JUDGMENT P. Krishna J.
The petitioner, a partnership firm, has sought by means of the present petition, a writ, order or direction in the nature of certiorari quashing the order dated August 6-8-1999, passed by the Commissioner of Income-tax, Kanpur, in so far as it relates to the non-extension of time in respect of the late payment received from Prime Leather Enterprises, USA, for Rs. 77,121 and from M/s. Horseman, USA, for Rs. 1,88,860 and a writ of mandamus commanding the Commissioner of Income-tax to pass a fresh order under section 80HHC(2)(a) of the Income Tax Act, 1961, in respect of the extension of time for payment received from the aforesaid two persons.
The petitioner claims itself an exporter and is doing the export of saddlery leather and brass items to various countries outside India. It, for the assessment year 1997-98 exported the goods worth Rs. 1,07,80,835. A sum of Rs. 3,53,000 was due as outstanding from three foreign buyers as on 31-3-1997. An application for extension of time as required under section 80HHC(2)(a) of the Income Tax Act (hereinafter referred to as "the Act") was filed by the petitioner before the Commissioner of Income-tax. The Commissioner of Income-tax by means of the impugned order dated 6-8-1999, has allowed the said application in part. It has granted extension of time for not bringing the sale proceeds of the goods exported by the petitioner to M/s. Andersen, Germany, but has refused to extend the time in respect of the foreign buyers, namely, M/s. Prime Leather Enterprises USA, and M/s. Horseman, USA.
Section 80HHC of the Act provides deduction in respect of profits retained for export business. This section was inserted with a view to increase large export of certain goods. It provides certain tax relief to the exporters. One of the conditions to claim the benefit of the special deduction under section 80HHC(2)(a) is that the sale proceeds of the specified 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 the previous year. For the relevant assessment year, i.e., 1997-98, power has been conferred on the Chief Commissioner or the Commissioner of Income-tax if satisfied, for reasons to be recorded in writing, that for reasons beyond the control of the assessee, he was unable to bring the convertible foreign exchange into India within six months, to extend further period as he may allow in this behalf.
The period of six months specified in section 80HHC(2)(a) of the Act was to expire on 30-9-1997. The petitioner filed an application dated 30-9-1997, before respondent No. 1 on 31-10-1997, requesting for extension of time, for the purposes of section 80HHC(2)(a) of the Act, of one year for bringing into India, in convertible foreign exchange, the sale proceeds approximately of Rs. 3,53,000 relating to the goods exported by it out of India. The ground taken in the extension application, in brief was that the petitioner has received a major portion of the convertible foreign exchange within time, but approximately a sum of Rs. 3,53,000 could not be recovered from the foreign buyers in spite of its best efforts. It was expected to receive the payments at the earliest. The details of the names of the buyers to whom the assessee exported the goods, invoice number, date and the amount of sale proceeds of the goods exported out of India that were outstanding on 30-9-1997, are as follows:
S. No. S. No. Name of the buyer to whom the assessee exported the good Name of the buyer to whom the assessee exported the good Invoice number and date Invoice number and date Amount of sale proceeds of goods exported out of India that were brought in India after the expiry of the six months period referred to in section 80HHC(2)(a) (Rs.) Amount of sale proceeds of goods exported out of India that were brought in India after the expiry of the six months period referred to in section 80HHC(2)(a) (Rs.) 1 M/s. Prime Leather Enterprises, Modestoca, USA Invoice number 3 dated 12-4-1996 77, 121, brought in to India on 4-11-1997 2 Andersen, Germany Invoice number 36 dated 9-12-1996 80, 091 3 M/s. Horseman Corral, Modestoca, USA Invoice number 52 dated 4-3-1997 1,88,860 brought in India on 13-4-1998Rs.78,495 on 16-8-1998Rs.1,10,065 As mentioned above, the Commissioner of Income-tax by the impugned order has refused to extend the time in respect of the buyers at serial Nos. 1 and 3 and has extended the time with respect to the buyer at serial No. 2. It has come on record that the convertible foreign exchange in respect of the buyer at serial No. 3, has been brought in India, on April 13-4-1998, Rs. 78,495 and on 16-6-1998, Rs. 1,10,065. The reason given by the Commissioner of Income-tax is that the petitioner had sufficient time for realising the sale proceeds and bringing the same into India. No sincere and genuine efforts were made to bring the sale proceeds into India within the normal time permissible under section 80HHC(2)(a) of the Act. Also one cannot rule out the possibility of the fact that the assessee expected a higher yield in terms of the Indian rupee by delaying receipt of sale proceeds because of the fall in the value of the Indian rupee. Challenging the aforesaid reasoning the present writ petition has been filed.
