The Commissioner Of Income Tax, Tamil Nadu-Iv, Chennai v. M/S.a.v.m.production

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.11.2006 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.667 of 2004 The Commissioner of Income Tax,Tamil Nadu-IV, Chennai...AppellantVs M/s.A.V.M.Production, 38, Arcot Road, Chennai. ..Respondent Appeal filed under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, 'A' Bench,Chennai, dated 27.3.2003 passed in I.T.A.No.908/Mds/1999 for theassessment year 1993-94 against the Commissioner of Income Tax(Appeals) X, Chennai- 34 in I.T/WT/GT/Appela No.ITA 54/96-97 date oforder 22.3.1999 for the Assessment year 1993-94 and against theDeputy Commissioner of Income Tax, Film Circle, Chennai 600 006.PAN.GIR No.47-066/FX-3608 date of order 30.1.1996 Assessment year1993-1994. For Appellant : Mr.N.Muralikumar Sr.Standing Counsel For Respondent : Mr.T.R.Senthilkumar J U D G M E N T The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal in I.T.A. No.908/Mds/1999 dated27.3.2003. 2. The Revenue is the appellant. During the relevantassessment year, viz., 1993-94, the assessee's claim for deductionunder Section 80HHC in respect of transfer of exhibition of rightsin regard to one print of a film outside India, was disallowed bythe assessing officer holding that it would not amount to export ofany goods or merchandise. Against the said order of the assessingofficer, the assessee preferred an appeal before the Commissioner ofIncome-tax (Appeals), who allowed the appeal, against which, the https://hcservices.ecourts.gov.in/hcservices/ Revenue went on appeal before the Income-tax Appellate Tribunal andthe Tribunal also held the issue in favour of the assessee. Hence,the present tax case appeal by the Revenue raising the followingsubstantial question of law: " Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in holding that,granting of deduction under section 80HHC of the Income-tax Act, 1961, in regard to export of one print of a filmfor exhibition out of India is valid in law ?" 3. Mr.N.Muralikumaran, learned senior standing counselappearing for the Revenue, fairly submits that the issue raised inthe above question of law is squarely covered against the Revenue bythe decision of the Bombay High Court in Abdulgafar A.Nadiadwala Vs.Dy.CIT [(2004)267 I.T.R. 488], which was followed by this Court inCommissioner of Income-tax v. V.C.KUGANATHAN (unreported decision inT.C.(A) Nos.224 of 2003, etc. Batch, by judgment dated 31.10.2006). 4. The Bombay High Court, in the case of AbdulgafarA.Nadiawala, referred supra, while considering the scope of Section80HHC in regard to the transfer of telecasting of films to a foreignenterprise, held as follows: "Points for determination:The substantial points for determination,in a narrow compass, on rival contentions asbetween the parties canvassing rival views, onthe facts and circumstances of the case, are asunder: 1. Whether the product involved can besaid to be "goods" and/or "merchandise"? 2. If yes, can it be said that it wasexported out of India by way of sale orotherwise involving clearance at the customsstation? 4. The Bombay High Court, in the case of AbdulgafarA.Nadiawala, referred supra, while considering the scope of Section80HHC in regard to the transfer of telecasting of films to a foreignenterprise, held as follows: "Points for determination:The substantial points for determination,in a narrow compass, on rival contentions asbetween the parties canvassing rival views, onthe facts and circumstances of the case, are asunder: 1. Whether the product involved can besaid to be "goods" and/or "merchandise"? 2. If yes, can it be said that it wasexported out of India by way of sale orotherwise involving clearance at the customsstation? 3. If yes,whether the considerationreceived can be described as sale proceedsconstituting part of export turnover?"In respect of first point, the Bombay High Court held asfollows:"Having given our anxious consideration to allthe factors referred to hereinabove, thetransaction in question, whereby the assesseehad purchased the rights of various decoders andhad recorded on beta-cam tape and entered intoan agreement with the Star TV for transfer oftelecasting rights for Asian region for a periodof five years, can conveniently be described asarticle or thing falling within the sweep of theword "goods" or "merchandise". We, therefore,hold that the beta-cam tape, which hasincorporealrights,isa"goods"or "merchandise" for the purposes of section 80HHCof the Act."In respect of second point, the Bombay High Court held asfollows:"Having taken the survey of various provisions,one