High Court Of Calcutta
Mountview Exports (P) Ltd. & Anr. vs. CIT & Ors.
Section 80HHC(2)
Asst. Year 1994-95
M.H.S. Ansari, J.
Writ Petn. No. 850 of 2002
8th August, 2002
Counsel Appeared :
Sumit Talukdar, B.R. Bhattacharya, S. Dasgupta & S.R. Kakrania, for the Petitioners : D.K. Shome with Md. Nizamuddin, for the Respondents
JUDGMENT
M.H.S. ANSARI, J. :
The petitioner-assessee has, in the instant writ application, inter alia, questioned the order dt. 12th Sept., 2001, passed by the Commissioner of Income-tax, Central-II (for short “the CIT”), being annexure p. 15 whereby and whereunder the application filed by the petitioner under s. 80HHC(2) (a) of the IT Act, 1961, has been rejected and prayed for consequential orders in that behalf. The petitioners have also prayed for certain other reliefs. The order-sheet dt. 8th July, 2002, shows that Mr. D.K. Shome, learned counsel appearing along with Md. Nizamuddin, advocate, for the respondent-tax authorities, submitted that the writ application can be heard without affidavit-in-opposition. The impugned order, it was submitted by Mr. Shome, can be sustained on the facts and for the reasons contained therein. The main question for consideration in the instant writ application is whether, in the facts and circumstances of the case, petitioner No. 1 is entitled to extension of time in terms of s. 80HHC(2) (a) of the IT Act, 1961, in respect of its claim for deduction in respect of the asst. yr. 1994-95. It is dependent upon the above question that the other reliefs prayed for require to be considered. Petitioner No. 1 claims that it is entitled to deduction of a sum of Rs. 2,86,565 under s. 80HHC of the IT Act, 1961, in respect of the said asst. yr. 1994-95 in respect of the exports made by it during the previous year 1993-94 relevant to the asst. yr. 1994-95.
4. The background facts are stated in the impugned order being annexure P-15. Briefly, stated, they are : The petitioner-assessee is engaged, inter alia, in the business of export of tea. The petitioner claims entitlement to deduction of profits derived from exports of tea in the computation of its total income under s. 80HHC(1) of the Act. Sec. 80HHC(2)(a) before its amendment w.e.f 1st June, 1999, provides for such entitlement to deduction of the export profits, if the sale proceeds of specified goods is received, or brought to India in convertible foreign exchange within a period of six months from the previous year or within such further period as the Chief CIT or CIT 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. The IT return for the asst. yr. 1994-95 was filed by the petitioner- assessee on 20th Jan., 1998, in response to a notice issued under s. 148 of the Act, which was served on the petitioner on 20th Sept., 1996. The said assessment was finalised by an assessment order dt. 24th March, 1998, the AO observed that the export proceeds received during the relevant year were Rs. 83,61,621 whereas the assessee claimed export profit which was worked out on the basis of export turnover of Rs. 97,64,444. According to the AO, the assessee suffered a loss in export business. Accordingly, no deduction was allowed under s. 80HHC of the Act. Aggrieved by the said order, the petitioner-assessee preferred an appeal which was disposed of by an order dt. 15th Nov., 2000, confirming the AO’s disallowance of deduction under s. 80HHC of the Act. Relevant on this aspect of the matter is the fact that for the previous year ended on 31st March, 1994, the normal time-limit of realisation of export proceeds in convertible foreign exchange ended on 30th Sept., 1994. However, the petitioner filed an application before the CIT on 26th Feb., 1998, requesting for extending time for realisation of export proceeds. The hearing of the application was fixed for 30th April, 1998, which was intimated to the petitioner by the CIT’s letter dt. 23rd April, 1998. The impugned order records that none appeared on the date of hearing and that there were no further proceedings for about three years until the petitioner wrote a letter dt. 4th Aug., 2001, requesting for grant of another opportunity of hearing. It is pursuant thereto that the CIT heard the matter and rejected the application filed for extension of time. It is this order of rejection by the CIT that has been assailed in the instant writ application.
