D.b. Income Tax Appeal v. M/ S. The Gem Palace

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANAT JAIPUR BENCH, JAIPUR D.B. Income Tax Appeal No.736/ 2008Commissioner of Income Tax-I vs. M/ s. The Gem Palace Date of Judgment : 16.02.2015 REPORTABLE HON'BLE THE ACTI NG CHI EF JUSTI CE MR.SUNI L AMBW ANIHON'BLE MR. JUSTI CE PRAKASH GUPTA Mr. Anuroop Singhi, Mr.Sandeep Pathak, Mr.Saurabh Jain,counsel for appellant-Income Tax Department.Mr. N.M.Ranka, Sr.Counsel assisted byMr. N.K.Jain, Mr. Siddharth Ranka, counsel for respondent. 1.This Income Tax Appeal has been preferred by theCommissioner of Income Tax against the order passed by theIncome Tax Appellate Tribunal, in which the followingsubstantial question of law has been framed: “(i)Whether on the facts and circumstances of thecase, the ITAT was justified in allowing the deductionu/ s 80HHC to the assessee on counter sales made toforeign tourists, ignoring the specific provisions ofExplanation (aa) to Section 80HHC of the Act, whenthe assessee has failed to prove that the goods haveunder gone custom clearance?” 2.The facts, given rise to the present appeal, are that the respondent-assessee is a dealer of jewellery and handicraftsfrom shops/ emporium at Jaipur. The assessee sold the goodsby counter sale to foreign tourists in the showroom against theconvertible foreign exchange in India. The deduction undersection 80HHC of the Income Tax Act, 1961 was not allowed bythe Assessing Officer, on the ground that though the goodswere sold at the counter of the shop/ emporium, for which the sale voucher was signed by the tourists which provided theirpassport number and declaration to the effect that the goodswill not be gifted or sold in India, the exemption cannot beallowed until the proof of clearance of the goods at theCustoms 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 sPalace [ ( 2 0 03 ) 25 9 I TR 6 84 ( SC) ] has held that thecounter sale to the foreign tourists against convertible foreignexchange in India, is eligible for deduction under section80HHC of the Income Tax Act. The Apex Court has alsoapproved the decision of the Allahabad High Court in the caseof Ram Babu & son s vs. Un ion of I n dia [ ( 1 9 9 6 ) 2 2 2 I TR6 0 6 ( All.) ] . 5.The Rajasthan High Court in several decisions, hasconsistently taken the same view, in Jew els Em por iu m &Or s. vs. Un ion of I n dia & Or s. [ ( 2 0 0 3 ) 2 6 2 I TR 3 0 4( Raj .) ] , Com m ission er of I n com e Tax vs. Jew elsEm 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 0 0 4 ) 2 7 1 I TR 4 4 8 ( Raj .) ] , Com m ission er of I n com eTax vs. Mot ilal R. Min da [ ( 2 0 0 1 ) 2 5 0 I TR 8 3 1 ( Raj .) ] andI n com e Tax Off icer vs. Vaibh av Tex t iles [ ( 2 0 0 2 ) 2 5 8 I TR3 4 6 ( Raj .) ] . The Allahabad High Court has also taken thesame view in Mar ble Men vs. Com m ission er of I n com e Tax& Or s. [ ( 2 0 0 5 ) 2 7 2 I TR 8 1 ( All.) ] following its earlier judgments. 6.Learned counsel appearing for the Income TaxDepartment-appellant tried to distinguish the decisions, on theground of the language used in the Explanation(aa) of sub-section (4C) of section 80HHC of the Income Tax Act, is thatunless there is proof of the clearance at any Customs Station,as defined under section 2(13) of the Customs Act, 1962, theexemption was not allowable by the assessing authority. Hesubmits that the burden of proof of clearance at any CustomsStation was on the assessee, and that since there nodocuments were produced recording any clearance at anyCustoms Station, the exemption was denied under section80HHC of the Income Tax Act. judgments. 6.Learned counsel appearing for the Income TaxDepartment-appellant tried to distinguish the decisions, on theground of the language used in the Explanation(aa) of sub-section (4C) of section 80HHC of the Income Tax Act, is thatunless there is proof of the clearance at any Customs Station,as defined under section 2(13) of the Customs Act, 1962, theexemption was not allowable by the assessing authority. Hesubmits that the burden of proof of clearance at any CustomsStation was on the assessee, and that since there nodocuments were produced recording any clearance at anyCustoms Station, the exemption was denied under section80HHC of the Income Tax Act. 7.The explanation (aa) of sub-section (4C) of section 80HHC 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,not involving clearance at any customs station asdefined in the Customs Act, 1962 (52 of 1962).” 8.In the present case, the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded thename and address of the customer (tourist), but also his/ herpassport number and the declaration given by him that thegoods will not be gifted or sold in India. The goods sold atcounter at the shop/ emporium were sold to be taken out of thecountry, which necessarily involved clearance of baggage, bythe customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the CustomsStation by the assessee is required. The declaration in theform of Sale To Foreign Tourist Voucher, for sale made againstthe convertible foreign exchange with the undertaking that thegoods 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 theassessee to have produced the documents of clearance ofgoods sold by him to the foreign tourists at any CustomsStation. The Explanation (aa) is not a rule of evidence, norraises any presumption. It also does not require any proof ofclearance at any Customs Station. The explanation is couchedin double negative. It is a rule of exclusion and excludes onlythose transactions, which do not involve clearance at anyCustoms Station. It cannot be read in a manner, as suggestedby learned counsel appearing for the department that a proofof 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 TaxAct. 9.The question of law is even otherwise covered byjudgment of the Supreme Court in Com m ission er of I n com eTax vs. Silver & Ar t s Palace ( su pr a) , which has beenfollowed by the Rajasthan High Court consistently. The factsand circumstances of the case are not distinguishable to take adifferent view in the matter. The questions are, thus, decided in favour of the assessee and against the Department. 10.The Income Tax Appeal is dismissed. ( PRAKASH GUPTA) ,J. ( SUNI L AMBW ANI ) ,ACTI NG C.J. MohitAll corrections made in the judgment/order have been incorporated in the judgment/order being emailed.Mohit Tak, P.A.