2007 (2) TMI 207 - HC - Income Tax

Summary

Issues Involved:
1. Whether the right to telecast the program in foreign countries qualifies as a sale of goods or merchandise eligible for deduction u/s 80HHC of the Income-tax Act, 1961.
2. Applicability of sections 80HHE and 80HHF of the Income-tax Act for the deduction claimed.

Summary:

Issue 1: Eligibility for Deduction u/s 80HHC
The primary issue was whether the right to telecast programs in foreign countries could be treated as a sale of goods or merchandise eligible for deduction u/s 80HHC of the Income-tax Act, 1961. The assessee-company, engaged in telecasting Tamil programs, entered into agreements with foreign parties, granting them telecast rights and received Rs. 50,86,342 as remuneration, which was claimed as a deduction u/s 80HHC. The Assessing Officer rejected the claim, stating there was no sale of goods or merchandise, only an assignment of rights. The Commissioner of Income-tax (Appeals) allowed the appeal, considering the transaction as a sale of goods or merchandise. The Tribunal upheld this decision, leading to the present appeal.

The court examined whether the product involved could be classified as "goods" or "merchandise" under section 80HHC. Referring to the Supreme Court's decisions in Tata Consultancy Services v. State of A.P. and Bharat Sanchar Nigam Ltd. v. Union of India, the court noted that "goods" could be tangible or intangible, provided they have utility, can be bought and sold, and are capable of being transmitted, transferred, delivered, stored, and possessed. The court concluded that the telecast rights met these criteria and thus qualified as "goods." Consequently, the assessee was entitled to the deduction u/s 80HHC.

Issue 2: Applicability of Sections 80HHE and 80HHF
The Revenue contended that the deduction should be claimed under sections 80HHE or 80HHF, not 80HHC. Section 80HHF, inserted by the Finance Act, 1999, effective from April 1, 2000, specifically covers deductions for profits from the export or transfer of film software, television software, music software, television news software, including telecast rights. The court referenced the Bombay High Court's decision in Abdulgafar A. Nadiawala v. Assistant CIT, which rejected a similar contention. The court clarified that section 80HHE pertains to computer software exports, not telecast rights, which fall under section 80HHF. However, since section 80HHF was not in effect during the assessment year 1998-99, the assessee's claim under section 80HHC was valid. The court emphasized that the introduction of section 80HHF does not negate the applicability of section 80HHC for the relevant assessment year.

Conclusion:
The court found no substantial question of law and dismissed the appeal, affirming the assessee's entitlement to the deduction u/s 80HHC for the assessment year 1998-99. No costs were awarded.