Income Tax Appellate Tribunal - Cochin
Sea Pearl Industries vs Income-Tax Officer on 3 November, 1987
Equivalent citations: [1988]26ITD380(COCH)
ORDER
K.S. Viswanathan, Accountant Member
1. The assessee, a registered firm, is mainly contesting two of the findings of the Income-tax Officer in respect of the assessment year 1983-84.
2. The assessee-firm is having a business in export of marine products. The first issue is the disallowance of the provision made towards purchase tax of the marine products. The total provision was Rs. 18,63,564. The assessee had been claiming in the sales tax returns that they are not liable to pay purchase tax in respect of the marine products since the purchases are covered Under Section 5(1) and 5(3) of the Central Sales Tax Act. For this purpose the assessee had also relied on the decision of the Kerala High Court in the case of Neroth Oil Mills Co. Ltd. (sic) The Sales Tax Department had not raised any demand against the assessee for this year in respect of the purchases. However, the assessee is of opinion that the Sales Tax Department might eventually raise this demand since they had gone on appeal to the Supreme Court against the decision of the Kerala High Court. The assessee also apprehends that there is a change in the statutory provisions in the Sales Tax Act by which the department might deny the assessee exemption. Whatever it is, no demand has been raised during this year. This provision has been made only in anticipation of a contingency when the department might raise the demand.
3. The Income-tax Officer and the CIT (Appeals) had held that there is no liability to pay purchase tax. For this purpose, they have relied not only on the Kerala High Court decision but also on a decision of the Supreme Court in the case of Sterling Foods v. State of Karnataka [1986] 63 STC 239. In our opinion, the order of the CIT(A) on this point must be upheld. We have gone into the details of the assessee's contention while disposing of the appeal of another assessee Geo Sea Foods [IT Appeal No. 9 (Coch.) of 1987, dated 9-9-1987]. For the reasons stated in that order, we are of opinion that the assessee is not entitled to this deduction.
4. The next issue is whether the assessee is entitled to the deduction Under Section 80HHC. Now, this section as it stood during the relevant accounting year reads as follows :
80HHC. (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 ;
(ii) mineral oil ;
(iii) minerals and ores ; and
(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.
The assessee's contention is that the assessee exports out of India marine products to which the section applies and, therefore, they are entitled to a deduction of 1 per cent and a reduction of 5 per cent on the increase in turnover over the prior accounting year. The assessee's submission is that the conditions in Sub-section (2) are also satisfied and the sale proceeds of the goods exported out of India are received by the assessee in convertible foreign exchange.
5. The Income-tax Officer did not allow the claim fully. He found that a part of the exports had been undertaken through recognised export houses and, therefore, the assessee would not be entitled to the deduction in respect of that turnover through export houses. He found that the turnover in export done by the assessee by itself is only Rs. 29,02,720. The total turnover on which the assessee claimed the deduction was Rs. 4,10,84,286. The balance, i.e., Rs. 3,81,81,565 was exported through export houses. The question to be decided in this case is whether the assessee is entitled to deduction Under Section 80HHC in respect of the exports through the export houses.
6. The assessee had been entering into agreements with certain export houses in respect of some of their exports. As an illustration we may refer to the agreement they had entered into with M/s. Mathur Imports and Exports Pvt. Ltd., a recognised export house. It is an admitted position that this may be taken as an illustration of all other agreements with export houses. Clause 2 of the preamble of the agreement states that the export houses had approached the assessee to export frozen marine products and the assessee had agreed to undertake such exports. Clause 3 of the preamble states that the assessee would export against export orders received by the export houses provided that the assessee approved all the prices at which these orders have been booked. The assessee also agrees to export the product against export orders in the name of the export house. In respect of the export orders secured by the assessees themselves, the assessees will ensure that the overseas buyers open sight letters of credit in the name of the export houses or that the overseas buyers open transferable letters of credits. Thus, Clause 3 of the preamble envisages two types of export orders, one in which the export house would procure the order and pass it on to the assessee and the second the assessees themselves would obtain the export orders. Whoever might have obtained the orders, the export must be in the name of the export house. Further, the letter of credit must also be opened in the name of the export house.
