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TMI Blog2006 (1) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign currency was accumulated, it dispatched the same physically to credit Swiss (Bank) Switzerland through Airlines. The said Bank, after physical checking of such currency, was required to pay the assessee into their NOSTRO account with some other Bank in USA or UK as the case may be. Such transfer was in the currency of that country. Assessee could use such money for meeting its requirement in these countries. Whenever, it had needed the fund, it had remitted the same to India from such NOSTRO account. On these facts, assessee claimed deduction under section 80HHC qua the convertible foreign exchange brought to India out of NOSTRO account. It may be mentioned that such claim was not made in the return of assessment year 1989-90 but was claimed in assessment proceedings. In all other years, the claim was made in the return of income. The Assessing Officer rejected the claim of assessee on the following ground: "(a) The transfer of funds to the foreign accounts is only one of the method for obtaining credit. Therefore, it is merely a procedure adopted by the assessee and does not amount to export. (b) What the assessee transfers is foreign exchange and what is credited to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is entitled to weighted deduction under section 35B. The assessee has filed details of his foreign travel which go show that his travel was in connection with the said export business. The assessee therefore directed to be allowed weighted deduction on foreign tour expenses of Rs. 33,231. (b) The case of Imperial Tobacco Co. v. IRC - 25 TC 292 (CA) was referred for the following proposition: 'We must decide this case having regard to the fact as found. In the light of those facts, the acquisition of these Dollars cannot be regarded as colourless. They were an essential part of a completed commercial operation. That being so, what is the true analysis of the position? A manufacture has provided himself with a commodity namely, Dollars. I call Dollars a "commodity" not for the reason that they are not currency in this country, but they have a characteristic which is common to other commodities, and is not shared by Sterling, namely, that their value from day-to-day varies in terms of Sterling just in the same way as coal or bricks or anything else may do.' (c) The case of R.R. Sen Brothers v. JCIT- 95 TTJ 398 (Cal.) it was referred for the following proposition: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 80HHC does not appear to hold good in view of the provision of section 80HHC(3)(b). Whereas, section 80HHC(3)(a) considers availability of deduction under this section of goods or merchandise manufactured (or processed) by the assessee, sub-clause (b) of section 80HHC(3) provides conditions in respect of export out of India of trading goods for the purpose of deduction under section 80HHC. It is now clear that foreign currency is to be considered as "goods" and these are "traded goods" .... Therefore, the Assessing Officer was wrong in not allowing deduction under section 80HHC in the instant case and the CIT(A) was also in error in confirming such order when trading in foreign currency assumes the meaning of trading in goods and merchandise and is eligible for deduction under section 80HHC(3) of the Act. In reversing the orders of the authorities below, we allow this ground taken by the assessee.' (d) The case of CIT v. Soorajmull Nagarmull - 129 ITR 169 (Cal.) was referred for the following proposition: 'It was held that the bonds were "goods" or "commodities" within the meaning of those words in the Order. Our attention was also drawn to the observations in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated commercial operation."' That being so, what is the true analysis of the position? A manufacturer has provided himself with a commodity, namely, dollars. I call Dollars a "commodity" not for the reason that they are not currency in this country, but because they have a characteristic which is common to other commodities, and is no shared by Sterling, namely, that their value from day-to-day varies in terms of Sterling, just in the same way as coal, or bricks, or anything else may do." In view of the above decisions, it was submitted that foreign exchange be considered as "goods" for claiming deduction under section 80HHC. It was also submitted that this issue is concluded by the decision of Co-ordinate Bench in the case of R.R Sen Bros. v. Joint CIT [2005] 95 TTJ (Cal.) 398 which is binding on this Bench. If for any reason, different view is possible, then the matter be referred to Special Bench. At this stage, a query was raised as to what is the scope of the word "goods" under' Sale of Goods Act, 1930. In response to the same, it was submitted by him that definition of goods in the said enactment excludes "money" but money, according to him, would include only Indian c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, a word may be defined differently in different statutes depending upon the object/purpose of the Act. Consequently, such meaning should be restricted to these enactments only. Various decisions have been referred to in support of such submission. It was further submitted that sale implies two different things i.e., goods on