2006 (1) TMI 453 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction under section 80HHF of the Income-tax Act, 1961.
2. Evidence required for export or transfer outside India.
3. Legitimacy of the means of transfer.
4. Consistency in appellate decisions.

Detailed Analysis:

1. Entitlement to Deduction under Section 80HHF:
The core issue in this appeal is whether the assessee is entitled to a deduction under section 80HHF of the Income-tax Act, 1961. The assessee, engaged in the production and distribution of cine films, claimed a deduction under section 80HHF for foreign exchange earnings from Yashraj Films International Limited, UK, related to the export of DVD, VCD, and VHS rights of the film 'Prem Rog'. The Assessing Officer (AO) denied the deduction, stating that the assessee did not provide evidence of actual exports. The CIT(A) upheld this decision, emphasizing the need for evidence of legitimate means of transfer, such as customs clearance.

2. Evidence Required for Export or Transfer Outside India:
The AO and CIT(A) required the assessee to provide evidence of actual export or transfer of the VHS cassettes, including customs clearance. The assessee argued that the deduction was claimed for the transfer of rights, not the physical export of cassettes, and provided a confirmation from Yashraj Films International Limited, UK, regarding the transfer by courier. The tribunal noted that section 80HHF applies to the export or transfer of software or software rights, and the consideration must be received in convertible foreign exchange within a specified period. The tribunal found that the assessee had indeed transferred the television software rights and received the consideration in convertible foreign exchange, fulfilling the conditions for deduction under section 80HHF.

3. Legitimacy of the Means of Transfer:
The CIT(A) insisted on evidence of customs clearance to prove the legitimacy of the transfer. However, the tribunal clarified that for eligibility under section 80HHF, it is not necessary to physically export the television software. The transfer of rights itself, with the receipt of consideration in convertible foreign exchange, suffices. The tribunal found that the assessee had legally transferred the rights to Yashraj Films International Limited, UK, and received the payment as per the agreement, thus meeting the requirements of section 80HHF.

4. Consistency in Appellate Decisions:
During the hearing, it was highlighted that the same Commissioner (Appeals) had previously passed orders on similar facts with opposite conclusions. The tribunal emphasized the need for consistency in appellate decisions and noted that the CIT(A) had deviated from earlier decisions without providing cogent reasons. Although the tribunal decided the issue on merits in favor of the assessee, it underscored the importance of maintaining consistency in legal conclusions.

Conclusion:
The tribunal concluded that the assessee had transferred television software rights as per the agreement with Yashraj Films International Limited, UK, and received the consideration in convertible foreign exchange. Therefore, the assessee was entitled to the deduction under section 80HHF. The tribunal directed the AO to delete the disallowance of the deduction, allowing the appeal in favor of the assessee.