TaxTMI 
TaxTMI 
1996 (1) TMI 178
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....Income-tax Rules, 1962. (5) The order of the CIT(A) be vacated and that of the A.O. be restored." 3. the facts of the case as narrated in the assessment order are that the assessee is a manufacturer of heat exchangers carrying on its business at Pune. The original return of income was filed on 24-12-1991 showing nil income. The revised return was filed on 28-9-1992 again disclosing nil income. In the original return, the assessee had claimed a deduction of Rs. 1,33,43,104 under section 80HHC. However, in its revised return the claim of this deduction was revised to Rs. 1,28,06,035. From the details collected by the Assessing Officer during the course of the assessment proceedings, he noticed that the assessee had received sale proceeds in rupees and sold the goods exported to an Indian party, namely, M/s Span Overseas Pvt. Ltd. (hereinafter referred to as Span). Hence the Assessing Officer conducted enquiries with Span to ascertain as to who was the real exporter. During the enquiry, Span categorically contended that Span was the real exporter and had received the convertible foreign exchange. It further clarified that the order from the Russian party was in its name, the let....
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....He, however, did not have any share-holding in M/s Rifox Engg. (I) P. Ltd. The said Shri Chothia was also a partner of the Steam Process Aids who were appointed as the sole selling agents by the assessee and were paid a commission of Rs. 10 lakhs in connection with the sale which is the subject-matter of the present dispute. Shri C.S. Gandhi further admitted that the export order was not in the name of the assessee, but was in the name of the Span and that the assessee received the sale proceeds not in convertible foreign exchange, but in rupees from Span. The remittance in rupees was also not received directly from the Russian party, but from the merchant exporter, i. e. Span Overseas Pvt. Ltd. when questioned by the Assessing Officer as to on what basis he claimed to be an exporter eligible to deduction under section 80HHC. Shri Gandhi replied that he was an Engineer and this question should be put only to his Chartered Accountant who accompanied him. Shri C.S. Gandhi further disclosed that the enquiry from the Russian importer was obtained by Shri Manoj Shivnani, the Director of Span who was stationed during the relevant period in Moscow. However, Mr Sathe (General Manager of Hi....
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....of any packing credit and the assessee as a manufacturer was to avail of the facility of packing credit ; (viii) C.C.S. was to be charged by both the parties, i.e., 60% to the assessee and 40% to the Span, REP and duty draw-back, bank certified invoice and disclaimer certificate were to be provided by Span to the assessee ; (ix) Bill of lading showed the assessee's name as manufacturer. Another point of view claimed by the assessee in its letter read as follows : " The intention of Legislature is to give the benefits under section 80HHC to the exports for bringing convertible foreign exchange in India. In case of exports by supporting manufacturers through export house or trading house, the legislative intention is that the benefits of tax exemption should be given to both the parties. However, total exemption granted to both the parties should not exceed total profits earned. In our case, Span is not a export house or trading house and hence, we are not supporting manufacturers. However, the case is synonymous and total profit claimed as exempt by us as well as by Span is the total profit earned on exports. The case is not of double claim but that at splitting of th....
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....realised the net foreign exchange as the L.C. was in favour of the Span. Since Span was neither an Export House nor a Trading House, the possibility of passing the export turnover to Rifox was not there. All the terms and other conditions which were of commercial nature were obviously on back to back basis, i. e., the delivery date, liquidated damages, inspection clause, quality, guarantee, etc. An exporter as per the import-export rules and regulations can get the goods manufactured locally and export the same, and, if necessary, can also obtain advance licences to help the manufacturer in producing the goods, if they are within the norms and regulations of the import-export policy of that financial year. As regards the specifications and guarantee, Shri Shivnani has explained in his cross-examination that the order between the buyer and the exporter was between M/s. Exporters of Soviet Union and Span Overseas P. Ltd. Pune. Span had used Rifox as a manufacturer who would supply equipment to Span. Obviously, Span being a merchant trader and exporter, had to reflect on a back to back basis, all the guarantee and terms and conditions because the control on the manufacturing could be ....