5. The grounds of rejection stated in the impugned order, briefly summarised, are as under : (i) The assessee could not produce any document to show that it had applied to the Reserve Bank of India in the prescribed form requesting for permission to extend the period for realisation of export proceeds. (ii) There was no material brought on record before the CIT to reach satisfaction that the assessee had acted with due diligence and taken necessary steps to bring the sale proceeds on or before 30th Sept., 1994. Mere existence of a dispute with the foreign buyer it was held would not mean that the circumstances were beyond the control of the assessee. (iii) The record shows that the director of the foreign buyer, with whom the dispute arose, was also a shareholder of the assessee and hence the transaction was not at arm’s length. (iv) The IT return for the relevant year was not filed voluntarily. Even after the service of notice under s. 148 of the Act on 26th Sept., 1996, the petitioner-assessee took about sixteen months to file the return on 20th Jan., 1998. The application for extension of time under s. 80HHC(2)(a) was filed much after two years from the end of the relevant assessment year. Assailing the aforesaid conclusions arrived at by the CIT, Mr. Sumit Talukdar on behalf of his leader Mr. B.R. Bhattacharya, the learned senior advocate, appearing along with Mr. S. Dasgupta and Mr. S.R. Kakrania, the learned advocates for the petitioner, submitted that the impugned order is wholly unsustainable in law and contrary to the tenor of the provisions and cannot therefore be sustained. The CIT has not appreciated the true meaning and purport of s. 80HHC(2)(a) of the Act and erroneously rejected the application of the petitioner. The impugned order, it was contended, is arbitrary, unjust and unreasonable and has been passed without appreciating the material evidence on record and is passed on irrelevant and/or extraneous considerations and is, therefore, a nullity in the eye of law apart from being de hors the provisions of the Act. Mr. Sumit Talukdar further contended that the sole question for consideration was whether the goods were exported during the relevant previous year 1993-94 and not that the foreign buyer was one of the shareholders of petitioner No. 1-company. The impugned order is thus vitiated by taking into consideration irrelevant matters.
It is further contended by Mr. Talukdar that the petitioner was prevented from making an application under s. 80HHC(2)(a) in the absence of and/or want of a firm date from the foreign buyer regarding payment of the outstanding sale proceeds. The petitioner, it is urged, was constrained to file suit and obtained a decree in its favour in C.S. No. 266 of 1995 on 29th Jan., 1998. An order dt. 25th Jan., 1999, was passed in the appeal against that suit by the Calcutta High Court and the petitioner could realise its dues when directions were issued by the Court directing the Registrar of the High Court to invoke the bank guarantee for a sum of Rs. 20 lakhs. Therefore, it is contended that the delay has been duly explained and the same was beyond the control of the petitioner- assessee. It could realise the outstanding amounts only by execution of the decree. Lastly, it was contended that by arbitrary rejection of the petitioner’s application made under s. 80HHC(2)(a) of the Act, the petitioner has been illegally denied his entitlement to claim the statutory deduction of the sum Rs. 2,86,565 for the assessment year in question. Learned counsel for the petitioner has relied upon the judgment of this High Court in Geekay Exim (India) Ltd. vs. CIT (1999) 153 CTR (Cal) 417 : (1998) 234 ITR 560 (Cal) and sought to distinguish the judgments referred to and relied upon by the CIT in his impugned order.
6. On the other hand, Mr. Shome, appearing along with Mr. Nizamuddin, learned counsel for the respondent- Revenue authorities, submitted that the order under challenge suffers from no legal infirmity. It is a reasoned order and is supported by the authorities. The conduct of the petitioner as noticed in the impugned order and for the reasons stated by the CIT in the impugned order, the petitioner is not entitled to grant of any relief, contends Mr. Shome. Reliance has been placed upon the judgments of the Punjab and Haryana High Court as also upon a judgment of the Supreme Court, reference to which shall be made at the appropriate juncture.
7. The rival contentions need to be considered in the light of the statutory provisions of s. 80HHC of the IT Act. The said s. 80HHC has been the subject-matter of consideration by the Punjab and Haryana High Court and also by this High Court. A perusal of the unamended provision of s. 80HHC would show that under sub-s. (1), 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 a deduction of the profits derived from the export of such goods or merchandise in computing his total income. Clause (a) of sub-s. (2) of s. 80HHC lays down that the assessee is entitled to claim deduction of 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 are 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 CIT or CIT 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 CIT or CIT, as the case may be, has to record reasons in writing.
8. In Mayor & Co. vs. CIT (2001) 166 CTR (P&H) 114 : (2001) 248 ITR 162 (P&H), it was held that 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 requirement of recording reasons in writing is clearly indicative of the legislature’s intention that the power vested in the competent authority to grant or refuse extension of time must be exercised reasonably and fairly and must not be exercised arbitrarily. 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” not having been defined in the Act, their Lordships of the Punjab and Haryana High Court in that case observed that the same shall have to be interpreted keeping in view the context in which it appears. Accordingly, it was held that the assessee can seek extension of time beyond six months only by showing that he had acted with due diligence and had taken necessary steps for bringing in the sale proceeds within the stipulated period but could not do so due to reasons on which he did not have any control. After having observed that the expression “such further period” has also not been defined in the Act, their Lordships keeping in view the limitation prescribed under s. 153 of the Act for passing of the order of assessment, i.e, two years from the end of the assessment year held : “. . . there is no difficulty in holding that the extension contemplated by s. 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 CIT or the CIT, as the case may be, is obliged to grant extension of time.
