Ita/1053/2009 Of The Commissioner Of Income Tax v. Parry Agro Industries

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY, THE 14TH DAY OF MARCH 2018 / 23RD PHALGUNA, 1939 ITA.No. 1053 of 2009 AGAINST THE ORDER/JUDGMENT 31-01-2008 IN ITA 19/2005 of I.T.A.TRIBUNAL,COCHIN BENCH APPELANT/RESPONDENT THE COMMISSIONER OF INCOME TAX, COCHIN,BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: PARRY AGRO INDUSTRIES LTD.,BRISTOW ROAD, WILLINGTON ISLAND, KOCHI-3.BY ADV. SRI.P.BENNY THOMASBY ADV. SRI.K.JOHN MATHAIBY ADV. SRI.E.K.NANDAKUMAR THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 14-03-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: SKV K. VINOD CHANDRAN & ASHOK MENON, JJ ----------- - - - - - - - - - - - -- - - - - - - - - - - - - - - - I.T APPEAL No. 1053 of 2009 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 14[th] day of March, 2018 JUDGMENT The only question arising from the order of the Tribunal in the above appeal, as available in the Memorandum, is extracted hereunder: “Whether on the facts and in thecircumstances of the case and in view of the factthat the Commission portion of the export proceedswere not brought to India in convertible foreignexchange, i. the assessee is entitled to claim the benefit of Section 80HHC? ii. An amount equivalent to it was includiblein the export turnover?” 2. We are only concerned with the claim under Section 80HHC, of the Income Tax Act, 1961 (for brevity “the Act”) and thedeletion made from the export turnover, by the Assessing Officer.We see from the assessment order that the assesse, in its exportturnover, had included a commission on sales, coming toRs.37,54,026/- paid to M/s. Parry Agro Industries Ltd., an agencyoutside India. The commission was deducted in the sale invoiceitself and the balance consideration alone was brought into Indiaas convertible foreign exchange. The Assessing Officer found thatthe said commission cannot be included in the export turnover to I.T.Appeal No.1053 of 2009 2 compute the export profit and hence deleted the same from theexport turn over. 3. The first appellate authority concurred with the finding of the Assessing Officer based on the provisions ofExplanation to Section 80HHC(2)(a). The export turnoveris the sale proceeds brought into India by the assessee inconvertible foreign exchange in accordance with theprovisions of Section 80HHC(2)(a). The Tribunal,however, reversed the concurrent decisions, on thereasoning that there were two options available forpayment of agency commission and the assessee havingtaken the easier mode, cannot be disentitled from makingthe claim. 4. We are unable to countenance such reasoning ofthe Tribunal. The Tribunal has found that there is a clearnexus between the commission payment and the exportsmade by the assessee as also a live connection between I.T.Appeal No.1053 of 2009 3 the commission and export sale. There is also no difficultyin the assessee resorting to either of the two options, ie:paying commission directly in foreign exchange to theforeign agency or in bringing it back into the country andthen paying it in foreign exchange. However, if theassessee takes the easier mode as found by the Tribunal,the assessee would be disentitled in including the saidcomponent in the export turnover. Section 80HHC, asper Sub Section (2)(a) applies only if the sale proceeds ofgoods or merchandise exported out of India are receivedin or brought into India, by the assessee in convertibleforeign exchange, within a period of six months from theend of a previous year or within such further period as thecompetent authority may allow in this behalf. Thecondition having been not complied with, the commissiondeducted by the foreign agent from the sale consideration I.T.Appeal No.1053 of 2009 4 cannot enjoy the benefit of Section 80HHC. We have nohesitation in setting aside the order of the Tribunal and weanswer the questions of law in favour of the Revenue andagainst the assessee. The appeal stands allowed. No Costs. Sd/- K. VINOD CHANDRAN, JUDGE Sd/- ASHOK MENON, JUDGE SKV