2003 (7) TMI 25 - HC - Income Tax

Special deduction export - Held that Tribunal was right in law in holding that remittances received by the assessee in convertible foreign exchange from abroad as advertisement charges were not on account of sale proceeds of any goods which are exported out of India and hence would not be export turnover under Explanation (B) to section Held that Tribunal was right in directing the Assessing Officer to withdraw the benefit of section 80HHC on the amount received against advertisements from abroad

Issues Involved:
1. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
2. Classification of remittances received as advertisement charges under section 80HHC of the Income-tax Act, 1961.
3. Direction to the Assessing Officer to recompute the deduction as per the Special Bench decision.
4. Invocation of section 263 by the Commissioner of Income-tax despite the issue being decided by the Commissioner of Income-tax (Appeals).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Income-tax under section 263:
The Tribunal upheld the view that the Commissioner of Income-tax had jurisdiction under section 263 of the Income-tax Act, 1961, to revise the assessment orders for the years 1991-92 and 1992-93. The Commissioner found the Assessing Officer's decision to allow the benefit of section 80HHC on advertisement charges erroneous and prejudicial to the interests of the Revenue. The Tribunal supported the Commissioner's action, stating that the Assessing Officer had incorrectly allowed deductions under section 80HHC for amounts received against advertisements, which did not qualify as export turnover.

2. Classification of remittances received as advertisement charges under section 80HHC:
The Tribunal and the High Court both concluded that remittances received by the assessee in convertible foreign exchange from abroad as advertisement charges were not on account of sale proceeds of any goods exported out of India. The High Court emphasized that the definition of "export turnover" under Explanation (B) to section 80HHC does not include advertisement charges. The court noted that advertisements published in a journal do not constitute export of goods or merchandise. The Commissioner and the Tribunal found that the amount received for advertisements was for rendering a service, not for the sale of goods, and thus did not qualify for deductions under section 80HHC.

3. Direction to the Assessing Officer to recompute the deduction:
The Tribunal directed the Assessing Officer to recompute the deduction as per the Special Bench decision, which clarified that advertisement charges do not form part of export turnover. The High Court upheld this direction, agreeing that the Assessing Officer had misinterpreted the definition of export turnover, leading to an incorrect computation of deductions under section 80HHC.

4. Invocation of section 263 by the Commissioner of Income-tax:
The High Court addressed the issue of whether the Commissioner of Income-tax could invoke section 263 despite the Commissioner of Income-tax (Appeals) having decided the issue of deduction under section 80HHC. The court held that the Commissioner of Income-tax was within his rights to invoke section 263, as the Assessing Officer's order was found to be erroneous and prejudicial to the interests of the Revenue. The High Court dismissed the argument that two views were possible, stating that the Assessing Officer's view was incorrect and could not be sustained.

Conclusion:
The High Court affirmed the decisions of the Commissioner of Income-tax and the Tribunal, holding that remittances received as advertisement charges do not qualify as export turnover under section 80HHC. The court supported the jurisdiction of the Commissioner under section 263 to revise the erroneous assessment orders and directed the recomputation of deductions accordingly. The application under section 256(2) was rejected, and the question referred by the Tribunal was answered in favor of the Revenue and against the assessee.

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