TMI Blog2007 (2) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (for brevity, "the Act"). The Assessing Officer disallowed the claim of the deduction under section 80HHC of the Act on the ground that relief in respect of export of music software is available under section 80HHF of the Act only from the assessment year 2000-01 onwards and is not available for the impugned assessment year. On appeals by the assessees, the Commissioner of Income-tax (Appeals) allowed the appeals and directed the Assessing Officer to recompute the income allowing deduction under section 80HHC of the Act. On further appeals by the Revenue, the Tribunal following the decision of the Bombay High Court in Abdulgafar A. Nadiadwala v. Asst. CIT [2004] 267 ITR 488 held in favour of the assessees. Hence the present appeals. Mrs. Pushya Sitaraman, learned senior standing counsel for the appellant contends that the deduction under section 80HHC of the Act is applicable only for profits derived from export of goods and merchandise, and thus cannot apply to the transaction of the assessees, who have not exported any goods or merchandise, but only exported music software. At the outset, what is to be determined is whether the product involved in these cases can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in sub-section (1) of section 50 of the Customs Act, 1962, (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof. (3) For the purposes of sub-section (1), (a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee; (b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; (c) where the export out of India is of goods or merchandise manufactured or processed by the assessee, and of trading goods, the profits derived from such export shall, (i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent. of any sum referred to in clause (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, if the assessee has necessary and sufficient evidence to prove that, (a) he had an option to choose either the duty drawback or the Duty Free Replenishment Certificate, being Duty Remission Scheme; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the Duty Free Replenishment Certificate, being Duty Remission Scheme. Explanation.-For the purposes of this clause, 'rate of credit allowable' means the rate of credit allowable under the Duty Free Replenishment Certificate, being the Duty Remission Scheme calculated in the manner as may be notified by the Central Government... Explanation.-For the purposes of this sub-section, (a) 'adjusted export turnover' means the export turnover as reduced by the export turnover in respect of trading goods; (b) 'adjusted profits of the business' means the profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d verified in the manner prescribed that in respect of the export turnover mentioned in the certificate, the Export House or Trading House has not claimed the deduction under this section: Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditing the accounts of the Export House or Trading House under the provisions of this Act or under any other law. (4B) For the purposes of computing the total income under subsection (1) or sub-section (1A), any income not charged to tax under this Act shall be excluded. Explanation.-For the purposes of this section, (a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (aa) 'export out of India' shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962); (b) 'export turnover' means the sale proceeds received in, or brought i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, whether those properties be tangible or intangible. In India the test to determine whether a property is 'goods' for the purpose of sales tax, is not whether the property is tangible or intangible or incorporeal. The test is whether the item concerned is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed, etc. The intellectual property, once it is put on to a medium, whether it be in the form of books or canvas or computer discs or cassettes, and marked would become 'goods'. A software program may consist of various commands which enable the computer to perform a designated task. The copyright in that program may remain with the originator of the program. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. We see no difference between a sale of a software program on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pushya Sitaraman, learned senior standing counsel for the Revenue that the deduction could be claimed by the assessee only under section 80HHF of the Act, but not under section 80HHC; and that since section 80HHF of the Act providing deduction in respect of profits and gains from export or transfer of any film software, television software, music software, television news software, including telecast rights was inserted by the Finance Act, 1999, with effect from April 1, 2000, the assessee is not entitled to deduction even under section 80HHF of the Act for the assessment year 1999-2000. A contention made in the above lines, was carefully considered by the H Division Bench of the Bombay High Court in Abdulgafar A. Nadiadwala v. Asst. CIT [2004] 267 ITR 488 and rejected. Moreover, in view of the ratio laid down by the apex court in Tata Consultancy Services v. State of A. P. [2004] 271 ITR 401 and Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 (SC) referred to supra, we are of the considered opinion that merely because section 80HHF came to be inserted with effect from April 1, 2000, that, by itself, does not mean the benefit of section 80HHC could be denied to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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