7. Clause 4 of the preamble states that the assessees will complete all formalities with regard to the export and to ship the goods under bills of lading which will show that the goods were exported by the assessee on account of the export house. By Clause 5 the assessee had agreed, to submit to the export house after each shipment the relevant letters of credit and all relevant documents pertaining to the shipment including valid bills of lading duly endorsed, duplicate and triplicate copies of GR 1 forms, packing lists, etc. These documents are to be made available to the export house within such period as to enable them to negotiate the documents within 15 days of the bills of lading. After each shipment the export houses agree to negotiate these documents pertaining to the said shipment through the bankers specified by the assessees instructing the bankers to credit the entire proceeds on such documents to the account of the assessee.
8. Thus, it would be seen that the assessee should export these goods in the name of the export houses, inform them about the shipment and forward to them all the relevant documents. The letter of credit will be in the name of the export house but the export house will negotiate these documents with the bankers for crediting the sale price to the assessee's bank account. In consideration of these services done by the assessee the export house would pay them a commission of 2.25 per cent on the FOB value of the products exported. The RCP Import Licence benefits would be available as per the policy only for the export houses. It is further provided by Clause 8 that in respect of the exports made by the assessees the export houses will be entitled to claim all the benefits accruing to Eligible Marchant Exporter under the terms of the Import Trade Control Policy. There is also a Clause in respect of the drawback benefits available from Customs and Central Excise authorities. The assessee will be eligible for these benefits and the export house will not claim them. Clause 12 is important and it is reproduced below :
12. The Merchant Exporter shall purchase the said marine products in the course of export on board ship outside the customs Frontiers of India at the C & F price obtained by the Merchant Exporter against export orders. The title of the goods shall pass to the Merchant Exporter on board ship by delivery of the shipping documents for each consignment to Merchant Exporter. The Processors shall be responsible for all the sales tax or other taxes applicable on such sale.
Clause 13 pertaining to the expenses on exports is also important and that is reproduced below :
The Processors agree that all expenses incurred or to be incurred in connection with the said export such as Bank charges, stamp duty charges, negotiating charges will be borne by the Processors. The Processors further agree that all freight and insurance charges in respect of the shipment made by the Processors will also be borne by the Processors. The Processors shall get the goods insured as required under the Letter of Credit.
Clause 14 regarding the quality warrantees is given is as below :
The Processors hold themselves fully responsible for quality shortage and delivery terms to the overseas buyer. The Processors will be responsible for making good of losses/damages to the overseas buyers on account of default on the part of the Processors with regard to quality and timely shipment. The Processors hold themselves responsible on account of default on the part of the overseas buyers and shall reimburse the amount of claims, damages to the Merchant Exporter immediately.
The assessee had been exporting goods on these conditions. We had perused some of the documents in connection with the typical export. The export application as per Annexure II(B) is in the name of the assessee. It gives the details of the party abroad, the amount and the rate at which the goods are to be exported. The claim for drawback Under Section 75 of the Customs Act is by the assessee. The Export Inspection Agency has certified the export worthiness and they had given the name a,nd address of the exporter as the assessee's name. The various expenses connected with shipping are in the assessee's name. The bill of lading reads like this :
Shipper (Principal or Seller licensee and full address) M/s Sea Pearl Industries, Chandiroor. A/c.
M/s Mathur Imports & Exports (P.) Ltd., New Delhi.
The invoice prepared by the assessee also shows that the export is made on account of the export house. The bill of charges of shipping, however, is in the name of the assessee. The bank accounts of the assessee show that they have realised the sale proceeds in convertible foreign exchange. Where there is any interest payable on account of delayed realisation, the assessee is debited with that amount. The Marine Products Export Development authority had recognised the assessee as the exporter in respect of those exports also done in the name of the export houses. Form GR of the Reserve Bank of India is also in the name of the assessee only.
9. As against these evidences the department has relied on certain other documents to show that the assessee has not exported these goods for the purpose of the section. It is pointed out that the export houses themselves have claimed this deduction in their assessments and this claim has been allowed. In the case of M/s Jagatjit Industries Ltd. that assessee had made the claim in respect of the very same exports on which the assessee is now basing the claim. The documents given in support of the claim are
(i) Copy of the outright purchase order placed by the non-resident in which the assessee before us is merely shown as the shipper or the manufacturer ;
(ii) A letter from the United Commercial Bank, Foreign Exchange Department, which states that the export house was the beneficiary of a letter of credit;
(iii) The bank certificate of exports given by the banks in Form No. 1 to the Chief Controller of Imports and Exports shows the export house as the party which had exported. It also certifies that the documentary export bill drawn by the export house was negotiated by the bank ; and
(iv) A certificate given by the United Commercial Bank that the export bills negotiated or sent for collection on account of the export house in respect of the second half of 1982 was to the tune of Rs. 35.47 lakhs.
