1994 (12) TMI 117 - AT - Income Tax

Summary

Issues:
1. Deduction under section 80HHC for local counter sales made against foreign exchange.
2. Interpretation of 'export out of India' under Explanation (aa) to section 80HHC.
3. Requirement of customs clearance for goods sold to foreigners in India against foreign exchange.
4. Determining the export turnover for the purposes of section 80HHC.

Analysis:
1. The common issue in the appeals pertains to the deduction under section 80HHC for local counter sales made against foreign exchange. The Assessing Officer initially did not include these sales in the export turnover eligible for deduction. However, the CIT(A) directed the inclusion of local counter sales against foreign exchange as export sales for the purpose of computing the deduction under section 80HHC for assessment years 1987-88 and 1988-89.

2. The retrospective amendment to section 80HHC by the Finance (No. 2) Act of 1991 clarified that counter sales should not be considered exports out of India if they do not involve clearance at any custom station as defined in the Customs Act of 1962. The Tribunal referred to previous decisions to support this interpretation, emphasizing that customs clearance is necessary for goods to be classified as exports under section 80HHC.

3. The Tribunal analyzed the meaning of 'export out of India' under Explanation (aa) to section 80HHC, highlighting that the requirement for customs clearance applies to the exporter seeking the exemption under section 80HHC. It was established that in cases of counter sales to foreigners in India against foreign exchange, customs clearance is not needed as per the Customs Act of 1962, as the buyers take the goods with them outside India.

4. The judgment clarified that for goods sold to foreigners in India where the seller has to deliver the goods in a foreign country, customs clearance may be necessary, and such turnover would form part of the export turnover for section 80HHC purposes. The Tribunal differentiated between scenarios where customs clearance is required and where it is not, based on the nature of the transaction and the involvement of the exporter in the export process.

5. Ultimately, the Tribunal remitted the issue back to the Assessing Officer to allow the assessee an opportunity to establish whether customs clearance was involved in the sale of goods to foreigners against foreign exchange. This decision aimed to ensure a fair assessment based on the specific circumstances of the transactions and the requirements of section 80HHC.