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....dhi who cross-examined Shri Manoj Shivnani failed to prove that Shri Shivnani's version on this aspect was false. (ii) The agreement with the Russian party was very clearly in the name of Span and the assessee's name did not figure anywhere in it. The said agreement did not make any mention of the agency agreement. (iii) There is no reason to dispute the reasons stated by Shri Shivnani for passing on the order on back to back basis to the assessee. It is a common sense that any purchaser who purchases the goods for ultimate supply to others at a fair price would definitely pass on the quality, delivery and risk conditions on the manufacturer from whom it purchases the goods. (iv) It had been admitted by both Shri Gandhi and Shri Chothia that Steam Process Aids was the agent of Rifox Engg. (I) P. Ltd. and the payment of Rs. 10 lakhs had been made to Steam Process Aids on the basis of the agreement dated 12-6-1990 with effect from 1-11-1989. If this is so, it was not known as to how Span could be the assessee's agent. (v) As per clause (3) of the agreement dated 12-6-1990 the assessee had appointed Steam Process Aids as sole selling agent for obtaining export business fro....
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.... been received by the Span. (g) The export benefits had been claimed by the Span through the Government agencies and had been passed on to the assessee as per the agreement between the two parties regarding supply of goods. (h) The export order, the letter of credit, shipping bill, bill of lading etc. were all in the name of the Span. (i) Span was not a canalising agency. (j) Span had not acted as a commission agent, but had proved itself to be an exporter. (k) The sale of the heat exchanger by the assessee was only a local sale and was made to M/s. Span Overseas P. Ltd. and it was for this reason that the transaction was treated as a domestic sale during the course of export under the provisions of the Income-tax law. Neither the assessee had exported any goods nor had it received the price consideration thereof from any foreign buyer. The price received by the assessee was from a local buyer, namely, Span Overseas P. Ltd. 10. As a result of the above findings and the conclusions drawn therefrom, the Assessing Officer rejected the assessee's claim to deduction under section 80HHC and directed initiation of penalty proceedings for concealment of income under secti....
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....ition that no agency agreement or any other agreement pursuant to these minutes was ever executed between the assessee and the Span. A pointed reference was also made to the fact that the price of the goods exported mentioned in the Russian buyer's contract agreement was Rs. 3,96,26,082 and the same price was mentioned in the purchase order placed by the Span with the assessee. According to the assessee, no trader in goods would pay a purchase price equal to the sale price of the goods exported. The fact that for Span both the purchase and sale price was the same and the Span was entitled only to a commission indicates that the Span was merely a commission agent of the assessee and not an exporter in its own right. One contention raised before the learned CIT(A) and accepted by her was that the Form No. 14B under the Sales-tax rules was furnished by penultimate seller to ultimate seller. Since it was so done in the present case, it indicated that the Span was an agent and not a principal or an exporter. So far as the tax law is concerned, reliance was placed before the learned CIT(A) on the decision of the Andhra Pradesh High Court in the ease of CIT v. R. S. Subbaiah Pillai & Co. ....
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....sale proceeds in Indian rupees was to be treated as remittance in convertible foreign exchange as per the CBDT press-note dated 22-6-1983. (xii) The sale proceeds were received from the Russian party by the Span not on its own behalf, but on behalf of the assessee. (xiii) It was true that M/s. Span was not a canalising agency, but it is similarly true that M/s. Span acted only as an agent/intermediary on account of the fact that the order was placed on back to back basis with the assessee. (xiv) The fact that same price was mentioned in the contract agreement with the Russian party as well as in the purchase order placed by the Span with the assessee indicated that the Span was to receive only the commission and was, therefore, a commission agent. (xv) Commission cannot be equated with profit and commission is received only by an agent and not by a person trading on his own account. (xvi) The penalties, if any, leviable under the transaction were to be borne by the assessee. (xvii) The commission and charges paid to Hongkong Bank were deducted by the Span from the amount paid to the assessee and this also indicated that it was the assessee who had borne all the ex....
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....ufacturer within the meaning of section 80HHC(4A)(a). (h) The export benefits were claimed by the Span from the various Government agencies and had been partly passed on to Rifox as per the terms of their commercial agreement relating to the local purchase of goods. (i) It is an admitted position that the Span was not a canalising agency. (j) The Russian party had nothing to do with Rifox. There was no privity of contract between the Russian buyer and the assessee manufacturer. (k) There existed an agreement dated 12-6-1990 (with effect from 1-11- 1989) between Rifox and Steam Process Aids according to which Steam Process Aids was the sole selling agent of Rifox, for this category of goods for various foreign countries including Russia. This agreement was to be in force for 3 years from 1-11-1989 and Rifox had paid commission to Steam Process Aids on the basis of this agreement. Since Steam Process Aids was the sole selling agent, the question of appointing Span as an agent in respect of the same category of goods and for the same territory was totally ruled out. (l) Shri R.E. Chothia, who was the Chairman of Rifox when the order was received through his good office ....