The discretion conferred upon the Chief CIT or the CIT under s. 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 CIT or the CIT that the sale proceeds could not be brought within the stipulated period, due to reasons beyond his control, the extension contemplated by s. 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 subs. (2)(a) of s. 80HHC is consistent with the object sought to be achieved by incorporating s. 80HHC i.e., to encourage export of goods and merchandise out of India for earning foreign exchange.” 9. I am in respectful agreement with the view of their Lordships of the Punjab and Haryana High Court as above in Mayor & Co.’s case (supra) Applying the above dicta to the case on hand it will be seen that the application under s. 80HHC(2) (a) has been filed only on 26th Feb., 1998, when the previous year ended on 31st March, 1994, and the normal time-limit of realisation of export proceeds in convertible foreign exchange ended on 30th Sept., 1994. The assessment for the assessment year in question was completed by 24th March, 1998, whereas the amount was credited in the account of the petitioner-assessee on 26th April, 1999, which has been taken, as suggested by the assessee, to be the date of realisation of outstanding export sale proceeds.
10. In Geekay Exim (India) Ltd.’s case (supra), a learned single Judge of this Court relying upon the judgment of the Allahabad High Court in the case of Azad Tobacco Factory (P) Ltd. vs. CIT (1997) 140 CTR (All ) 476 : (1997) 225 ITR 1002 (All), held that the right to deduction under s. 80HHC is a right given to the assessee which can be easily availed of within a period of six months as contemplated in the section itself. Also the said right remains suspended if the assessee is unable to bring in the sale proceeds within the said period for reasons beyond his control and in such circumstances the competent authority is bound to exercise the power for allowing a further period to the assessee if he is satisfied that the assessee was unable to bring in the sale proceeds into India within the period of six months for reasons beyond his control. P.C. Ghosh, J. was further pleased to hold that it is not necessary to make any application to the CIT before the expiry of the period of six months from the end of the previous year or before the filing of the return. I am in respectful agreement with the aforesaid views of P.C. Ghosh, J. In the absence of any bar contained in the provision in question or any stipulation as to the time within which an application must be made for extension of time the assessee cannot be denied the right to make an application for extension of time even after the specified period of six months had elapsed. However, in the case on hand that is not the ground of rejection. Mr. Shome, learned counsel for the tax authorities, referred to the judgment of the Supreme Court in Raja Jagdambika Pratap Narain Singh vs. CBDT 1975 CTR (SC) 206 : (1975) 100 ITR 698 (SC), in support of his contention and as held by the Supreme Court in that case : “If a party is inexplicably insouciant and unduly belated due to laches, the Court may ordinarily deny redress”. Although the said observations were made by the Supreme Court in the context of the exercise of jurisdiction under Art. 226, Mr. Shome submitted that the same are apposite and relevant in the enquiry on hand and specially keeping in view the conduct of the petitioner-assessee, as noticed in the impugned order. Mr. Sumit Talukdar sought to distinguish the judgment of the Punjab and Haryana High Court in D. B. Exports (India) vs. CIT (1997) 140 CTR (P&H) 502 : (1998) 231 ITR 836 (P&H). The said judgment was relied upon by the CIT in his impugned order and upon which much reliance has also been placed by Mr. Shome, learned counsel for the respondent-tax authorities.
