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I-T - Direct debit of commission by foreign agents before transferring sale considerations, makes exporters ineligible for benefit of Sec 80HHC(2): HC

 

By TIOL News Service

ERNAKULAM, APRIL 26, 2018: THE ISSUE BEFORE THE DIVISION BENCH IS - Whether exporter can enjoy the benefit of Section 80HHC, when the foreign agents had directly deducted commission from the sale consideration before making payment to the exporter. NO IS THE VERDICT.

Facts of the case:

The Assessee is one of the largest tea manufacturers in India. While filing its return, the Assessee in its export turnover, had included a commission on sales, coming to Rs.37,54,026/- paid to M/s. Parry Agro Industries Ltd., an agency outside India. The commission was deducted in the sale invoice itself and the balance consideration alone was brought into India as convertible foreign exchange. The AO found that the said commission could not be included in the export turnover to compute the export profit and hence deleted the same from the export turnover. On appeal, the FAA concurred with the finding of AO based on the provisions of Explanation to Section 80HHC(2)(a). The Tribunal, however, reversed the concurrent decisions, on the reasoning that there were two options available for payment of agency commission and the assessee having taken the easier mode, could not be disentitled from making the claim.

High Court held that,

++ the Tribunal has found that there is a clear nexus between the commission payment and the exports made by assessee as also a live connection between the commission and export sale. There is also no difficulty in the assessee resorting to either of the two options, ie: paying commission directly in foreign exchange to the foreign agency or in bringing it back into the country and then paying it in foreign exchange. However, if the assessee takes the easier mode as found by the Tribunal, the assessee would be disentitled in including the said component in the export turnover. Section 80HHC, as per Sub Section (2)(a) applies only if the sale proceeds of goods or merchandise exported out of India are received in or brought into India, by the assessee in convertible foreign exchange, within a period of six months from the end of a previous year or within such further period as the competent authority may allow in this behalf. The condition having been not complied with, the commission deducted by the foreign agent from the sale consideration cannot enjoy the benefit of Section 80HHC.

(See 2018-TIOL-778-HC-KERALA-IT)


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