10. The arguments of the assessee in support of their contention that they are the real exporters can be summarised as follows :
(i) Section 80HHC does not define the term 'exporter' or 'export turnover'. So the definition given in other allied Acts can be utilised to understand its meaning. The term 'exporter' has been defined in Section 2(18) of the Customs Act. It means in substance 'taking out of India to place outside India'.
(ii) For the purchase of raw materials for exports banks advance at low interest known as packing credit. The assessee was the recipient of this interest.
(iii) The goods are purchased by the assessee, graded and packed by them. They get the orders directly from the non-residents. The export house comes to know about the actual exports long after the exports are made. All communications are between the importer and the assessee only.
(iv) The assessee undertakes the storage, export clearance, pre-shipment inspection, inspection by export inspection agency, etc. These authorities treat the assessee as the exporter.
(v) The assessee has applied for the export, has made claims for drawback before the Customs and Central Excise department and dealt with the clearing agent and the Customs.
(vi) The Marine Products Development authority has considered the assessee as the exporter.
(vii) Bankers have shown that the credits for export proceeds in the assessee's name are included in their accounts and this includes exports through export houses.
(viii) Full freight is paid by the assessee till the goods reached its destination and the insurance cover is also taken by the assessee.
(ix) There is no definition of export house in the Income-tax Act. One has necessarily to refer to paragraph 165 of Chapter 17 in Volume I of the Import and Export Policy Book of 1983 to understand what is an export house. A registered exporter who had shown a minimum amount of turnover can be an export house. For this purpose, exports through third parties are also considered as exporters. The allowance of the export house considering third parties' exports as their exports for this purpose is only to facilitate the export house to claim the benefits under the Import Policy and it is for declaring or holding them to be the real exporter. In any case, they cannot be exporter for the purpose of Section 80HHC. There is a decided authority on this point. The Delhi High Court in the case of Ferro Alloys Corporation Ltd. v. R.C. Mishra, Director, Tax Credit [1978] 114 ITR 753, had considered a similar situation and had accepted the plea that the actual exporter should be considered as the exporter for the purpose of Section 280ZC of the IT Act.
11. The department's contention can be summarised as follows :-
(i) The term 'export' implies an importer. The person from whom the importer purchases the goods is the exporter. In this case the goods were purchased from the export house because of the sale of the property at high seas.
(ii) As per the agreement the assessee is only to carry out the directions of the export house. If they had anything in the process of export they are merely agentp of the export house,
(iii) As per Clause 3 the export orders are to be procured by the export house.
(iv) The crucial test is who gets the convertible foreign exchange. As per agreement and as per actual fact the convertible foreign exchange is receivable by the export house. It is only at their instruction to their banks that the amount is transferred to the assessee. Therefore, what the assessee gets is the rupee equivalent and not convertible foreign exchange.
(v) The assessee is receiving a commission for the exports undertaken by them. This commission is paid for services rendered and it clearly shows that the assessee is only carrying out the instructions of the exporter.
(vi) The decision of the Delhi High Court is not applicable to the facts of the case. That was a case of canalised exports through a Government agency. The High Court held that the incentives given under this scheme was not for Government agencies. That was why it was given to the assessee there. Further the High Court found there was no concluded contract in that case. Here, there is such a concluded contract.
(vii) The Board's circular issued in 1985 clearly says that the benefits are only for the exporters and only if the export house passes on the benefit to the manufacturer they can claim the same. Although the Board circular is after the amendment in 1985, it will be applicable for 1983-84 also.