Heard counsel for the parties and perused the record. Learned counsel for the petitioner submitted that the order of the Commissioner so in far as it relates to the refusal of extension of time in respect of buyers Nos. 1 and 3, as detailed in the above chart is arbitrary and capricious. The Commissioner of Income-tax has not appreciated the true meaning and purport of section 80HHC(2)(a) of the Act and erroneously rejected the application of the petitioner. It has been passed without appreciating the material evidence on record and based on irrelevant considerations. In contra, learned counsel for the department submitted that the order passed by the Commissioner of Income-tax does not require any inference by this court. The order is based on the material on record and the exercise of discretion by the Commissioner partly in favour of the petitioner and partly against it is justified on the facts and circumstances of the case.
In Mayor and Co. v. CIT (2001) 248 ITR 162 (P&H) it has been held that the power vested in the competent authority to grant extension of time, which necessarily included the power to refuse extension of time beyond the period of six months, is quasi-judicial in nature. The requirement of recording reasons in writing is clearly indicative of the Legislature's intention that the power vested in the competent authority to grant or refuse extension of time must be exercised reasonably and fairly. It must not be exercised arbitrarily. The order must reflect objective application of mind by the competent authority to the factors relevant to the determination of the issue as to whether the assessee could not bring or receive the sale proceeds of the exported goods due to reasons beyond his control.
The expression "reasons beyond his control" is not defined in the Act. It should be interpreted keeping in view the context in which it appears. The intention of the Legislature for enacting the aforesaid provision should also be kept in mind. The purposive interpretation of a statute is also one of the recognised principles of interpretation of statute. At this juncture it is to be noted that the Act prescribes a two-year period to complete an assessment. The Punjab and Haryana High Court in the case of Mayor and Co. v. CIT (2001) 248 ITR 162 has held that the expression "such further period", though not defined in the Act, keeping in view the limitation prescribed under the Act for completion of assessment within two years from the end of the assessment year, the extension contemplated by section 80HHC(2)(a) can be granted for the period ending with the expiry of two years from the end of the assessment year. To put it differently, if the sale proceeds of the goods or merchandise exported out of India are received or brought into India by the assessee in convertible foreign exchange within the period of two years from the end of the assessment year and the assessee shows that the amount could not be brought or received earlier on account of reasons beyond his control, then the concerned authority is obliged to grant extension of time. The aforesaid judgment has been followed by the Calcutta High Court in Mountview Exports (P) Ltd. v. CIT (2002) 258 ITR 46.
Now we venture to examine the relevant facts of the case with respect to invoice No. 3 dated 12-2-1996, through which the goods were exported to M/s. Prime Leather Enterprises. The explanation given by the petitioner was that the aforesaid payment outstanding as on 30-9-1997, from M/s. Prime Leather Enterprises was received on 4-11-1997. Thus the extension of time sought for this transaction is little more than one month to be exact 34 days. The petitioner came out with the case that it received major amount of total export value before the specified date and only a minor portion of the amount could not be recovered by it before the due date inspite of repeated letters and reminders. By a letter dated 12-5-1997 to M/s. Prime Leather Enterprises, the petitioner requested for early payment of the outstanding bill amount. The said party has earlier promised to make the payment by 15-1-1997, but failed to do so. The Commissioner of Income-tax was of the view that since the first letter was written by the assessee to make the payment only after one year from the date of invoice, it does not show that any serious effort was made by it to make realisation in time. The conclusion of the Commissioner of Income-tax cannot be held to be justified for the reason that the petitioner has come out with the allegation that this was the very first year of business with the said party. The petitioner has discontinued its business for the succeeding year on account of conduct of the buyer in not making payment within the reasonable time. The Commissioner of Income-tax has not controverted the plea raised by the petitioner that this was the first year of business with the buyer, namely, M/s. Prime Leather Enterprises and no further business was done by the petitioner with this party in the subsequent years. The Commissioner of Income-tax was obsessed with the view "that it is not uncommon to find or visualise situation where there is temptation for exporters to deliberately delay the receipt of sale proceeds of goods exported by them in the expectation that fall in the value of Indian rupee would fetch them higher yield", vide para. 12 of the order. It has failed to take into consideration that the petitioner-assessee had exported goods of an aggregate value of Rs. 1,07,80,853.The unrealised amount from the foreign buyer, namely M/s. Prime Leather Enterprises, within the specified time was only a very small fraction of the total exports. The Commissioner of Income-tax has failed to consider the relevant circumstances such as the aggregate export sales and the unrealised convertible foreign exchange by the specified date in order to find out as to whether the assessee-petitioner deliberately delayed the receipt of sale proceeds of the goods exported by it in expectation that fall in value of Indian rupee would fetch it a higher yield. The power to extend time under section 80HHC(2)(a) has been given to the competent authority with certain purposes. The said power should be exercised in a quasi-judicial manner and with a view to achieve the purpose. The non-extension of the period of about 34 days for such a small amount in comparison to the aggregate exports is arbitrary and respondent No. 1 committed illegality in not extending the time with respect to the goods exported to M/s. Prime Leather Enterprises, USA.
