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TMI Blog1991 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee went in appeal. The CIT (Appeals) disposed of this issue very briefly in para 5 of his order which reads as follows : " 5. The next ground in appeal is that the ITO was not justified in not allowing 80HHC with reference to cash exports sales made in India to the foreign buyers from whom money was received by foreign exchange. 80HHC comes into place only when there is export of goods from India by the seller and not by the purchaser and therefore the action of the ITO is perfectly in order and there is no interference called for. " It is against this finding of the CIT (Appeals) that the assessee is in appeal before us. 6. Mrs. Aarti Vissanji, appearing for the appellant, argued that the issue for consideration was whether sales to foreign tourists effected in the shop situated in the Taj Mahal Hotel could be treated as export sales for the purpose of deduction under section 80HHC. She pointed out that the goods sold to foreign tourists in the shop situated in Taj Mahal Hotel were paid for in foreign currency for which the appellant had maintained a separate account. It was an admitted fact that the appellant was engaged in export of readymade garments and in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, argued the learned counsel, even the import export policy had treated sales of readymade garments to foreign tourists as qualifying for import replenishment under the Import policy for the registered exporters. The appellant-firm was a registered exporter and therefore such sales, it was argued, should be treated as exports for the purpose of section 80HHC. Finally, Mrs. Vissanji argued that the retrospective amendment in Finance Bill, 1991, to section 80HHC, by negative implication directly supported the stand of the assessee [190 ITR para-6 p. 300 (Statutes)). She also relied on a decision of the Delhi Bench in the case of Indian Handicrafts Emporium v. ITO [IT Appeal No. 1354 (Delhi) 1980] for the assessment year 1976-77 where the Tribunal held that sales to the extent of Rs. 21 lakhs against foreign currency received in India represented foreign sales. Although this decision was given in the context of section 35C, the main finding given by the Tribunal, argued Mrs. Vissanji, supported the appellant's case. The learned Departmental Representative pointed out that the language of section 80HHC, as it stood before its amendment by the Finance Act, 1985, with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hotel for which payment was received in convertible in foreign currency should have been treated as export sales for the purpose of relief under section 80HHC. 8. We have considered the submissions made on either side. After a careful scrutiny of the relevant provisions and the papers filed on record, we are of the view that the appellant is entitled to succeed in its claim for section 80HHC, relief in respect of local sales effected to foreign tourists for which money is received in foreign currency. The main purpose of section 80HHC is to encourage exports, with the main intention of earning foreign exchange. No doubt sub-section (1) of section 80HHC speaks of an assessee being an Indian company or a person (other than a company) who is resident in India, who exports out of India any goods or merchandise to which this section applies. Whereas the amended section speaks of an assessee being an Indian company or a person (other than a company) resident in India, which is engaged in the business of exports out of India of any goods or merchandise. In real terms, we do not find any material difference in the language of the two sections. The expression "exports out of India" cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch import licences, what are called Replenishment licences, had accepted that the sales effected to tourists in foreign currency constituted exports which qualify for issue of import entitlements. 9. There is one more aspect of the matter which requires consideration while deciding this issue. Mrs. Vissanji pointed out that the provisions of section 80HHC were proposed to be amended from 1st of April 1992 and the amended provisions were to become effective in relation to the assessment year 1992-93 and subsequent years. In this context, she relied on the 'Memorandum explaining provisions in Finance (No.2) Bill, 1991', and the explanatory notes in respect of the proposed amendment and in particular, the following extract of such notes appearing in 190 ITR--p. 300 (Statutes) :-- " the issue, whether sale of goods to foreigners in shops or other establishments situated in India is export, has been a subject-matter of litigation. The Department's view, all along, has been that such counter sales within India do not constitute export and, therefore, are not eligible for the tax concession under section 80HHC. To give finality to this view and to end all judicial controversies, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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