one hand and the consideration in the form of price on the other hand. If foreign exchange is to be understood as "goods", then it would be case of "Barter" not amounting to sale, According to him, "sale proceeds" in section 80HHC refers to consideration in the form of money while export of goods refers to other things. Hence, it cannot be said that foreign exchange is "goods". Lastly, it was submitted that section 80HHC was enacted with the object of augment the foreign exchange reserve. Therefore, if the contention of the assessee's Counsel is accepted, then it would defeat the purpose of the enactment since it would deplete the foreign exchange reserve when the same is exported out of India. According to him, the construction of statute should be that which serves the purpose of the Act rather than which defeats the same. 5. Rival submissions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a broad sense. However, Their Lordships did not accept this contention and rather endorsed the view of the earlier decision of the Constitution Bench of the Apex Court in the case of STO v. Budh Prakash Jai Prakash AIR 1954 SC 459 and then held at Page-566 "we must accordingly hold that the expression "sale of goods" in Entry 48 cannot be construed in its popular sense, and it must be interpreted in its legal sense. What its connotation in that sense is, must now be ascertained". Further, at Page-569, " Their Lordships observed "We think that true legislative intent is that the expression "sale of goods" in Entry 48 should bear the precise and definite meaning it has in law, and that, that meaning should be left to fluctuate with the definition of "sale" in laws relating to sale of goods which might be in force for the time being". Proceeding further, at Page-570, they observed "We are of the opinion that the provisions in the Government of India Act, 1935, relied on for the appellant are too inconclusive to support the inference that "sale" in Entry 48 was intended to be used in a sense different from that in the Sale of Goods Act". Finally, Their Lordships observed at Page-573 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court observed at Page-11 "when words acquire a particular meaning or sense because of their authoritative construction by superior courts, they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context." 7. In view of the above authoritative judgments, it is clear that where a word or an expression has been defined in a particular enactment, then it is presumed that Legislature was aware of such legal meaning of that word or expression while enacting a subsequent legislation and, therefore, if such word or an expression is not defined in the subsequent legislation, then the meaning of such word or expression has to be understood in that legal sense in which it was used in the earlier enactment. 8. In the present case, we are required to ascertain the meaning of the word "goods" as appearing in section 80HHC of the Act. The word "goods" is not defined in the Income-tax Act but the meaning of such word has already been defined in the sale of Goods Act, 1930. We have already noticed that the Hon'ble Supreme Court applied the meaning of the expression "sale of goods" as provided in the Sale of Goods A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that, for example, it is usually given a wide meaning when used in a will and when that meaning gives effect to the intention of the testator, an intermediate meaning in connection with actions for money paid or for money had and received, and a narrow meaning in the criminal law and in relation to execution [27 Halsbury's Laws (3rd Edn.)]. "Money" includes a cheque, bank-note, postal order or money order (Betting, Gaming and Lotteries Act, 1963, section 55). (3) Black's Law Dictionary Special Deluxe Fifth Edition Money - In usual and ordinary acceptation it means coins and paper currency used as circulating medium of exchange, and does not embrace notes, bonds, evidences of debt, or other personal or Real Estate. Lane v. Railey, 280 Ky. 319, 133 S.W. 2d 74, 79, 81. (4) Webster's Encyclopaedic Unabridged Dictionary Money - 1. Gold, Silver or other metal in pieces of convenient form stamped by public authority and issued as a medium of exchange and measure of value; 2. Any circulating medium of exchange including coins, paper money and demand deposit; 3. Any article or substance used as medium of exchange, measure of wealth or means of payment; 4. An amount or sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government may discharge its foreign debts in foreign currency. If the contention of assessee that foreign exchange amounts to goods is accepted, then, in our opinion, it would frustrate and defeat the purpose or object of section 80HHC inasmuch as it would deplete the foreign exchange reserve by sending the same to outside countries. The object of section 80HHC would be achieved only when the word "goods" is held to exclude money including foreign exchange. Thus, we would prefer the interpretation, which serve the purpose and object of the enactment. Even on this ground, we hold that "foreign exchange" cannot be considered as "goods" for the purpose of section 80HHC. 13. The judgments of the High Courts relied upon by the Learned counsel for the assessee are not on the point before us and, therefore, do not help the case of the