In that case cheques out of Non Residential External (NRE) account of the foreign purchaser had bounced and a criminal case against the said party had been launched. The CIT in that case had granted five extensions spreading over more than two years to the petitioner in that case to bring convertible foreign exchange into the country. Finding that civil as well as proceedings under s. 138 of the Negotiable Instruments Act, 1881, had startedbetween the petitioner and the defaulting party, which were not likely to conclude soon, further extension in time was declined. The Court upheld the said order of the CIT and rejected the contentions of the petitioner in that case for the following reasons : “In case the argument of counsel for the petitioner is accepted then the extension was to be given to the petitioner till the conclusion of proceedings in the civil Court including further appeals to the higher Courts, which would “take many years to conclude. The legislature has given a mandate that deduction has to be given only if convertible foreign exchange is brought into the country within six months of the expiry of the previous year. Discretion to grant extension is to be exercised only if the assessee is unable to bring theconvertible foreign exchange because of no fault of his. A dispute has arisen between the parties which apart from causing delay can be decided either in favour of the petitioner or the party opposite. Assessment proceedings could not be kept pending for an indefinite period till the conclusion of civil litigation. Under the Act assessment proceedings have to be finalised within the time prescribed under the Act, otherwise these become time-barred. The purpose of giving incentive is to bring foreign convertible exchange into the country within a reasonable time. The very purpose of giving incentive by way of deduction in the computation of taxable income would stand defeated if there is an inordinate delay in bringing convertible foreign exchange into the country within a reasonable time.” Mr. Sumit Talukdar sought to rely upon favourable statements and distinguish the unfavourable ones in that judgment by submitting that in the case on hand the amount had been credited to the account of the petitioner as can be seen from the impugned order pursuant to the decree passed by the Calcutta High Court in civil suit proceedings on 29th Jan., 1998. It is not a case where several extensions had been granted by the CIT and despite the same the assessee could not bring in the amounts within the extended period. Mr. Sumit Talukdar further submitted that in D.B. Exports (India)’s case (supra) extensions were allowed to the petitioner for more than two years to bring in the convertible foreign exchange. The distinguishing feature therefore contends Mr. Talukdar is that during the said period civil and criminal proceedings had started between the assessee and the foreign buyer which were not likely to conclude soon and for that reason the Court in that case declined further extension of time. I cannot accede to the above submissions. The institution of proceedings civil and/or criminal would not ipso facto bring the matter within the expression “beyond the control” of the assessee. In other words the time for bringing in the foreign exchange cannot be made to depend upon the conclusion of such proceedings which can be indefinite in time. In the case on hand the petitioner cannot be allowed to take advantage of his own unexplained and inordinate delay or default in making the application under s. 80HHC(2)(a) and thereafter not moving in the matter before the CIT despite notice of hearing and despite the fact that assessment had been completed by 24th March, 1998. It is a case of lack of due diligence and laches. The petitioner moved in the matter of hearing of the application before the CIT after the conclusion of the civil proceedings. The observation in that case, extracted supra, are therefore directly attracted. The discretion conferred upon the CIT under the provision in question is to grant extension in time for and within reasonable time after the specified date. The mandate of the legislature is to give the benefit only if the convertible foreign exchange is brought into the country within the specified period or within a reasonable time thereafter, on the satisfaction of the CIT to be recorded in writing that the assessee could not for reasons beyond its control bring it within the said specified period. The function performed by the CIT by virtue of the powers conferred upon him under s. 80HHC(2)(a) is quasi-judicial in nature. Discretionary powers have thereby been conferred. Like all discretions when exercised by a judicial or quasi-judicial authority the same has to be exercised judicially and based upon objective considerations. Assessment proceedings cannot be kept pending for an indefinite period as they have to be completed within the time prescribed by the Act. The very object of giving the incentive stands defeated if there is an inordinate delay as in the case on hand in bringing in the convertible foreign exchange within a reasonable time, in the case on hand after the completion of the assessment which was made pursuant to the belated return filed sixteen months after notice issued under s. 148.
15. In Geekay Exim (India) Ltd.’s case (supra), it was held that the application can be filed even after the specified period of six months had elapsed. It does not imply or mean that an assessee can file the application for extension in time whenever it should suit the assessee. In D.B. Exports (India) ‘s case (supra) extensions were allowed to the petitioner, in that case for more than two years to bring convertible foreign exchange into the country. During that period civil and criminal proceedings had been started between the petitioner and the defaulting party which were not likely to conclude soon and on that ground the extension has been declined. The Court upheld the order of the CIT under challenge in that case, inter alia, on the ground that it cannot be said that the discretion exercised by the CIT was arbitrary or unjust. In Mayor & Co.’s case (supra), notice has been taken of the said decision and it was distinguished on the ground that no litigation has commenced and the entire amount of sale proceeds in that case had been received almost three months before the passing of the impugned order and more importantly it was observed by the Court that the time-limit prescribed for completing the assessment has also not elapsed. The Court thereupon observed that there was no valid reason to decline extension in time to the petitioner in that case. The CIT in the impugned order has observed that there was no material brought on record before the CIT to reach satisfaction that the assessee had acted with due diligence. The conduct of the petitioner has also been taken note of by the CIT. The petitioner, in spite of service of notice under s. 148 of the Act, took about sixteen months to file the return and the application under s. 80HHC(2)(a) was filed much after two years from the end of the relevant assessment year. Besides, the convertible foreign exchange was brought in much beyond the period (limitation prescribed under s. 153) within which the assessment under s. 143/144 is required to be completed. The petitioner-assessee has thus disentitled himself to the grant of benefit of extension in time. No case, in my view, has been made out by the petitioners for grant of the reliefs, as prayed for.
16. In the result, the writ application is liable to be and is accordingly dismissed.
17. In the facts and circumstances of the case, there shall, however, be no order as to costs.
[Citation : 258 ITR 46]
