Satish Chandra, C.J. - (1.) THE Income-tax Appellate Tribunal has submitted this statement of the case and has referred several questions of law for our opinion at the instance of the assessee as well as the Revenue. THE reference relates to six assessment years from 1964-65 to 1969-70.
(2.) THE assessee is a private limited company. It is a hundred per cent, subsidiary of a foreign company, namely. Orient Carpet Manufacturers (London) Ltd. THE latter is a company incorporated in England. The assessee-company carries on the business of manufacture and sale of carpets. Almost its entire production of carpets is exported out of India. We shall first take up the question of tax concession and higher rebate on super-tax.
(3.) IT appears that in order to earn more foreign exchange the Govt. of India introduced incentives for encouraging export. One incentive was that the exporters will get import licences for certain items so that they can recoup their losses, if any, which they may have incurred in their export business. The other incentive was by way of tax concession and higher rebate. The assessee-company exported carpets manufactured by it. It received import licence in respect of certain dyes, chemicals, wool and wool tops because of the carpets exported by it. It incurred a loss on the export of carpets. It sold the dyes, chemicals, wool and wool tops imported by it on the strength of the import licence given to it by the Govt. of India. It earned huge profits on such sales. For the assessment year 1964-65 profit on the sale of wool and wool tops and dyes was Rs. 18,84,498, whereas the loss in the export of carpets was Rs. 15,01,586.;