Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/ S.mangalam Arts, Govind Nagar, Amber Palace Road, Jaipur

Reportable IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANAT JAIPUR BENCH, JAIPUR :: JUDGMENT :: D.B. INCOME TAX APPEAL NO.37/ 2008Commissioner of Income Tax, Jaipur-II, JaipurVs.M/ s.Mangalam Arts, Govind Nagar, Amber Palace Road, Jaipur D.B. INCOME TAX APPEAL NO.442/ 2008 Commissioner of Income Tax, Jaipur-II, JaipurVs. M/ s.Mangalam Arts, Govind Nagar, Amber Palace Road, Jaipur D.B. INCOME TAX APPEAL NO.475/ 2008 Commissioner of Income Tax, Jaipur-II, Jaipur Vs. M/ s.Mangalam Arts, Govind Nagar, Amber Palace Road, Jaipur D.B. INCOME TAX APPEAL NO.531/ 2008 Commissioner of Income Tax, Jaipur-II, Jaipur Vs.M/ s.Mangalam Arts, Govind Nagar, Amber Palace Road, Jaipur 10.02.2015 HON'BLE THE ACTI NG CHI EF JUSTI CE MR. SUNI L AMBW ANIHON'BLE MR. JUSTI CE PRAKASH GUPTA Mr.R.B.Mathur, for the appellant.Mr.Sanjay Jhanwar, for the respondent. 1.In these Income Tax Appeals filed by the Commissioner ofIncome Tax under Section 260A of the Income Tax Act, one of thecommon questions of law involved, is as follows: - “Whether in the facts and circumstances of the case, the ITATwas justified in law in allowing the deductions u/ s.80 HHC to the assessee on the counter sales to foreign tourists when theassessee has failed to prove that the goods have undergonecustom clearance and whether such deduction can be allowedu/ s.80HHC in the light of explanation (aa) added with regardto counter sales with retrospective effect?” 2.The facts, given rise to the present appeals, are that therespondent-assessee is a dealer of jewellery and handicrafts fromshops/ emporium at Jaipur. The assessee sold the goods by countersale to foreign tourists in the showroom against the convertibleforeign exchange in India. The deduction under section 80HHC ofthe Income Tax Act, 1961 was not allowed by the Assessing Officer,on the ground that though the goods were sold at the counter of theshop/ emporium, for which the sale voucher was signed by thetourists which provided their passport number and declaration to theeffect that the goods will not be gifted or sold in India, theexemption cannot be allowed until the proof of clearance of thegoods at the Customs Station was produced. 3.We have heard learned counsel appearing for the parties. 4.We find that the Apex Court in CI T vs. Silver & Ar t s Palace[ ( 2 00 3 ) 2 5 9 I TR 6 8 4 ( SC) ] has held that the counter sale to the foreign tourists against convertible foreign exchange in India, is eligible for deduction under section 80HHC of the Income Tax Act.The Apex Court has also approved the decision of the Allahabad HighCourt in the case of Ram Babu & sons vs. Union of I n dia[ ( 1 99 6 ) 2 2 2 I TR 6 0 6 ( All.) ] . 5.The Rajasthan High Court in several decisions, has consistentlytaken the same view, in Jew els Em por iu m & Or s. vs. Un ion ofI n dia & Or s. [ ( 2 00 3) 2 6 2 I TR 3 0 4 ( Raj .) ] , Com m issioner of I n com e Tax vs. Jew els Em por iu m [ ( 2 0 0 3 ) 1 3 1 TAXMAN 2 6 6( Raj .) ] , Com m ission er of I n com e Tax vs. Raj en dr a Kasliw al[ ( 2 00 4 ) 2 7 1 I TR 4 4 8 ( Raj .) ] , Com m ission er of I n com e Taxvs. Mot ilal R. Min da [ ( 20 0 1 ) 2 5 0 I TR 8 3 1 ( Raj .) ] and I ncom eTax Officer vs. Vaibh av Tex t iles [ ( 2 0 0 2 ) 2 58 I TR 3 4 6 ( Raj .) ] .The Allahabad High Court has also taken the same view in Mar bleMen v s. Com m ission er of I n com e Tax & Or s. [ ( 2 00 5) 27 2 I TR8 1 ( All.) ] following its earlier judgments. I n com e Tax vs. Jew els Em por iu m [ ( 2 0 0 3 ) 1 3 1 TAXMAN 2 6 6( Raj .) ] , Com m ission er of I n com e Tax vs. Raj en dr a Kasliw al[ ( 2 00 4 ) 2 7 1 I TR 4 4 8 ( Raj .) ] , Com m ission er of I n com e Taxvs. Mot ilal R. Min da [ ( 20 0 1 ) 2 5 0 I TR 8 3 1 ( Raj .) ] and I ncom eTax Officer vs. Vaibh av Tex t iles [ ( 2 0 0 2 ) 2 58 I TR 3 4 6 ( Raj .) ] .The Allahabad High Court has also taken the same view in Mar bleMen v s. Com m ission er of I n com e Tax & Or s. [ ( 2 00 5) 27 2 I TR8 1 ( All.) ] following its earlier judgments. 