2006 (10) TMI 65 - HC - Income Tax

Deduction under section 80HHC - Revenue contended that assessee is not entitle for the deduction under section 80HHC on the ground that there is no transfer of goods and merchandise only transfer of right to exhibit films - Held that revenue contention is not correct and allowed the deduction

Summary

Issues:
1. Whether the transfer of the right to exhibit films constitutes a sale of goods or merchandise for deduction under section 80HHC of the Income-tax Act, 1961.

Analysis:
The High Court of Madras heard appeals filed by the Revenue against orders passed by the Income-tax Appellate Tribunal concerning the treatment of the transfer of film rights in various tax cases. The central issue was whether the transfer of rights to exhibit films qualified as a sale of goods or merchandise for the purpose of claiming deductions under section 80HHC of the Act. The court consolidated all matters due to the common issue. The contentions revolved around the interpretation of 'goods' and 'merchandise' in the Act and the requirement of actual export sale proceeds for claiming relief under section 80HHC.

In one of the cases, the Bombay High Court's judgment in Abdulgafar A. Nadiadwala v. Asst. CIT [2004] 267 ITR 488 was cited, where the court held that intangible assets like film rights could be considered as goods or merchandise under section 80HHC. The court analyzed the definitions of 'goods' from various sources, including the Sale of Goods Act, to support the inclusion of film prints within the scope of the term 'goods'. The judgment emphasized that tangible and intangible assets satisfying certain attributes could be classified as goods, as per the Supreme Court's decision in Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401.

The court examined the Bombay High Court's detailed reasoning on the export of film rights, considering the transaction as falling within the concept of 'sale' for section 80HHC purposes. The court agreed with the Bombay High Court's interpretation, noting the absence of contrary arguments or evidence presented by the Revenue. Applying the principles established in the Tata Consultancy Services case, the court concluded that exporting film exhibition rights constituted goods or merchandise eligible for deduction under section 80HHC.

Ultimately, the High Court ruled in favor of the assessee in all tax cases, affirming their entitlement to deductions under section 80HHC. The court found that the transfer of film rights for exhibition qualified as goods or merchandise, meeting the conditions stipulated under section 80HHC. Consequently, the tax cases were dismissed with no costs awarded.