reads as under : "In respect of exports the scheme announced by me last year provided some tax relief to exporters whose export turnover for any year exceeded that of the immediately preceding year by more than 10 per cent. The total relief available under last year's scheme was also subject to a maximum of 10 per cent of tax payable. I now propose to simplify and liberalise the scheme and remove both the minimum qualifying amount and limit of relief.

Exporters will be entitled to deduct 5 per cent of their incremental turnover in computing their taxable income. Thus, under the new scheme all increments in export turnover will be entitled to relief. Exports of all goods will qualify for this concession excepting a few specified items. As the new provision will take effect from the assessment year 1983-84, the provision made last year is proposed to be deleted." [Extracted from 140 ITR 29-Statutes] This speech in turn refers to the Scheme announced in the Budget Speech of the Hon'ble Finance Minister for 1982-83. The relevant part reads as under : I will now come to some proposals regarding foreign exchange earnings. I propose to provide some tax relief to exporters whose export turnover for any year exceeds that of the immediately preceding year by more than 10 per cent. The tax relief, to be calculated at a specified percentage of such excess turnover, would be limited to 10 per cent of the income-tax otherwise payable on export profits. The rate at which the tax relief will be calculated and the goods qualifying for the purpose of this concession will be notified by the Central Government. [Extracted from 134 ITR 26-Statute] From above it is clear that the object with which the provisions were brought on the Statute was to allow the incentive to the real exporter and not to the ostensible one. If it were not so, then the incentive would not have been linked with the deduction allowable from the profit earned by the assessee.

7. As the facts available in the cited judgment are almost identical to that of the assessee's case, we hold that the CIT(A) was not justified in allowing the claim of the assessee under Section 80HHC of the Act.

We, therefore, set aside the order of the CIT(A) and restore that of the Assessing Officer.

The Appeal is defective as the same has been signed by two different officers that is Form No. 36 has been signed by the Deputy Commissioner and the grounds of appeal has been signed by the Commissioner of Income-tax. Therefore, same is required to be dismissed.

While no specific arguments were raised in support of the cross-objection taken by the assessee, in view of the decision in the case of CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 (SC), the assessee's plea is not accepted. In the aforesaid case it was clearly held that the Tribunal while deciding a case should not be unduly influenced by trivial procedural technicalities. The memo of appeal should be liberally seen and entertained. In case the necessary grounds have been taken in the appeal memo, there is no specific formula which is necessary for seeking relief in the hands of the Tribunal. In view of above, the assessee's cross-objection is rejected.

9.In the result, the departmental appeal is allowed whereas the cross-objection filed by the assessee is dismissed.