1992 (4) TMI 107 - AT - Income Tax

Summary

Issues:
- Entitlement to deduction under section 80HHC of the Act for exports made by the assessee in the assessment years 1983-84 and 1984-85.
- Classification of dry chillies and Methi seeds as primary agricultural commodities.
- Requirement of exporting the same commodities in the immediately preceding year for eligibility for deduction under section 80HHC.
- Receipt of sale proceeds in convertible foreign exchange as per section 80HHC(2)(a).

Analysis:

The judgment pertains to departmental appeals against the CIT(A)'s order regarding the assessee's entitlement to deduction under section 80HHC for exports made in the assessment years 1983-84 and 1984-85. The main issue was whether the exported goods, dry chillies and Methi seeds, qualified as primary agricultural produce, impacting the eligibility for the deduction. The CIT(A) allowed the claim, stating that the goods were not primary agricultural produce and that the assertion of no exports in earlier years was incorrect.

The Department contended that the commodities were indeed primary agricultural produce and cited relevant ITAT decisions. The assessee's counsel supported the CIT(A)'s order. It was revealed that the assessee did not export anything in the year relevant to 1982-83 and exported Methi seeds for the first time in the previous year relevant to 1984-85.

The Tribunal delved into the classification of agricultural commodities, emphasizing that primary agricultural produce retains its original character after minimal processing. It cited the example of paddy and highlighted that if a new commodity emerges after processing, it ceases to be primary agricultural produce. The Tribunal found that both dry chillies and Methi seeds qualified as primary agricultural produce, thereby denying the assessee's deduction claim under section 80HHC.

Consequently, the Tribunal allowed the departmental appeals, holding that the assessee was not entitled to the deduction under section 80HHC. The judgment did not delve into other questions raised, given the resolution of the primary issue.

In conclusion, the Tribunal's decision centered on the classification of commodities as primary agricultural produce and its impact on the eligibility for deduction under section 80HHC, ultimately ruling against the assessee's claim based on the nature of the exported goods.