2007 (6) TMI 17 - HC - Income Tax

Export Revenue contended that assessee is entitle for deduction under 80HHF instead of 80HHC in respect profit and gains from export and transfer of any film software, television software etc. Held that revenue contention is not correct and allowed deduction under 80HHC

Summary

Issues Involved:
1. Allowability of deduction under section 80HHC for the export of master copies of film songs and music.
2. Classification of the transfer/export of master copies of film songs and music as a sale of goods or merchandise for the purpose of section 80HHC.
3. Applicability of section 80HHF for deductions instead of section 80HHC.

Issue-wise Detailed Analysis:

1. Allowability of Deduction under Section 80HHC:
The core issue was whether the Tribunal was correct in holding that there was no dispute about the allowability of deduction under section 80HHC for the export of master copies of film songs and music. The assessee, a company engaged in the export of Digital Audio Tape Master (DAT Master) containing recorded film songs, claimed deductions under section 80HHC. The Assessing Officer initially disallowed the claim, arguing that the exploitation rights in the film songs and music did not constitute an export of goods. However, the Commissioner of Income-tax (Appeals) and subsequently the Tribunal allowed the deduction, following the precedent set by the Bombay High Court in Abdulgafar A. Nadiadwala v. Asst. CIT [2004] 267 ITR 488.

2. Classification as Sale of Goods or Merchandise:
The second issue was whether the transfer/export of master copies of film songs and music could be treated as a sale of goods or merchandise under section 80HHC. The court referred to the definition of "goods" and "merchandise" as interpreted by the Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401 and Bharat Sanchar Nigam Ltd. v. UOI [2006] 282 ITR 273. The Supreme Court held that "goods" include all types of movable properties, whether tangible or intangible, provided they have attributes such as utility, capability of being bought and sold, and capability of being transmitted, transferred, delivered, stored, and possessed. The court found that the master copies of film songs and music met these attributes, thus qualifying as "goods" under section 80HHC.

3. Applicability of Section 80HHF:
The Revenue contended that the deduction should be claimed under section 80HHF, which deals with profits and gains from the export or transfer of film software, television software, music software, television news software, including telecast rights, and was inserted by the Finance Act, 1999, effective from April 1, 2000. The court rejected this contention, stating that the insertion of section 80HHF does not preclude the applicability of section 80HHC for the assessment years in question (1994-95 to 1997-98). The court emphasized that the specific provision under section 80HHF would apply to future transactions, while the transactions in question were rightly covered under section 80HHC.

Conclusion:
The court concluded that the attributes required for the property involved to be considered "goods" were satisfied. Consequently, the assessee was entitled to deductions under section 80HHC. The appeals were dismissed, and no substantial questions of law were found for further consideration.