One of the few incentives available under the tax laws is in respect of exemption of export profits under section 80-HHC of the Income Tax Act, 1961. However, this benefit is subject to the important condition that the export proceeds must be brought to India in convertible foreign exchange.

The time limit provided for bringing the amount to India is within six months from the end of the financial year. However, with the permission of the chief commissioner or the commissioner, this period could be extended if he is satisfied that the Indian exporter was unable to bring the amount to India for reasons beyond his control.

Two interesting questions considered by the Allahabad high court in Azad Tobacco Factory (P)Ltd. v.l C.I.T.(225 I.T.,R. 1002) were whether section 80-HHC(2)(a) contemplates the making of an application for claiming deduction, and , if so, whether such application is to be made before the expiry of the said period of six months.

According to the Court section 80-HHC does not specify the making of any application or any time limit for making such application nor any rules or forms therefore have been prescribed. The income-tax Act is a complete code in itself and has laid down the method, manner and time for making applications wherever required, for which appropriate rules have been framed and forms have been prescribed.

Chapter VI-A entitles an assessee to claim various deductions as contemplated in sections 80-C to 80-U. Such deduction is to be claimed in the return to be filed in respect of the concerned assessment year. Nowhere in the Act has any manner or method or procedure for claiming deduction other than the manner as indicated in Chapter VI-A has been provided. The manner of claiming deduction is indicated in Form No.2 appended to the income-tax rules , being the form for submitting the return.

After perusing the provisions of various sections of the Act, the Court observed that section 80-HHC(a) does not specify any manner or procedure for claiming deduction. For the purposes of claiming deductions under the provisions of sections 80-C to 80-U, other than section 80-HHC, no manner, procedure for making application or time limit for such application has been prescribed. Such deductions are to be claimed in the return itself. Therefore, section 80-HHC cannot claim special treatment other than the rest of the sections 80-C to 80-U.

The time limit mentioned in section 80-HHC(2)(a) is not a limitation for claiming deduction, but it is the right to claim deduction which is available if the sale proceeds are received within a period of six months.However, there might be cases where on account of no fault on the part of the assesee, he could not receive or was unable to bring into India the sale proceeds within the said period.

Contemplating such a situation, the legislature in its wisdom had provided for suspension, which could also be termed as relaxation of the said period subject to the satisfaction of the Chief Commissioner or Commissioner on the condition that the assesee was unable to receive in or bring into India the sale proceeds within the period of six months as aforesaid for reasons beyond his control.

The chief commissioner or commissioner has been invested with the power to decide the period of such suspension or relaxation if he is satisfied that the assessee was unable to do so for reasons beyond his control. A plain reading of the said section gives an impression that the discretion is confined to the question of satisfaction by the chief commissioner or commissioner but not with the power to allow the period of suspension or relaxation.

The commissioner, if satisfied, that the conditions are fulfilled, is bound to allow the period which remained suspended due to the inability of the assessee to receive in or bring into India the sale proceeds for reasons beyond his control. There is no discretion in the matter of allowing the period of suspension if the chief commissioner or commissioner is satisfied that the condition for suspension of the period was fulfilled.

Since the deduction is claimed in the return, the question of deciding the period of such suspension or relaxation would arise in computing the total income in the process of assessment. Since the authority to relax is vested in the chief commissioner or commissioner, the assessing authority having no jurisdiction to deal with the same, the same is to be decided by the commissioner or chief commissioner, for which a reference would be necessary by the assessing authority to the chief commissioner or commissioner.

Since no procedure has been provided a procedure beneficial to the assessee is to be adopted. The purpose of engrafting the section for such deduction is to encourage the earning of convertible foreign exchange.

The Court further observed that a plain reading of the said section did not indicate the making of any application or fixing of any time limit for making such application. Different meanings cannot be imported for different parts of the same section, that the deduction can be claimed without any application if the sale proceeds are received or brought into India within six months and an application would be necessary if it is not and that too to be made before the expiry of the period of six months.

On the other hand, if a statute invests a public officer with authority to do an act in specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when circumstances for exercise of authority are shown to exist. Even if the words used in the statute are prima facie enabling the court will readily infer a duty to exercise power which is invested in six of enforcement of a right-public or private-for a citizen. This has been so held in the case of L. Hirday Narain V. I.T.O.(78.I.T.R. 26 (SC).

In the instant case, the court held that the right to deduction under section 80-HHC is a right to the assesee which he can get straightaway within a period of six months as contemplated therein. However, the said right remains suspended if the assessee is unable to have it for reasons beyond his control.

In such circumstances, the authority is empowered to allow a further period to cover the period of suspension if he is satisfied that the conditions contemplated are in existence. Therefore, the court observed that the exercise to allow further time by the commissioner is not dependent on the making of any application or that the said discretion is to be invoked before the expiry of the period of six months.

In the court's view, a plain reading of section 80-HHC(2)(a) does not contemplate the making of any application by the assessee within ma period of six months either for availing of the deductibility with respect to sale proceeds received in or brought into India as contemplated therein within a period of six months from the end of the previous year or for the purpose of invoking the power of the Chief Commissioner or Commissioner to allow further period in case the assessee is unable to receive in or bring into India the sale proceeds for reasons beyond his control.

The Court held that if such a position was accepted, then there was no scope for making any application for the purpose of having the benefit of further period before the expiry of six months. On the other hand, the Court's considered view was that the deductibility claimed in the return was to be decided in computing the total income in case the six month period had expired before the assessee received or brought into India the sale proceeds. In that event, it was for the assessing authority to place the same before the chief commissioner or commissioner if the assessee proposed to satisfy that he was unable to do so for reasons beyond his control.

In the present case, by way of an application, the discretion was sought to be invoked immediately preceding the submission of the return. In such circumstances, the court opined that the commissioner or the chief commissioner was bound to exercise the power for allowing further period if he was satisfied that the assessee was unable to receive in or bring into India the sale proceeds within a period of six months for reasons beyond its control. Once he was satisfied about the existence of such condition, he had to exercise the discretion in favour of the assessee.

The aforesaid decision of the Allahabad high court certainly takes into account the letter and spirit of the exemption sought to be given to exporters. The court's decision is not based on a mere literal interpretation but meant to effectuate the object of promoting exports.This judgement has indeed come at the right time, considering the sluggishness in the growth rate of exports in the last few months.

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