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....s of the subject of the contract to the sub-contractors. However in those cases all the responsibility under the contract rests with the sellers." The learned senior departmental representative also pointed out that there is absolutely no mention or reference whatsoever to M/s. Rifox Engg. (I) P. Ltd. in this contract agreement. There was thus no privity of contract between the Russian buyer and the assessee. The learned senior departmental representative made similar reference to the purchase order No. 89/01 dated 25-12-1989 placed by the Span with Rifox Engg. (I) P. Ltd. This document is nomenclatured as purchase order which, according to the learned senior departmental representative, indicates that the transaction was that of local sale and purchase. On the question of use of the word ' commission ', it was submitted by the learned senior departmental representative that the word has to be interpreted in the factual context in which it has been used. In the present case, the word was used in a loose sense and with a view to ensure only the minimum margin of profit of the Span in executing the Russian order. Since the goods manufactured by the assessee were to be exported, it....
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....oard the ship. Since this event of loading the ship on board in terms of FOB stipulation took place after the goods had crossed the customs frontiers of India, it was the assessee who made the export of the goods. In this connection, the learned counsel referred to the definition of ' export ' as given in the Imports & Exports (Control) Act, 1947, the Customs Act, 1962 and contended that since the delivery of the FOB and the delivery took place after crossing by the goods of the customs frontiers, it was the assessee who exported the goods. According to the learned counsel, since it was the assessee who had furnished the Bond to the Central Excise authorities in connection with the export of the goods, it was the assessee who should be treated as the exporters. In this connection, he referred to the dictionary meaning of the term ' FOB ' as given in the Black's Law Dictionary and Jowitt's Dictionary of English Law, and also the decision of the Supreme Court in the case of Mineral& Metal Trading Corpn., the decision of the Andhra Pradesh High Court in the case of K.S. Subbaiah Pillai & Co. (P.) Ltd and the decision of the Cochin Bench of the Tribunal in ITA No. 1220/86, a copy where....
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....n observing and holding that the Form No. 14B is furnished by a penultimate seller to an ultimate seller and it was done so in the present case. According to the learned counsel, the furnishing of Form 14B in the present case was not at all necessary. These provisions of the Sales-tax Act and the provisions made therein are directory in nature. Therefore, issue of Form No. 14B in the present case was not significant and could not have any material bearing on the question as to whether or not any domestic/local sale took place in India. He further contended that in view of the fact that the nature of the transaction was clearly shown by the documents, it was not necessary for the Assessing Officer to have orally examined the witnesses. As regards the production of the minutes of the meetings dated 1- 1-1990 and 5-1-1990, the learned counsel stated that even though these documents were not produced or filed before the Assessing Officer during the assessment proceedings, yet they were there on the file of the assessee which files were produced before the Assessing Officer. On the other aspects of the case, the learned counsel cited the following Court decisions : (1) Broach Distt. ....
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...., that Export orders in all cases will be secured and accepted by SPAN in its own name. SPAN will place a back-to-back purchase order with RIFOX in the case of each export order for execution thereof. RIFOX shall execute the purchase orders and perform its obligations in relation thereof in accordance with the terms and stipulations of the export order secured by SPAN (a copy whereof shall be furnished to RIFOX) and shall be responsible to the customer for the due performance of the contract for supply of the products and shall be liable for breach or non-performance of its contractual obligations including damages/penalties stipulated therein. Clause 8 : SPAN shall pay to RIFOX or to their bankers in case RIFOX avails of the bill discounting facility, the amount due to RIFOX, within 7 days of the receipt by SPAN of the sale proceeds from its customers. Clause 14 : RIFOX hereby agrees to indemnify SPAN in respect of any actions, claims, demands, costs, losses, expenses and damages, if any, caused by reason of the products contravening the specifications in force from time to time. Clause 15 : The date of delivery shall be nor....