Now we take up the petitioner's case for extension of time in respect of the goods exported by it to M/s. Horseman, USA, in respect of invoice No, 52 dated 4-3-1997. The Commissioner of Income-tax has not doubted that the payments have been received and brought into India in convertible foreign exchange in two instalments on 13-4-1998, and 16-6-1998, total Rs. 1,88,860. The petitioner sought the extension of time and came out with the case that its partner, Shri Anup Mehra, during his visit to the USA on 28-5-1997, and 17-5-1997, reminded the party to make the payment. A letter dated 13-8-1997, asking the party to make the payment immediately up to 30-9-1997, was also written. Reply to this letter sent by one Shri Bali of Horseman was also filed before the Commissioner. The Commissioner of Income-tax proceeded on the basis that the said reply does not contain the date of letter and, therefore, it must have been received by the assessee -petitioner soon after 13-8-1997. In reply Shri Bali, had informed that instructions were given to his banker for making payment but the bank reported that it had not received the same. Therefore, he assured that he was "going to wire money today in one hour". This reply, as held by the Commissioner of Income-tax, suggests that the party had assured very prompt action on the petitioner's communication dated 13-8-1997, and therefore, according to him it is difficult to understand as to why the money was delayed and the realisation could only be made on 13-4-1998 and 16-6-1998. The moneys have been received after more than six months from the prescribed period of six months, i.e., from 30-9-1997. The assessee also furnished a copy of the reminder dated 17-3-1998, reminding the party to make the payment. On these facts the Commissioner of Income-tax observed that the assessee only sent some routine reminder letters to the buyer and no sincere effort from realisation to bring convertible foreign exchange into India by 30-9-1997, was made by the assessee. Thereafter he observed that one cannot rule out the possibility that this was due to the fact that the assessee expected a higher yield in terms of Indian rupee by delaying the receipt of sale proceeds because of expectation of fall in the value of the Indian rupee. Another factor which has been taken into account is that immediately in the preceding year also the petitioner had failed to bring the sale proceeds into India from the same party within the period of six months referred to in section 80HHC(2)(a) of the Act. Therefore, he reached the conclusion that the assessee has been delaying the process of bringing the export sale proceeds in convertible foreign exchange into India in the past also and such delay adversely affects the national economy. Under section 80HHC(2)(a) of the Act the relevant consideration is whether the assessee is "for reasons beyond his control" unable to bring the convertible foreign exchange into India within a period of six months from the end of the previous year. The Commissioner of Income-tax has not disbelieved the personal visit of a partner of the petitioner-firm to the buyer's place and the request for early payment. The petitioner has written letters and reminders asking the foreign buyer to make the early payment. The question which arises is as to whether in such circumstances it could be said that the sale proceeds of the goods or merchandise exported out of India are not brought in India by the assessee within the period of six months from the end of the previous year "for reasons beyond his control". The Commissioner of Income-tax has failed to record any finding that the sale proceeds could not be brought into India within the specified period by the assessee "for reasons beyond his control". The order of the Commissioner of Income-tax is based on the supposition that as the value of the Indian rupee has fallen in the mean time and correspondingly the petitioner-assessee thus has yielded an extra Rs. 32,029 in respect of this transaction, the possibility was that the assessee received the delayed payment in expectation of fall of value of Indian rupee in terms of foreign exchange. He has failed to consider the aggregate export to foreign country in the year in question and the proportionate unrealised convertible foreign exchange within the specified period. The non-extension of time by little more than six months in the present case cannot be said to be justified otherwise it would be defeating the very purpose conferring such power on the authority concerned. The petitioner has done what it could do in the matter and in the absence of any other relevant material, mere fall of value of Indian rupee in terms of foreign exchange would not lead to the conclusion that there was deliberate action on the part of the petitioner not to bring the convertible foreign exchange into India within the specified time.
For the reasons given above we are of the view that respondent No. 1 has acted arbitrarily in not extending the time to bring convertible foreign exchange into India in respect of the two export transactions vide invoice No. 3 dated 12-4-1996, and invoice No. 52 dated 4-3-1997. To that extent the order dated 6-8-1999, passed by respondent No. 1 is quashed by issuing a writ of certiorari. Respondent No. 1 is commanded by a writ of mandamus to grant extension of time under section 80HHC(2)(a) of the Act in so far as it relates to the sale proceeds in respect of the goods exported by the petitioner to M/s. Horseman, USA under invoice No. 3 dated 12-4-1996, and the goods exported by the petitioner to M/s. Prime Leather Enterprises, USA, under invoice No. 52 dated 4-3-1997.
The writ petition is allowed. No order as to costs.