HANUMAN TRADING COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Cochin Bench, has referred under Section 256(2) of the I.T. Act, 1961, as directed by this court at the instance of the assessee, the following questions of law :

(2.) THE assessee is a firm in Alleppey and is engaged in the business of exporting hill produce like pepper. THE assessment year concerned is 1969-70. On April 18, 1966, and May 7, 1966, the assessee entered into two separate contracts with a party in Russia to sell 50 tons of pepper each, at the rate of Rs. 4,170 per ton. THE payment was to be made in Indian rupee out of an irrevocable letter of credit established by the Russian buyer with the bank for foreign trade of the U.S.S.R. for the total value of the contracts. 95% of the price was to be paid on shipment and the balance of 5% after the goods reach the destination. THE goods covered by the two contracts were duly shipped on May 21, 1966. THE buyer had opened the letter of credit and the assessee realised 95% of the price on May 27, 1966. In realising this amount the assessee had to face some difficulty, as the Russian bank had advised the letter of credit to be opened in the name of " Hanuman Trading Company " whereas the assessee's name is " Sree Hanuman Trading Company ". THE assessee, however, managed to negotiate documents by giving a guarantee to the Indian Overseas Bank, Alleppey, where the letter of credit had been opened. On May 27, 1966, the assessee wrote to the Russian buyer to get this mistake corrected. On June 7, 1966, the Russian bank sent a letter to the Indian Overseas Bank, Alleppey, asking that the name "Hanuman Trading Company" be corrected as " Sree Hanuman Trading Company". THE Indian Overseas Bank, Alleppey, received this letter on June 9, 1966. However, in the meanwhile on June 6, 1966, the Indian rupee was devalued. This devaluation did not affect the two contracts because they were for payment in Indian rupees and the assessee had no right to get enhanced value for the price. But within a short time the Governments of India and Russia reached an agreement that all the Indian shipments should be given an increase of 47.5% on "the unimplemented portion of their contracts". On July 27, 1966, a press note was issued to announce this policy decision. THE press note denned " unimplemented portion of the contract " in the following terms :

(3.) IT is in this way that the assessee got Rs. 1,87,870.45, being 47.5% of 95% of the sale price.