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....complied with you. As the buyers are very strict about delivery commitments, penalties due to delayed delivery by you, will be enforced on you. 2. Prices : (a) The prices mentioned in this Purchase Order are on FOB Bombay basis, including cost of sea-worthy packing as mentioned in the Contract. (b) On the prices mentioned in the Purchase Order a commission of Rs. 49,83,000.00 (Rupees forty nine lakhs eighty three thousand only) is payable to us. 10. Taxes & Duties : Sales Tax will not be charged by you. We will furnish you Form N-14 if necessary. Central Excise Duty is not chargeable, since the goods are meant for export. You will arrange for clearance of the goods on Form AR4/AR4A under your own Bond and follow the prescribed procedure for adjust ment of the Bond Accounts. 11. Packing Credit : We hereby declare that we have not availed of Packing Credit from any bank against this export Contract, and shall not avail of the same. You, as manufacturers, may avail of Packing Credit from your bankers, in respect of this Order, based on this waiver. The original certificate dated 18-12-1989 from our bankers is enclose....
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..... On this aspect of the matter, there cannot be any clearer provision than that contained in clause 22 of the agreement which lays down that " nothing contained herein shall be construed as creating any relationship of partnership or agency between the parties hereto and the relationship herein is strictly on a principal to principal basis ". It appears that neither before the two revenue authorities nor before us any explanation has been offered justifying the insertion of such clause if the parties really intended to create a relationship of principal and agent. In this connection, we would like to observe that under the rules of interpretation of evidence, what is apparent is presumed to be real until the party contending otherwise is able to prove that it is not so. In the present case, clause 22 does clearly define the relationship between the parties. Since it is the assessee who contends that the relationship was not of principal to principal basis, it was incumbent upon the assessee to prove to the contrary. The assessee has neither made any serious effort, nor succeeded in proving that the relationship between it and SPAN was not of principal to principal basis. In this co....
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....saction between the two parties was one of sale and purchase and not of transfer of goods under an agency arrangement. There is a specific clause 10 in this document with regard to Taxes & Duties. It has been provided in this clause that sales-tax would not be charged by Rifox. Span was to furnish Form No. N-14B, if necessary. Now, had this not been an order of purchase, no condition with regard to liability for taxes and duties would have been incorporated in this order. Sales-tax is chargeable only when a domestic sale takes place. In case Span was intended to be an agent of Rifox, then there would not have been any question of domestic sale so as to attract sales-tax liability. The question of providing a clause of the nature as clause 10 would, therefore, not have arisen. A seller cannot sell the goods to himself. Similarly, a seller cannot sell the goods to his agent who is supposed to act on behalf of his principal. III : Another aspect which requires consideration is the contract agreement between Span and the Russian party. A photocopy of this document has been made available at pages 62 to 76 of the departmental paper book. Here again, Span has been referred to as ' sel....
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....oposition that it was the assessee, Rifox Engg. (I) P. Ltd. which sold the goods to the Russian party and was, therefore, the real exporter. IV : Sales-tax : 22. The next aspect of the matter which has been discussed at all levels of the proceedings relates to the question as to whether there was any domestic sale so as to give rise to the sales-tax liability under the Bombay Sales-tax Act/Central Sales-tax Act or to necessitate the furnishing of Certificate in Form No. N-14B under rule 21A of the Sales-tax Rules. It appears that the learned CIT(A) has gravely erred in using this circumstance in favour of the assessee's contention that it was the assessee who was the real exporter. Rather this circumstance weighs heavily against the assessee's contention. The Form No. N-14B is issued under rule 21A copy whereof is available at page 53 of the departmental paper book. As would be evident from rule 21A and the tenor of this Form, the certificate in this form is delivered by a dealer purchasing goods from another dealer and selling the same in the course of export out of the territory of India within the meaning of sub-section (3) of section 5 of the Central Sales-tax Act, 1956. ....
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....this connection, three documents have been brought on the record. They are Form No. A.R. 4-A and Form No. G.P-2 which are available at pages 205 and 207 respectively of the assessee's paper book. The learned counsel for the assessee frankly conceded before us that these documents have necessarily to be executed and filed by a manufacturer, irrespective of whether he is or is not an exporter. Thus, these documents as such do not have any bearing on the question as to whether the assessee was or was not an exporter. Thus, in no case, these documents can be pressed into service to the advantage of the assessee. Rather, from a perusal of Form No. A.R. 4A, we find that this document discloses a fact which speaks adverse to the assessee's contention. In column 13 it has been stated that the excisable goods which are sought to be removed from the factory under this application are to be exported through Span Overseas P. Ltd. When the Bench required the learned counsel for the assessee to explain, he candidly conceded that this circumstance was unfavourable to the assessee's case, but stated that this was only a mistake and, therefore, cannot be given much significance. We, however, feel t....
