1993 (12) TMI 86 - AT - Income Tax

Summary

Issues Involved:
1. Whether the software exported by the assessee qualifies as "goods" or "merchandise" u/s 80HHC of the Income-tax Act, 1961.
2. Applicability of section 80HHE, introduced by the Finance (No. 2) Act, 1991, to the assessment period in question.

Summary:

Issue 1: Qualification of Software as "Goods" or "Merchandise" u/s 80HHC

The primary controversy revolves around whether the software exported by the assessee qualifies as "goods" or "merchandise" under section 80HHC of the Income-tax Act, 1961. The assessee-firm exported computer software to Moscow and claimed exemption u/s 80HHC. The Assessing Officer denied this exemption, arguing that the software did not fall under "goods" or "merchandise." This view was upheld by the CIT (Appeals).

The Tribunal examined the nature of the software, which was recorded on tapes/discs, and found it to be tangible, having considerable weight and mass. The Tribunal emphasized that the language of section 80HHC is clear and unambiguous, providing exemption for the export of "goods" or "merchandise," with no specific exclusion for software.

The Tribunal referred to various legal precedents and statutory definitions, including the Sale of Goods Act and the Constitution of India, which define "goods" as movable property. The Tribunal concluded that the software recorded on tapes/discs qualifies as "goods" or "merchandise" under section 80HHC, entitling the assessee to the claimed deduction.

Issue 2: Applicability of Section 80HHE

The Assessing Officer and CIT (Appeals) relied on section 80HHE, introduced by the Finance (No. 2) Act, 1991, which specifically addresses the export of computer software. However, this provision came into effect after the relevant accounting period and was not applicable to the assessment year in question.

The Tribunal held that a subsequent provision (section 80HHE) could not be used to interpret or restrict the meaning of an earlier provision (section 80HHC). The Tribunal cited Supreme Court rulings that a newly added provision cannot restrict the meaning of an earlier one unless there is ambiguity, which was not the case here.

The Tribunal also noted that section 80HHE was introduced to provide temporary relief for certain types of software exports not covered by section 80HHC. The Tribunal found that the software exported by the assessee, being in a physical form (tapes/discs), fell within the scope of "goods" or "merchandise" under section 80HHC.

Conclusion:

The Tribunal allowed the appeal, holding that the software exported by the assessee qualifies as "goods" or "merchandise" under section 80HHC, and the assessee is entitled to the claimed deduction. The reliance on section 80HHE by the revenue authorities was deemed inappropriate for the assessment period in question.