COMMISSIONER OF INCOME TAX Vs. BANNARIAMMAN EXPORTS LTD.

JUDGEMENT

(1.) The Revenue is on appeal as against the order passed by the Income Tax Appellate Tribunal, Chennai 'D' Bench dated 25.11.2005 in ITA.No.1270/Mds/99 relating to the assessment year 1996-97 raising the following questions of law:

(2.) The assessee is a trading concern exporting Molasses, granites, diamond and leather. It exported molasses worth Rs.6,14,87,164/-. As per the terms and conditions of the sale of molasses to M/s.United Molasses, London, demurrage and dead freight incurred by virtue of loading molasses at Kochin Port had to be borne by M/s.United Molasses, London and the same was to be paid to the Chartered Ship owners. M/s.United Molasses, London in turn, collected the demurrage and dead freight charges from the assessee on the ground that the delay in loading was attributable to the assessee. Thus the demurrage and dead freight incurred was Rs.31,44,590/- and Rs.3,33,405/- respectively. Instead of the assessee paying the amount towards demurrage and dead freight, the purchaser, M/s.United Molasses, London deducted the said amount from the sale consideration and remitted the balance sale proceeds to the assessee company. The assessee submitted that the deduction under Section 80 HHC has to be worked out on the sale consideration of Rs.6,14,87,164/-. However, the Assessing Officer rejected the said claim and restricted the deduction only to the net amount received by the assessee.

(3.) Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals); having lost the same, the assessee filed an appeal before the Income Tax Appellate Tribunal, which allowed the assessee's appeal. In considering the said claim, the Tribunal however, pointed out that the issue had to be seen in the context of the agreement between the assessee and the foreign company. Consequently, it remitted the matter back to the Assessing Officer to give a finding from the materials on record as to whether this sum were actually of such nature to be borne by the assessee.