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....n to this export bill. The next document is the Bill of Lading, which is available at page 59 of the departmental paper book. In this Bill of Lading, the Shipper is shown to be Span Overseas Pvt. Ltd. and not Rifox Engg. (I) P. Ltd. The name of Rifox Engg. (I) P. Ltd. does appear in this document, but as the manufacturer and not as the exporter or shipper. In the Bank Certificate of Export, available at page 60 of the departmental paper book, it is the Span Overseas Pvt. Ltd. which has been shown to be exporter. Similar is the case with the Shipping Bill available at page 61 of the departmental paper book. Thus, all the documentary evidence is indicative of the fact that it was Span who was the exporter and shipper of the goods. VII : Forwarding/Clearing Agents : 25. The next fact which is relevant to the present question is, as to who was the clearing/forwarding agent for this consignment and who has appointed that agent. The Shipping Bill available at page 61 of the departmental paper book shows that in the present case it was A.T.C. (Clearing & Shipping) Pvt. Ltd. which had forwarded this consignment. A copy of this Shipping Bill is issued to enable an exporter of goods to....
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....ment is available at pages 13 to 17 of the departmental paper book. With the assistance of this document, the learned senior departmental representative elaborated that Rifox had appointed Steam & Process Aids as its sole selling agent for these type of goods for the territories of U.S.S.R. and other East European countries, Iran and Australia and, therefore, there was no question of Span having been appointed as agent of Rifox. Pursuant to this agreement and on account of the execution of the impugned sale by Rifox to Span, a commission of Rs.10 lakhs was paid to Steam & Process Aids, a firm, one of whose partners was Shri R.E. Chothia who was also the then Hon. Chairman of Rifox. We have examined this document and find that this document also takes the department further to the proof that the assessee Rifox was not the exporter of the goods. This agreement purports to be an agency agreement effective from 1-11-1989 and under this document, Steam & Process Aids had been appointed as the sole selling agent for territories of U.S.S.R. and other East European countries, Iran and Australia. Clause 6 of this agreement obliges the principal, i.e., Rifox, not to appoint any other selling....
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....elevant extracts whereof have been made available at pages 21 and 24 of the assessee's paper book. These meanings read as under : " Black 's Law Dictionary : FOB. Free on board some location (for example, FOB shipping point ; FOB destination) ; the invoice price includes delivery at seller's expense to that location. Title to goods usually passes from seller to buyer at the FOB location. Jowitt's Dictionary of English Law : FOB. These letters, which mean " free on board," indicate, when used in a contract relating to the sale of goods intended to be sent by sea, that the seller is bound to deliver the goods on board ship free of cost to the buyer." 29. It would be seen from the above that as per the Jowitt's Dictionary of English Law, FOB is a stipulation connected only with price. Similarly other Dictionary also shows that this stipulation is mainly connected with price. Sometimes it may also indicate the location of delivery. But then, this position can be true only when the context so requires and/or the time and place of delivery is not well indicated otherwise. In the case before us the position is entirely different. As per clause 15 of the agreement dated 25-1....
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....s to be paid to Span. According to the learned counsel, the use of the word ' commission ' in these documents indicates that the relationship between Rifox and Span was that of principal and agent. In this connection, the learned counsel also referred to the meaning of the word ' commission ' as per Black's Law Dictionary and Jowitt's Dictionary of English Law. These definitions read as under : " Black's Law Dictionary : Commission : Compensation. The recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker, or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal -- Weiner v. Swales, 217 Mc 123, 141 A. 2d 749, 750. Compensation to an administrator or other fiduciary for the faithful discharge of his duties." Jowitt's Dictionary of English Law : " Commission, an order or authority to do some act. In the law of contracts and agency, a commission is an authority to an agent to enter into a contract especially one for the sale or purchase of goods ; such a commission generally included on engagement by the principal to remunerate the agent, and hence ' commission ....
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....self enough to constitute agency. A principal does not sell to his agent. The essence of sale is the transfer of title to the goods for a price paid or promised to be paid. The essence of agency to sell is the delivery of the goods to a person who is to sell them not as his own property but as that of the principal who remains the owner of the goods. In the present case, not only the documentary evidence, but the direct oral evidence of the parties who dealt with the matter clearly shows that the relationship between Rifox and Span was that of principal to principal and not that of principal to agent. As has already been stated, the agreement dated 25-12-1989 clearly provides that the relationship sought to be created by that document was that of principal to principal and not that of principal to agent. The fact that the Purchase Order was placed by Span with Rifox and the goods were purchased on payment of price also show that the transaction was one of purchase and sale. The fact that Rifox sought, obtained and furnished to the sales-tax authorities a Certificate in Form No. N- 14B also shows that it was a case of domestic/local sale by Rifox to Span. Otherwise, such Certificate....
