The provision under section 80HHC of the Income Tax Act, 1961 does not require the goods to be physically exported out of India, and the focus is on earning foreign exchange, not the origin of the goods.

N. Kumar, J.—These appeals are preferred by the assessee challenging the order passed by the Tribunal which has held, to be eligible for the benefit under section 80HHC of the Income Tax Act, 1961, the foreign exchange is to be earned by exporting goods from India, otherwise, the assessee is not entitled to the benefit. As common questions of law is involved in all these appeals, they are taken up together and disposed of by this common order. The assessee is the proprietor of M/s Maharaja Metal Industries Ltd. Bangalore engaged in purchase and sale of non-ferrous metals, scraps, skimming ashes and drosses chemicals and other commodities. The purchases are made from one country and exported to another country at a margin of profit by arranging direct shipment from the purchasing country to the selling country. The bills are settled through Bank of Baroda in India. The proceeds are received through convertible foreign currency and payments are also made in convertible foreign currency. The assessee is also maintaining the Exchange Earners Foreign Currency Account (EEFC) account. The assessee claims that the entire business is covered by Foreign Exchange Management, 1999. The bills are raised in the name of M/s. Maharaja Metal Industries, Bangalore, and the sale bills are raised by M/s Maharaja Metal Industries.

2. For the assessment year 2001-02, the assessee on a total turn over of Rs. 2,74,02,676, he has shown net profit of Rs. 51,85,088, which the assessee claimed as deduction under section 80HHC. While examining the books of account of the assessee, it was noticed that the assessee was engaged in purchasing the goods from one country and selling it to another country. He had claimed 100% deduction on export profit as against 80% allowable from the assessment year 2001-02. The assessee accepted the said mistake, filed a revised return and paid taxes on 20% of the income at Rs. 11,25,020. He also claims certain other benefits about which we are not concerned in these appeals.

3. The assessing authority found that there was no export of any goods or merchandise out of India since the assessee was engaged in purchase of goods from one country and selling to another country. The assessee imported the materials from foreign country like Kenya and made payments in foreign exchange. The suppliers raised their invoices and the materials were taken for delivery by the assessee in various ports as per the terms of the trade. As per the Sale of Goods Act, the ownership of the materials contained in the invoices pass on to the buyer on the materials reaching the destination, as per the terms of the agreement along with the invoice. The properties in the invoice pass on to the buyer on receipt of the materials at the designated port. The assessee sold the above materials to his customers at South Africa, Bahrain etc. He directed the materials to be delivered at different destinations as per the terms of the sale invoice raised by him. The assessees ownership of the materials exported comes to an end on the goods being delivered at the port of the destination as agreed with the customers. The assessee being a resident Indian becomes the owner of the imported materials in India and the same is sold to foreign buyers, which become export in his hands. The assessee has received the entire sale consideration in foreign exchange in accordance with the Reserve Bank of Indias Rules.

4. After referring to the various judgments relied on behalf of the assessee, his contention was rejected on the ground that the transaction in this case is not in conformity with section 80HHC of the Income Tax Act.

5. According to the assessing authority, the word export as per the Law Lexicon, page 684, refers to taking out of goods which had become part and parcel of the mass of the property of the local area, and will not apply to goods in transit that is brought into the area for purposes of being transported out of it. Relying on the judgment of the Apex C