Income Tax Appellate Tribunal - Pune
Income-Tax Officer vs D.B. Electronics on 18 March, 1993
Equivalent citations: [1993]45ITD464(PUNE)
ORDER
T.A. Bukte, Judicial Member
1. This is revenue's appeal against the order of the CIT (Appeals), Pune dated 26-4-1988 on four grounds. All the grounds of appeal relate to only one issue of treating the sale to UNICEF Office in New Delhi and directing the Assessing Officer to grant 80HHC deduction. The revenue's contention is that neither the sale is out of India to allow deduction under Section 80HHC nor the assessee has fulfilled the required conditions for grant of such allowance. Therefore, the revenue has contended to vacate the order of the CIT (Appeals) and to restore that of the Assessing Officer.
2. We have heard the learned departmental representatives Shri Gautarn Kar and Shri A.K. Khaladkar. We have also heard the learned counsel for the assessee Shri K.A. Sathe. Their arguments are taken into consideration. We have also gone through the relevant papers filed on record by the learned counsel for the assessee, inviting our attention that the contents mentioned therein support the assessee's claim for the allowance of 80HHC deduction. We have also looked into the provisions of (THE) United Nations (Privileges and Immunities) Act, 1947, a xerox copy of which is on record.
3. The only point involved in this appeal for our consideration is whether the office of the UNICEF situated at New Delhi is to be considered a foreign territory (foreign country) to construe the meaning that the sales made by the assessee to that office at New Delhi is eligible for granting 80HHC deduction. To give a finding on this point, it is necessary to look into the provisions of UNICEF Act, 1947 coupled with the arguments advanced on behalf of the assessee by Shri Sathe and by interpreting the documents filed on record.
4. The preamble of UNICEF Act is to give effect to the Convention on the Privileges and Immunities of the United Nations. It is not in dispute that the office of the UNICEF is situated at New Delhi and is a part of the United Nations. Sections 2 and 3 of the said Act are for conferment on United Nations and its representatives and Officers of certain privileges and immunities. Article II relates to the property, funds and assets of the United Nations. Section 3 of the said Article II is in respect of premises of the United Nations. The said section reads as follows:
The premises of the United Nations shall be inviolable. The property and assets of the United Nations, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation and any other form of interference, whether by executive, administrative, judicial or legislative action.
Section 4 reads as under:
The archives of the United Nations and in general all documents belonging to it or held by it shall be inviolable wherever located.
5. The fair meaning of the above referred sections would be that the effect is to be given to the convention on the privileges and immunities of the United Nations and its representatives and officers. The office of the United Nations or its sister concern wherever located and by whomsoever held shall be immune from search, requisition, confiscation, expropriation and any other form of interference whether by executive, administrative, judicial or legislative action. That means none of the organs of the Government is entitled to interfere in the office of the United Nations or its sister concern by any modes as mentioned in Sections 3 and 4 of Article II relating to property, funds and assets. There cannot be two opinions that any organs of Government are not entitled to take search, requisition, confiscation, expropriation and any other form of interference in the office of United Nations, nor any documents belonging to it will be inviolable. These provisions are to protect the assets, office premises and the Officers working in that office from any action as contemplated in Section 3 of the said Act.
6. The protection of assets, office premises and Officers working in the said office of UNICEF, a sister concern of United Nations Organisation whether can be treated as a foreign territory is a question. Giving the protection under the convention on the privileges and immunities of the United Nations cannot amount to a foreign territory particularly when the goods sold are to be treated as export sales. The goods sold by the assessee firm in India to the office of the UNICEF an organ of United Nations cannot be treated as an export of goods. Giving protection as narrated above is a different thing than the actual export of the goods to the foreign country out of Indian territory. Therefore, a cover of giving a protection to the assets, office premises and Officials of the UNICEF cannot be taken as an export of goods to the foreign country, because under no circumstances the office premises of the UNICEF situated at New Delhi can be deemed to be the foreign territory for the purpose of export of goods by the assessee firm to the said office.
7. After examining the provisions of Section 80HHC, we find certain necessary conditions to claim the deduction in respect of the properties retained for export business. In accordance with the said section, the assessee must be an Indian company or a person must be a resident in India. It should be engaged in the business of export out of India any goods or merchandise. While doing the business of export out of India of any goods or merchandise is made then the provisions of this section applies. In computing the total income of the assessee, the deduction of profits derived by the assessee from the export of such goods or merchandise is allowable. There is a proviso to this section that if the assessee is a holder of an Export House Certificate or a Trading House Certificate issues a certificate in respect of the amount of export turnover in that event the amount of deduction in the case of the assessee shall be reduced.
