1996 (7) TMI 185 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for deduction under section 80HHC of the Income-tax Act, 1961.
2. Definition and interpretation of "export out of India."
3. Applicability of the concept of "deemed export" under the Import and Export Policy to Income-tax Act.
4. Interpretation of the term "any other establishment" in Explanation (aa) to section 80HHC.
5. Relevance of receiving sale proceeds in convertible foreign exchange for deduction under section 80HHC.

Detailed Analysis:

1. Eligibility for Deduction under Section 80HHC of the Income-tax Act, 1961:
The primary issue is whether the appellant, a Pvt. Ltd. company engaged in metal printing and related activities, is eligible for deduction under section 80HHC. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) both rejected the claim, stating that the appellant did not meet the criteria of exporting goods out of India. The Tribunal upheld this view, emphasizing that the goods did not cross the territorial boundaries of India, a crucial condition for eligibility under section 80HHC.

2. Definition and Interpretation of "Export out of India":
The AO and the Commissioner of Income-tax (Appeals) both stressed that for a transaction to qualify as an export under section 80HHC, the goods must physically cross the boundaries of India. The Tribunal agreed, noting that the ordinary meaning of "export" involves sending goods outside the country. The goods in question were sold and delivered within India to UNICEF, and thus did not meet this criterion.

3. Applicability of the Concept of "Deemed Export" under the Import and Export Policy to Income-tax Act:
The appellant argued that the sales to UNICEF should be considered "deemed exports" as per the Import and Export Policy. However, the AO and the Commissioner of Income-tax (Appeals) rejected this argument, stating that the concept of "deemed export" does not exist in the Income-tax Act. The Tribunal concurred, noting that a deeming provision in one enactment cannot be imported into another enactment unless explicitly provided for.

4. Interpretation of the Term "Any Other Establishment" in Explanation (aa) to Section 80HHC:
The appellant contended that the term "any other establishment" in Explanation (aa) should be narrowly construed to mean establishments similar to shops or emporiums. The Tribunal disagreed, stating that the term includes any establishment not involving clearance at a customs station, thereby supporting the Revenue's case that physical export is necessary for section 80HHC benefits.

5. Relevance of Receiving Sale Proceeds in Convertible Foreign Exchange for Deduction under Section 80HHC:
The appellant argued that receiving sale proceeds in convertible foreign exchange should suffice for the deduction. The AO and the Commissioner of Income-tax (Appeals) noted that while receiving convertible foreign exchange is a condition, it is not the sole criterion. The Tribunal upheld this view, emphasizing that both conditions-export out of India and receipt of convertible foreign exchange-must be met.

Conclusion:
The Tribunal upheld the decisions of the AO and the Commissioner of Income-tax (Appeals), concluding that the appellant did not satisfy the conditions for deduction under section 80HHC as the goods were not exported out of India. The appeal was dismissed.