fails to understand as to why the word"otherwise" should not cover within its sweepsuch types of transactions and, if such types oftransactions are taken into account, then theywould be nothing but sale for the purposes ofsection 80HHC. We, thus, hold that thetransaction in question involved export of goodsout of India falling within the sweep of theconcept of "sale" involving clearance at thecustoms station as contemplated under section80HHC of the Act."In respect of third point, the Bombay High Court held asfollows:"Reading of the above illustrations in generaland clauses (v) and (vi) thereof in particularmake it clear that while describing thededuction under section 80HHC the words used are50 per cent of the "export proceeds" broughtinto India. It is, therefore, clear that eventhe Central Board of Direct Taxes has understoodthe words "export proceeds" to be synonymous to"sale proceeds". If that be so, the amountreceived by way of consideration in thetransaction in question can conveniently betermed as "export proceeds" equal to that of"sale proceeds". Once we hold that thetransaction involved in this case is akin to"sale" falling within the sweep of the words"sale or otherwise" then the consideration i.e.,export proceeds received can be termed as "saleproceeds". Finally, the Bombay High Court considered the abovecontentions in detail and held as follows:"In the above view of the matter and followingthe well recognised principles of interpretationreiterated from time to time and adoptingpurposive interpretation keeping in mind thepractical common sense approach and commercialexpediency we have reached the conclusion thatthe transaction involved in this appeal, on thefacts and circumstances of the case, is wellwithin the sweep of section 80HHC of the Act andall the authorities below were not justified indenying the deduction to the claim of theassessee under section 80HHC in the sum ofRs.84,23,746 in respect of export of beta-camtapes as per agreement dated March 29, 1995. We, thus, hold that the assessee is entitled tosuch deduction under section 80HHC of the Actand allow the appeal on this count.Accordingly, we answer the question in favour ofthe assessee and against the Revenue on thiscount." We, thus, hold that the assessee is entitled tosuch deduction under section 80HHC of the Actand allow the appeal on this count.Accordingly, we answer the question in favour ofthe assessee and against the Revenue on thiscount." 5. That apart, the Apex Court, while considering the scope ofthe word "goods" in Tata Consultancy Services Vs. State of AndhraPradesh (271 ITR 401), held as follows:- "It is not in dispute that when a programme iscreated it is necessary to encode it, upload thesame and thereafter unloaded. Indian law, asnoticed by my learned Brother, Variava J., doesnot make any distinction between tangibleproperty and intangible property. A "goods" maybe a tangible property or an intangible one. Itwould become goods provided it has theattributes thereof having regard to (a) itsutility; (b) capable of being bought and sold;and (c) capable of being transmitted,transferred, delivered, stored and possessed.If a software whether customized or non-customized satisfies these attributes, the samewould be goods. Unlike the American courts,Supreme Court of India have also not gone intothe question of severability." 6. Applying the above said principles, this Court, by judgmentdated 31.10.2006, in Commissioner of Income-tax v. V.C.KUGANATHAN(unreported decision in T.C.Nos.224 of 2003, etc., batch), referredsupra, observing that exporting the right for exhibition of positiveprint is nothing but sale of goods or merchandise, held that theassessee had satisfied the conditions contemplated under Section80HHC of the Act and hence the assessee is entitled for thededuction under Section 80HHC of the Act. In view of the above settled proposition of law, we answer thequestions of law in favour the assessee and against the Revenue.Accordingly, the tax case is dismissed. No costs. Sd/-Asst. Registrar. /true copy/ sra Sub Asst. Registrar. To 1.The Assistant Registrar,Income Tax Appellate TribunalIII Floor, Rajaji Bhavan, Besant Nagar, Chennai-600 090.Income Tax Appellate TribunalIII Floor, Rajaji Bhavan, Besant Nagar, Chennai-600 090. 2.The Commissioner of Income Tax,Tamilnadu IV, Chennai. Tamilnadu IV, Chennai. 3.The Commissioner of Income Tax (Appeals)X, Chennai-34. 4. The Deputy Commissioner of Income Tax,Film Circle, Chennai-6. 1 cc to Mr.T.R.Senthilkumar, Advocate, Sr. 58654 1 cc to M/s. Pushya Sitaraman, Advocate, Sr. 59143 Tax Case (A) No.667 of 2004 MS (CO)kk 3/1