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"1. Whether, on the facts and in the circumstances of the case, the excise duty rebate and customs drawback could be assessed as income in the hands of the assessee-company for the assessment years 1972-73 and 1975-76?
2. Whether, on the facts and in the circumstances of the case, the interest on fixed deposit amounting to Rs. 4,65,108 is assessable as income of the assessee for the assessment year 1975-76 ?"

15. At the hearing, the learned advocate for the Revenue relied on the orders of assessment of the Income-tax Officer and the finding recorded there. He submitted further that in the instant case, the assessee was an exporter of tea and as such it was the assessee alone who would be entitled to claim the refund of excise duty rebate and customs drawback. Such refund would necessarily be paid only to the assessee and the same would constitute a business receipt in its hands initially, irrespective of any corresponding liability of the assessee to refund the said amounts. It was submitted that in the facts, no overriding title in favour of the foreign buyers had been established in respect of the said amounts of excise duty rebate and customs drawback.

16. In support of his contentions, the learned advocate for the Revenue cited the following decision.

17. K.C. Bose & Co. v. CIT . This decision was cited as in that judgment, a number of reported decisions on the question of diversion of income by overriding title starting from Raja Bijoy Singh Dudhuria v. CIT [1933] 1 ITR 1 35 (PC) Raja Bijoy Singh Dudhuria v. CIT [1933] 1 ITR 1 35 (PC) were considered. Learned advocate for the assessee contended on the other hand that on a proper construction of the agreements between the assessee and its foreign buyers, it would be apparent that the amounts of excise duty rebate and customs duty drawbacks at no time became or could be deemed to be the income of the assessee. Under the said agreements, the assessee could only collect and receive the amounts of rebate and drawback on behalf of its foreign buyers and it was specifically provided in the agreements that the same would be refunded to the foreign buyers after the permission of the Reserve Bank was obtained. The said amounts, it was contended, were diverted at source by an overriding title in favour of the foreign buyers who owned the said amounts under the agreements.

(d) Addl. CIT v. Brijlal Gupta . In this case, it was held by a Division Bench of the Allahabad High Court that 10% of an advocate's fee which represented the fee of the clerk of the advocate could not be held to be a part of the professional income of the advocate and exigible to income-tax.

22. On a consideration of the facts as found, the provisions of the relevant agreements between the assessee and its foreign buyers, the respective submissions of the parties and the decisions cited, it appears to us that under the agreements it was made clear that the assessee would be entitled to receive the excise duty rebate and customs duty drawback only on account of the foreign buyers and not on his own account. Under the said agreements, the assessee was also under an obligation to remit the said amounts received to the foreign buyers after obtaining the permission from the Reserve Bank of India, It follows that the said amount never reached the hands of the assessee as its own receipt or income. The assessee received the same on behalf of its foreign buyers and the foreign buyers were entitled to the same and to hold the assessee accountable for the same. Even if the permission of the Reserve Bank was not received for remittance of the said amount outside India, it was open to the foreign buyers to receive the said money in India and spend the same in India.

24. We hold that the amounts received on account of customs duty drawback and the excise duty rebate never constituted the real income of the assessee as they were diverted at the inception by an overriding title in favour of the foreign buyers under the agreements entered into by the assessee with them.

25. In that view, as the amounts collected by the assessee on account of customs duty drawback and the excise duty rebate are not the real income of the assessee and hence, being held by the assessee for and on behalf of the foreign buyers, any accretion to the said amounts, while in the hands of the assessee, by way of interest or otherwise, cannot also be held to be the income of the assessee. The parties beneficially entitled to the said amounts, namely, the foreign buyers, can also claim the accretion thereto from the assessee and hold the assessee accountable for the same. The same view was taken by the Bombay High Court in Tanubai D. Desai [1972] 84 ITR 713 and by the House of Lords in Brown [1965] 57 ITR 729.