assessee. The decision of the Hon'ble Karnataka High Court in the case of Kirloskar Asea Ltd. v. CIT [1979] 117 ITR 82, related to the issue of capital gain under section 45 of the Act and the question was whether foreign currency could be considered as capital asset. The definition of the capital asset in section 2(14) of the Act is quite different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since it has been held by us that currency forms part of money it has to be excluded from the definition of "goods". Accordingly, the aforesaid decision of the Tribunal is quite distinguishable and cannot be applied in the present case. The only decision which favours the case of assessee is the decision of the Tribunal, Calcutta Bench, in the case of R.R. Sen Bros. v. Joint CIT [2005] 95 TTJ (Cal.) 398. In this case, it has been held that the foreign exchange falls within the scope of "goods". The perusal of the said order shows that such finding is based on the dictionary meaning as well as the decision of Imperial Tobacco Co.'s case the decision of the Hon'ble Karnataka High Court in the case of Kirloskar Asea Ltd. v. CIT [1979] 117 ITR 82 and the Hon'ble Calcutta High Court in the case of CIT v. Oil India Ltd. [1983] 143 ITR 848. The Learned Counsel for the assessee has contended that this decision being a decision of Co-ordinate Bench is binding on us and, therefore, different view cannot be taken. We are unable to accept such contention for the reasons given hereafter. No doubt the decision of the Co-ordinate Bench should be followed by another Co-ordinate Bench but the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relates to computation of deduction under section 80HHD of the Income-tax Act, 1961 ('Act'). 15. Briefly stated the facts are these: The facts relating to this issue are almost similar in all the appeals except the figures on various counts. Therefore, for the sake of convenience, Accordingly, the facts as narrated in the orders of the lower authorities and also taken from the Paper Book are stated hereinafter. 16. The assessee is a well-known company engaged in the business of conducting tours and consequently providing services to both foreign tourists as well as domestic tourists. In addition, the assessee derives income by way of booking of cargo and dealing in foreign exchange. Thus, the assessee was entitled to deduction under section 80HHD of the Act. It claimed deduction amounting to Rs. 84,44,292 by applying the formula prescribed in subsection 3(b) of section 80HHD. The computation of deduction has been enclosed along with the Audit Report as Statement-A, which is reproduced as under: "Statement A Item 1 of Annexure to report in Form No. 10CCAD under section 80HHD of the Income-tax Act, 1961 for 23 months period ended 31-3-1989. Computation of Profits derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international air tickets and in respect of tour inbounds. However, in respect of dealing in foreign exchange, the Assessing Officer was of the view that entire sale proceeds of foreign exchange constitute the business receipts for the purpose of applying the formula in sub-section 3(b) of the said section. Accordingly, he adopted the total turnover of the foreign exchange amounting to Rs. 6,50,12,99,100 as per the figures given by the assessee and the same appears at Page-38 of the Paper Book. To these figures, he added the commission receipts in respect of other two items and thus the total business receipts were taken at Rs. 6,67,12,67,118. In the similar manner, he computed total sale to foreign tourist at Rs. 33,53,61,833 on the basis of average rate of profit of 1.2 per cent shown by the assessee while computing exchange profit at Rs. 40,24,342. Thus, the receipts in convertible foreign exchange was computed at Rs. 40,15,95,358 as against Rs. 7,02,57,867 declared by the assessee. Thus, the deduction under section 80HHD was computed at Rs. 12,58,863 asunder: Rs. 40,15,95,358 X Rs. 2,09,12,138 ----------------------------------- = Rs. 12,58,863 Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. After giving our due consideration, we are unable to accept the contention of the Learned Counsel for the assessee. If we have a bare look at the provisions of section 80HHD(3)(b), we find that the Legislature has used the words "receipts of the business unlike the turnover of business in section 80HHC(3)". There is no dispute that assessee is dealing in the foreign currency and in the course of such business there may be profit or loss as the case may be. Such activity is akin to a trader and, therefore, the sale proceeds of currency amounts to business receipts. In this connection, reference may be made to the judgment of the Hon'ble Supreme Court in the case of Chauranghee Sales Bureau, wherein, the sale proceeds of goods sold on auction were considered to be trading receipts even though assessee was acting as an auctioneer and was entitled to commission only. If the sale proceeds in the case of an auctioneer can be considered as a business receipt, we failed to understand as to how in the present case, the assessee can contend that sale proceeds of a currency would not amount to business receipts. In view of the same, we uphold the orders of the Learned CIT(A) on this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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