12. What we have to decide in this case is whether the assessee has exported out of India any goods or merchandise so that he would have the benefit of the deduction Under Section 80HHC. As Shri Narayana,n submitted, the expression 'exports out of India' is not denned in the Act. We can, therefore, take guidance from other enactments which deal with exports. In the Customs Act there is a definition in Section 2(18). It says that 'export' with its grammatical variations and cognate expression means taking out of India to a place outside India. The movement of the goods outside India has to be an another place outside India. It is not enough if the goods taken outside India again returns to another place in India. The Calcutta High Court had an occasion to consider such a sale in Atiabari Tea Co. Ltd. v. Union of India AIR 1959 Cal. 648. They had stated that the intention with which the goods were sent outside India is relevant. They have stated that in order to amount to export there must be an animus or intention to export. We may also derive some help from the decisions given in the Central Sales Tax Act while dealing with Sections 5(1) and 5(3) of that Act. It has been laid down in Coffee Board v. Joint CTO AIR 1971 SC 870, that the only sale which can be said to cause the export is the sale which results in the movement of the goods from the exporter to the, importer. Thus, the necessary ingredients for the export sale is purchase of the goods and processing it for export and selling it to an importer and the goods moving out of India to the importer. If these conditions are satisfied, the assessee could be said to be an exporter.
13. The movement of goods for export from India to the destination outside India starts with the purchase order placed by the importer. Now, we have seen that the purchase order could be procured both by the assessee as well as the export house. Clause 3 of the agreement which we have already referred to reads as follows :-
The Processors agree to undertake exports of the said Frozen Marine Products against export orders received by the Merchant exporter provided the Processors approve of the prices at which these orders have been booked. The Processors also agree to export the said Frozen Marine Products against export orders in the name of the Merchant Exporter. In respect of the export orders secured by the Processors, the Processors will ensure that the overseas buyers open sight letters of credits in the name of the Merchant Exporter or that the overseas buyers open transferable letters of credits.
Thus it envisages orders being secured either by the assessee which is referred to as the Processor in the agreement or by the Export House which is referred to as the Merchant exporter. If, in case where the assessee secures the orders, the assessee will have to ensure that the overseas buyers open letters of credit in the name of the merchant exporter or that the overseas buyers open transferable letters of credit. In case where the assessee secured the export order, the first step leading to the final export of the goods is taken by the assessee alone. With regard to the cases where the export house secures the order we will consider it at a later stage.
14. On securing the export order, a letter of credit has to be opened. Now, as far as this letter of credit is concerned, it has to be in the name of the export house. If the assessee secures the order, he has to, under Clause 3 of the agreement, see that the letters of credit are in the name of the export house. Thus, at this stage whoever might have secured the orders the letter of credit would be in the name of the export house.
15. It is an undisputed position that the assessee purchases the goods which are to be exported, processes them to the requirement of the importer and goes through all the Customs formalities to effect the export. At this stage, we may refer to documents given by Shri Narayanan which show that right from the export application up to the final clearance by the Customs authorities and putting the goods in the ship everything is done by the assessee and the papers are in the name of the assessee. The export house does not appear at any of these stages. As far as the Port Trust authorities are concerned and as far as the Customs authorities are concerned, the exporter is only the assessee. So this part of the export process has been actually done by the assessee and not the export house.
16. At this stage, we would consider the impact of some of the documents being styled as'on account of the export house'. We have already noticed that the letter of credit is in the name of export house. The bill of lading shows the assessee's name and it makes it clear that it is on account of the export house. Now, the department's case, therefore, is that in such cases, the assessee is only carrying out the instructions of the export house and is, therefore, not an independent authority. In other words, the department's case is that the assessee is merely an agent. We are not able to accept this submission that the assessee in undertaking these steps for exporting the goods acts as the agent of the export house. Firstly the agreement between the assessee and the export house does not visualise an agency of the nature contemplated by the department. That is made clear by Clause 4 of the agreement. This Clause says that the assessee would complete all formalities with regard to the exports and to ship the products under bill of lading. This bill of lading will show the goods exported by the processors are on account of the export house. It accepts that the goods are exported by the processors but the bill of lading should show that it is on account of the export house. It is difficult from this Clause to spell out an agency. Now, Under Section 182 of the Contract Act, an agent is a person employed to do any act for another or to represent another in dealings with third persons. If an agency had been created then it should follow that the purchases of the goods, processing and the shipment must be done by the assessee for and on behalf of the export house. Therefore, all risks and expenses connected with the purcha.se of goods up to shipping should be that of the export house and not of the assessee. It is totally impossible to arrive at such a finding on the basis of this agreement. It is the assessee who has purchased the goods and processed for shipping. If there is any risk involved, it is the assessee who rims the risk. He loses if anything goes wrong. This will be clear if we refer to Clause 12 which we had already extracted earlier in para 8 of this order. If the export house was the principal and the assessee their agent, then, there is no question of the export house purchasing these goods on board the ship. Therefore, we are unable to accept this submission that the assessee was an agent of the export house for this purpose. If he was not the agent it necessarily follows that he was doing it independently on his own.