6.Learned counsel appearing for the Income Tax Department-appellant tried to distinguish the decisions, on the ground of thelanguage used in the Explanation(aa) of sub-section (4C) of section80HHC of the Income Tax Act, is that unless there is proof of theclearance at any Customs Station, as defined under section 2(13) ofthe Customs Act, 1962, the exemption was not allowable by theassessing authority. He submits that the burden of proof ofclearance at any Customs Station was on the assessee, and thatsince there no documents were produced recording any clearance atany Customs Station, the exemption was denied under section80HHC of the Income Tax Act. 7.The explanation (aa) of sub-section (4C) of section 80 HHC of the Income Tax Act reads as follows: “(aa) “export out of India” shall not include anytransaction by way of sale or otherwise, in a shop,emporium or any other establishment situate in India, notinvolving clearance at any customs station as defined inthe Customs Act, 1962 (52 of 1962).” 8.In the present cases, the assessee had produced the Sale ToForeign Tourists Voucher, which not only recorded the name andaddress of the customer (tourist), but also his/ her passport number and the declaration given by him that the goods will not be gifted orsold in India. The goods sold at counter at the shop/ emporium weresold to be taken out of the country, which necessarily involvedclearance of baggage, by the customs authorites. There was nofurther proof, nor any document in proof of clearance of the goodsat the Customs Station by the assessee is required. The declarationin the form of Sale To Foreign Tourist Voucher, for sale madeagainst the convertible foreign exchange with the undertaking thatthe goods will not be gifted or sold in India, was sufficient proof forexport out of India. Unless anything contrary was alleged andproved by the department, it was not necessary for the assessee tohave produced the documents of clearance of goods sold by him tothe foreign tourists at any Customs Station. The Explanation (aa) isnot a rule of evidence, nor raises any presumption. It also does notrequire any proof of clearance at any Customs Station. Theexplanation is couched in double negative. It is a rule of exclusionand excludes only those transactions, which do not involve clearanceat any Customs Station. It cannot be read in a manner, assuggested by learned counsel appearing for the department that aproof of customs clearance of baggage must be provided to establishthe export of goods out of India for the purpose of deduction ofprofits on such sales under section 80HHC of the Income Tax Act. 9.The question of law is even otherwise covered by judgment ofthe Supreme Court in Com m ission er of I n com e Tax vs. Silver &Ar t s Palace ( su pr a) , which has been followed by the RajasthanHigh Court consistently. The facts and circumstances of the case arenot distinguishable to take a different view in the matter. The question is, thus, decided in favour of the assessee and against theDepartment. 9.The question of law is even otherwise covered by judgment ofthe Supreme Court in Com m ission er of I n com e Tax vs. Silver &Ar t s Palace ( su pr a) , which has been followed by the RajasthanHigh Court consistently. The facts and circumstances of the case arenot distinguishable to take a different view in the matter. The question is, thus, decided in favour of the assessee and against theDepartment. 10.The common question of law in all the appeals, is thus,decided in favour of the assessee, and against the Revenue. Theadditional question of law framed in D.B.Income Tax AppealNos.442/ 2008, 475/ 2008 & 531/ 2008, is also decided in favour ofthe assessee, and against the Revenue. 11.The Income Tax Appeals are dismissed.12.A copy of this judgment be placed in all the connected files. ( PRAKASH GUPTA) ,J. ( SUNI L AMBW ANI ) ,ACTG.CJ. Skant/ -, Proof Reader Al l t he cor r ect i ons made i n t he j udgment / or der have been i ncor por at edi n t he j udgment / or der bei ng emai l ed. Shashi Kant Gaur ,Pr oof Reader