2004 (8) TMI 636 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under section 80HHC of the Income Tax Act.
2. Definition and scope of "goods" or "merchandise" under section 80HHC.
3. Alternative claim for deduction under section 80HHE.
4. Validity of the order under section 263 of the Income Tax Act.
5. Deduction under section 80-O of the Income Tax Act.

Detailed Analysis:

Issue 1: Deduction under section 80HHC of the Income Tax Act

The assessee, a data vending company, claimed a deduction under section 80HHC. The CIT(A) denied this claim, stating that the data and information exported by the assessee did not qualify as "goods" or "merchandise" under section 80HHC. The assessee argued that the exported data was tangible and marketed as a product globally. The Tribunal, referencing the case of Abdulgafar Nadiadwala v. Asstt. CIT, concluded that the data vending activities of the assessee qualified as "goods" or "merchandise," thus entitling the assessee to the deduction under section 80HHC.

Issue 2: Definition and scope of "goods" or "merchandise" under section 80HHC

The CIT(A) held that the terms "goods" and "merchandise" under section 80HHC referred to tangible items. The Tribunal disagreed, citing the judgment in Abdulgafar Nadiadwala's case, which held that broadcasting signals and similar intangible items could be considered "movable property" under the Sale of Goods Act. The Tribunal concluded that the data exported by the assessee fell within the scope of "goods" or "merchandise" for the purposes of section 80HHC.

Issue 3: Alternative claim for deduction under section 80HHE

The assessee submitted an additional ground for deduction under section 80HHE, arguing that the exported data qualified as computer software. The Tribunal did not specifically address this claim, as the primary claim under section 80HHC was allowed.

Issue 4: Validity of the order under section 263 of the Income Tax Act

The CIT exercised jurisdiction under section 263, modifying the assessment order and denying the deduction under section 80-O previously granted to the assessee. The Tribunal noted that since the primary claim under section 80HHC was allowed, the appeal against the order under section 263 became infructuous and was dismissed.

Issue 5: Deduction under section 80-O of the Income Tax Act

The assessee had initially been granted a deduction under section 80-O, which was later denied by the CIT under section 263. The Tribunal did not delve into the merits of the section 80-O claim, as the primary issue under section 80HHC was resolved in favor of the assessee, rendering the section 80-O claim moot.

Conclusion:

The Tribunal allowed the appeal concerning the deduction under section 80HHC, recognizing the data vending activities as "goods" or "merchandise." Consequently, the alternative claim under section 80HHE and the appeal against the section 263 order were dismissed as infructuous.