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....lso substantiates the version of Shri Chothia and Shri Shivnani that there was no relationship of principal and agent between Rifox and Span and the deal between the two parties was one of domestic/local purchase and sale and the assessee was not real exporter of the goods. At this stage, it would be necessary to refer to the minutes of the alleged meetings dated 1-1-1990 and 5-1-1990 said to have taken place between the representatives of Rifox and Span. Photocopies of these minutes have been placed by the assessee at pages 214 and 215 of its paper book. With the assistance of these documents, the assessee has sought to prove before the learned CIT(A) that the relationship between Rifox and Span was that principal and agent. These two documents read as under : " SPAN " " MINUTES OF THE MEETING HELD ON 1st JANUARY 1990 AT SAROSH BHAVAN PRESENT : RIFOX : Mr. C.S. Gandhi SPAN : Mr. M. Shivnani Mr. R.E. Chothia Mr F.J. Dastoor Mr. P.C. Nambiar Mr. S.G. Karandikar Mr. V.M. Uchil SUB : CONTRACT NO. 589/1859809/90061-09-322 OUR PURCHASE ORDER NO. 89/01 DATED 25-12-198 1. The point of calculating the commission due to Span was discussed and agreed that ....
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....s not been cross-examined on this aspect shows that no such meetings ever took place and no such minutes were ever recorded. (d) Since no agency agreement was signed between Rifox and Span, these minutes, even if they are held to be genuine and proved, could not have the effect of converting the relationship of principal to principal into that of principal and agent. 35. We have considered the submissions made by the two parties before us and find that these two documents do not help the assessee's case in any manner. Neither there is anything to show, nor was it contended before us by the learned counsel for the assessee that these two documents were filed before the Assessing Officer. There is no mention of these documents in the assessment order or in the proceedings before the Assessing Officer. Had any such meeting taken place and minutes recorded, Shri Shivnani and Shri Chothia would have been cross-examined on the point. Even the oral examination of Shri Gandhi himself is silent on this point. There was thus no attempt on behalf of the assessee to prove that any such meetings did take place and such minutes were in fact recorded and signed by the concerned persons. We ....
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....c in this argument. The logic, if any, speaks contrary to what has been urged by the learned counsel. The original entitlement to all the export benefits was that of Span. This means that it was Span, who, by virtue of being an exporter, was entitled to these benefits. It, however, allowed some of these benefits to be shared with Rifox. This was done by Span as a part of commercial arrangement and it does not in any manner indicate that Rifox was the exporter. If at all any inference can be drawn from this arrangement, such inference can be drawn only against the assessee. XIII : Case law : 37. Now let us discuss the case law relied upon by the parties. The learned CIT(A), in reaching her conclusions, had heavily relied upon the decision of the Delhi High Court in the case of Ferro Alloys Corpn. Ltd. This decision has been in Ferro Alloys Corpn. Ltd.'s case and photocopy of the same has been placed by the assessee on its paper book. The assessee has also placed on its paper book the photocopy of the judgment of the Supreme Court in the case of Mineral & Metal Trading Corpn. It was the said decision of the Delhi High Court which was the subject-matter of the judgment of the....
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....nd it was that company which had received remittance from abroad. From a cumulative consideration of all the above facts and circumstances and the discussion thereof made by us, it can safely be concluded that the assessee was not the exporter of the goods in question. 38. The next judgment on which the assessee placed reliance was the judgment of the Andhra Pradesh High Court in the case of K.S. Subbaiah Pillai & Co. (P.) Ltd. We are afraid that the ratio of this decision is against the assessee and not in its favour. The mere use of the word commission in the Purchase Order in the present case cannot be held to be conclusive or decisive of the fact that Span was an agent and the assessee-manufacturer was the exporter. It has been held in this judgment of the Andhra Pradesh High Court that unless and until the profits are earned by the activity of exporting goods out of India either directly or through an intermediary, the assessee cannot invoke sec. 2(5) of the Finance (No. 2) Act, 1962, for rebate. It was further held in that case that the words " profits and gains derived from the export of any goods or merchandise out of India " must be construed as profits earned or rec....