8. In this connection, Shri Sathe pointed out and relied upon pages 19 to 33 of the paper book. UNICEF placed an order for supply of item No. 1 as per page 19. The currency mentioned therein is US $ for supply of electrical goods. Page 20 also shows the price is F.O.R. destination at site, UNICEF House, 73 Lodhi Estate, New Delhi, inclusive of installation and commissioning in US $ currency. Page 21 is an invoice prepared by the assessee in US $. Page 22 is a certificate stating therein that the goods were supplied to United Nations Children's Fund, 73 Lodhi Estate, New Delhi-3 by the assessee firm and a sum of Rs. 6,31,378 being 90 per cent of the bill was paid in Indian currency. The payment was made by UNICEF in free foreign exchange, i.e., US $ 49,977.00 rate applied US $ 7.91 = Rs. 100. Page 23 is also a certificate from the General Manager of Rupee Co-operative Bank Ltd., Narayan Peth, Pune-30, for paying a sum of Rs. 69,586.47 by UNICEF in free foreign exchange, i.e., US $ 5553 @ 12.531. Page 24 is a copy of letter from Controller of Imports and Exports to show that the cash assistance was given to the assessee firm and the excise duty was refunded. Page 25 is an extract of cheque No. E 180645 for making the payment of balance of Rs. 96,530. Page 26 is also again for cash assistance and refund of excise duty. All other pages are also regarding certificate and letters from the Government of India.
9. Shri Sathe's second limb of argument is that because the cash assistance was given to the assessee firm, the excise duty was refunded, the order was placed in US $ Currency, the bill was also prepared in US $ Currency the goods supplied to the office of UNICEF at New Delhi are to be interpreted as goods exported by the assessee to allow deduction under Section 80HHC. The fact remains that the assessee received money in Indian Currency equivalent to the US $ on placing the order. The assessee actually did not bring foreign US $ into India. Granting of cash assistance and refund of excise duty does not help to treat the sale of electrical goods made by the assessee to the office of UNICEF situated at New Delhi as the sale made out of India to treat the same as export. Even placing the order in US $ with the assessee and assessee's preparing the bills also in US $ for supplying the electrical goods to the office of the UNICEF situated at New Delhi does not give the meaning of export out of India.
10. There is no doubt that the assessee is an Indian firm and doing the business in India. The certificate also has been issued but at the same time it cannot be construed that the assessee exported the goods out of India against the payment of US $ out of India to claim the deduction under Section 80HHC of the Act.
11. The learned departmental representatives are right in saying that the conditions laid down under Section 80HHC to claim the deduction for doing the business by sending the goods out of India and bringing US $ into India are not fulfilled. Unless these conditions are fulfilled, no deduction of claim as made out is allowable. In other words, it is not in dispute that UNICEF is an International Body. What is in dispute is the office premises occupied by it at New Delhi to treat the same as foreign territory. The office premises are situated at New Delhi and it cannot be treated as a foreign territory. The export incentives available under Section 35B stand on a different footing than the export incentive under Section 80HHC. The political boundaries of India do not mean the territorial boundaries.
12. In this view of the matter, we are unable to hold that the turnover of sales effected with UNICEF at New Delhi does amount export turnover. Therefore, the view taken by the CIT (Appeals) does not appear proper and in consonance with the facts and legal aspects.
13. Shri Sathe has brought to our notice that this point has arisen for the first time in this year only. He has cited the corresponding examples of 80C below Chapter VI-A. While arguing that the liberal construction should be given to the activity of sales of goods effected by the assessee firm, he has relied on three judgments of the Supreme Court in the case of Broach Distt. Co-op. Cotton Sales, Ginning & Pressing Society Ltd. v. CIT [1989] 177 ITR 418 and pointed out certain observations from page 422, in the case of CIT v. Strawboard Mfg. Co. Ltd. [1989] 177 ITR 431 and CIT v. South Arcot District Co-op. Marketing Society Ltd. [1989] 176 ITR 117 (SC) and pointed out relevant observations from page 119. He has tried to convince that how the deduction under Section 80HHC corresponds to Section 14(3) of Indian Income-tax Act, 1922.
14. The learned departmental representative Shri A.K. Khaladkar has argued that the export is an export out of India. According to him, Section 80HHC is confined only to goods travelling outside India or taking out of India. He has also pointed out that as per the provisions of Section 80HHC(3A)(b) goods must leave the shore of the country. While pointing out the meaning of export, he has urged that the export means the goods leaving the shore. He has urged that the UNICEF located at New Delhi is not out of India and it is within India. Shri Sathe while replying has submitted that the Government is interested in earning the foreign exchange by sending the goods outside India and it is not necessary to leave the shore of India. He has reiterated that the reasonable interpretation must be made and the relief should not be denied to the assessee.
15. We have gone through the orders of the Assessing Officer and the CIT (Appeals). We have also examined the facts relating to the sale of goods made by the assessee to the office of UNICEF situated at New Delhi. We have also examined the relevant correspondence in this respect. It would be incorrect to say that the goods sold and supplied by the assessee have left the shore of India. The goods sold and supplied by the assessee are in the office of UNICEF situated at New Delhi and within the territory of India. Even placing the order and issuing the bills in US $ does not mean that there is export of goods or merchandise. The sale to UNICEF at New Delhi cannot be treated as an export turnover. The order was placed in US $ and bills were issued in US $ but the assessee firm actually did not receive the US $ and what was received by it was the equivalent Indian currency. This does not amount that the assessee brought US $ into India. Going one step further by considering the legal provisions of (THE) United Nations (Privileges and Immunities) Act, 1947, it is difficult to come to a conclusion that the sales effected by the assessee are export business. Giving protection to the assets, office premises and the officers does not mean the said provisions are applicable for sales effected within India nor the said provisions can help to treat the sales as export turnover. In this view of the matter, we are of the opinion that the view held by the CIT (Appeals) is not correct.
16. In the result, the revenue succeeds and the appeal is allowed.