17. If the assessee was not the agent, then, what exactly is the relation between them as spelt out by the contract ? In our opinion, all that it means is that the export house has intention of purchasing the goods after its shipment and after it has crossed the Customs barrier. In order to effect such a purchase they have necessarily to enter into an agreement with the assessee before its shipment itself. In fact, the export house is not even interested in the purchase of the goods. Because when the goods are already on board and its buyer is specified and the price is specified, the export house cannot do anything independently after purchase of such goods. These goods necessarily have to reach its destination fixed prior to the purchase on board. The real interest of the export house is only to get the benefit of the RCP entitlements on the export turnover. In order to ensure that they get this RCP entitlement they have necessarily to show that the exports are done on their account. It is only for this purpose that the contract is entered into.
18. We next consider the fact of the opening of the letter of credit in the name of the export house. Opening of the letter of credit by itself does not mean that any funds had been transferred in the name of the export house. It is only a guarantee or certificate by the bank that funds have been set apart for meeting the import bill by the importer and the banks have been advised accordingly. Just as the title to the goods exported can be transferred freely on board, the benefit of letter of credit can also be transferred. As a matter of fact, the assessee gets benefit of the letter of credit. It is effected in this following manner. After the goods are shipped the bill of lading and other shipping documents are sent to the export house. This is as per Clause 5 of that agreement. Then the assessee makes out a bill or invoice in the name of the export house for the goods exported. The assessee does not bill the importer direct. He bills only the export house. But this bill on the export house is in foreign currency. This is according to the purchase order. How the bill itself says that the goods have been supplied to the importer and the bill is drawn on the export house for payment. Thereafter the assessee draws a bill of exchange on the export house and the export house merely endorses the letter of credit and directs the bank to transfer the foreign exchange to the assessee's accounts. Thus, it would be seen that although initially the letter of credit is in the name of the export house, the ultimate beneficiary is already agreed to be the assessee. The invoice for shipment of goods to the importer has to be paid by the export house in foreign currency. That is all that takes place because of the letter of credit being opened in the name of the export house.
19. Incidentally we may dispose of the department's objections regarding the receipt of convertible foreign exchange. As per Sub-section (2) of Section 80HHC, in order to be eligible for the deduction the assessee must receive the sale proceeds in convertible foreign exchange. It was the department's contention that the convertible exchange was received by the export house and not the assessee. It was the department's case that the assessee was only getting the Rupee equivalent of the foreign exchange. That is not so. The assessee was getting the foreign exchange credited to their accounts.
20. Now, we deal with the transfer of the goods on board of the ship. It is true that the assessee sells goods on board of the ship to the export house. But, then, as we have already pointed out, although the title to the goods passes to the export house that is hedged in by so many preconditions that there is really nothing that the export house can get except the sale proceeds ultimately from the importer. He cannot change the destination of the goods, he cannot appropriate any goods to anyone else, he cannot divert its destination, he cannot increase the price or reduce the price and in fact, he can do nothing. The only thing he can is to get the benefits of receiving the price from the importer. Now, even there as we find in the earlier paragraphs, the real beneficiary of the foreign exchange is only the assessee. Thus, although there is a transfer of goods on board of the ship, the export house has only purchased the bill of lading and other documents. In substance they have not purchased the goods.
21. It was next pointed out that as far as the importer is concerned, the goods imported by him had come from the export house which was the last owner of the property before it reached foreign shores. Therefore, he is the exporter. Now, this can be looked at from the angle of the risks involved till the goods reached the importer. If there is any defect in the goods either on quality or on quantity, if the export houses were to undertake it then, it could be said that the export house had really exported it. But this part of it is also taken care of the agreement that it is the assessee who runs the risk of any defects in quality or quantity. It has been made very clear that the importer will look to the assessee only for rectifying such defects. Therefore, this part also supports the assessee and not the export house. It would appear, therefore, to us that the assessee is the real exporter of these goods and he is the recipient of the convertible foreign exchange. So he is entitled to deduction Under Section 80HHC.
