TMI Blog1991 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... by raising an additional ground. The Commissioner (Appeals) following the Tribunal decision in the case of Natraj Jewellers v. ITO [IT Appeal No. 4635 (Bom.) of 1982 dated 17-1-1986] allowed the assessee's claim as he found that the facts of that case and the present case were exactly identical and in that case the Tribunal had held in favour of the assessee in both the situations, viz. (i) directly exported out of India and consideration received in foreign exchange, and (ii) goods sold across the counter and payments received in foreign exchange. 5. The learned Departmental Representative, Shri Keshav Prasad, submitted that Natraj Jewellers' case decided by the Tribunal was for deduction under section 35B and the claim was for advertisements, etc. for promotion of exports outside India. Section 80HHC, on the other hand, he submitted, allows deduction on turnover of export outside India received in foreign exchange. This is not a case of actual export, but sales made by a shop in the hotel to the foreign customers. Sales were in India and not of export of goods outside India. Receipt of foreign exchange by itself, he submitted, is of no consequence. There was no necessity for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires export out of India and not the deemed export in India. 7. We have heard the parties and considered their rival submissions. The provisions of section 80HHC, as they stood at the relevant time, are as under : " 80HHC. (1) Where the assessee, being an Indian company or a person (other than a company) who is resident in India, exports out of India during the previous year relevant to an assessment year, goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, the following deductions, namely :---- (a) a deduction of an amount equal to one per cent, of the export turnover of such goods or mercnandise during the previous year; and (b) a deduction of an amount equal to five per cent of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding previous year. (2)(a) This section applies to all goods or merchandise [other than those specified in clause (b)] if the sale proceeds of such goods or merchandise exported out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some proposals regarding foreign exchange earnings. I propose to provide some tax relief to exporters whose export turnover for any year exceeds that of the immediately preceding year by more than 10 per cent. The tax relief, to be calculated at a specified percentage of such excess turnover, would be limited to 10 per cent of the income-tax otherwise payable on export profits. The rate at which the tax relief will be calculated and the goods qualifying for the purposes of this concession will be notified by the Central Government. " The amount of deduction was to be provided by sub-section (3) thereof and "the need to earn foreign exchange" was one of the factors to be taken into consideration for determining the amount of deduction by clause (c) of sub-section (4) thereof. Finding these provisions as cumbersome, the Finance Minister in his Budget speech for the Financial year 1983-84, with a view to simplifying and liberalising the scheme, introduced the present scheme under section 80HHC making it obligatory that the sale proceeds must be receivable in convertible foreign exchange. Therefore, the avowed object is to encourage inflow of convertible foreign exchange. If that obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common intention of both the seller and the buyer to export; (ii) an obligation to export, and (iii) actual export. The obligation to export may arise from statute, from contract or from the nature of transaction or in other words it may be implicit or explicit. But the bond between the sale and export must be such as cannot be broken without a breach of obligation. When the goods were sold to foreign tourists, there was a common intention of both the parties, i.e. that the goods shall be carried outside India. There was an obligation also on the part of the foreign tourists to take them out of India inasmuch as such goods could not have been thereafter dealt with or disposed of in India. Some of the goods were admittedly taken out of India and there is no evidence to the contrary to the effect that rest of the goods were not so taken out or sent out of India. Here one should not forget that the assessee's sales on counter were not of consumable items, but articles of handicrafts etc. which one would buy in India only to take out to their home-country for personal possession or to make a gift thereof to a friend in foreign country. Item F-3 of the Exchange Control Manual allows su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en section 80HHC as it stood before its amendment by the Finance Act, 1985 with effect from 1-4-1986, was applicable. Therefore, we are of the opinion that the benefit of deduction under section 80HHC has to be given in respect of the sales effected to foreign tourists across the counter in foreign exchange for the period prior to 1-4-1986. The assessment year 1983-84 being a period prior to 1-4-1986, the assessee is entitled to such relief. It may further be stated that such counter sales are treated as deemed export for the purposes of granting REP licences. Though the assessee had not applied for such entitlement, yet we find an example to this effect in the case of Burlingtons of Bombay [IT Appeal No. 5611 (Bom.) of 1987 dated 4-10-1991], wherein import entitlement to the extent of Rs. 9,700 on one occasion and Rs. 6,800 on another occasion was noticed to have been granted to the assessee. These facts would thus establish that even the relevant authority, i.e. the Joint Chief Controller of Export Import has treated such sales to the tourists in foreign exchange as export sales while issuing the import licence. In this case, the Tribunal has allowed the assessee's claim for 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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