22. In para 9 of this order, certain documents placed by the department had been referred to. It is pointed out by the department therein that in respect of these very exports the export house has been given the deduction Under Section 80HHC. That may be so. What we have to see is who is entitled to the benefit. It may be that both are entitled to the benefits. In any case we cannot refrain from going into the issue merely because the ITO assessing the export house has allowed the deduction for the export house. The documents which had been referred to therein have already been considered by us in arriving at our decisions. A copy of the outright purchase order has been placed before us and we have already considered the effect of the purchase orders. The next document is a letter from the United Commercial Bank which states that the export house was the beneficiary of the letter of credit. That has also been considered. The third item, i.e., bank certificate regarding the exports is only consistent with the facts which we have found. As per the agreement, since the letter of credit is in the name of the export house only they have to negotiate them with the bank. However, as we have pointed out, the entire benefit had been passed on to the assessee in convertible currency and that too as payment for an export done by the assessee to the importer.
23. In this connection, we may also mention about certain benefits the export houses have under the Import and Export Policy Book. Under paragraph 165 of Chapter 17 in Import and Export Policy Book for 1982-83 the export houses, who are registered exporters can take into account third party exports also for the purpose of the quantum of export to be done by them. Thus the Export and Import Policy Book itself envisages a real export by persons like the assessee and it being considered for certain purposes as the export of the export house. The agreements the export bouses are entered into with the assessee are this type of third party exports.
24. The CIT(A) had referred to a circular issued by the CBDT As Shri Narayanan pointed out, this circular refers to the provisions of Section 80HHC after its amendment in 1985. There is one substantial difference between the Act as it stood for the year 1983-84 and the amendment in 1985. The beneficiaries of the Act as it now stands would be an assessee being an Indian company or a person who is resident in India who exports out of India any goods or merchandise. The beneficiary after the amendment is very much different. After the amendment Sub-section (1) reads as follows :
80 HHC (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 an amount, not exceeding fifty per cent of the profits derived by the assessee from the export of such goods or merchandise :
It would be seen from the above that the assessee who claims this deduction must be engaged in the business of export out of India of any goods. Whereas before the amendment, any assessee who exports goods would be eligible for the deduction, after the amendment only those assessees who are engaged in the business of export out of India would be eligible for the deduction. It may be noted that the requirement of 'engaged in business of export' is unqualified. The section does not even say "mainly engaged". There must be 100 per cent engagement in export business. That is, only export houses would become eligible for the deduction after the amendment. The circular is in respect of such benefits which would be passed on to the actual manufacturers. That circular has no application at all for the year under consideration.
25. Finally, we refer to the decision of the Delhi High Court referred to in the course of the arguments. This was a case of tax credit certificate Under Section 280ZC. The assessees therein M/s. Ferro Alloys Corporation Ltd. were manufacturers of ferromanganese which was exported by them. They had entered into contracts with a number of foreign buyers for the sale of these goods. These contracts, however, provided for their substitution by fresh contracts between a Government Trading Corporation and the foreign buyers making it obligatory for the foreign buyer to open a letter of credit in favour of the Government Trading Corporation even though the assessee therein continued to be responsible for the quality and quantity of the material. These contracts were approved by the Government Trading Corporation in terms of a scheme of barter and although the substituted contracts were anticipated at both ends by the scheme, they were not formally entered into or executed. Actual shipment of goods were done by the assessee and the name of the Corporation was introduced and the bill of lading in some cases mentioned the exporter to be the Government Trading Corporation on account of the petitioners. In some other bills of lading it was the other way round. As in the case before us the letter of credit was issued in favour of the Trading Corporation but they were assigned to the assessee. The question was who was the exporter for the purpose of Section 280ZC. The High Court held that the assessee was the exporter. At page 767 it was observed as follows :
It, however, appears to us 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 petitioners would still be the real exporters for the purpose of the aforesaid provision and be entitled to the tax credit certificate.
The ratio of the case squarely applies to the facts of this case. There is a large number of similarities on facts and if the Delhi High Court has held that Ferro Alloys Corporation Ltd.'s case (supra) is the exporter there, the same principle would apply in the assessee's case here.
26. We, therefore, hold that the assessee is entitled to the deduction in respect of those exports in the name of the export house also.
27. The appeal is partly allowed.