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2015 Supreme(Raj) 90
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR
SUNIL AMBWANI and PRAKASH GUPTA, JJ.
Commissioner of Income Tax-I – Appellant
vs.
M/s. Jewels Emporium – Respondent
Income Tax Appeal No.357/2005
Decided On : 16.02.2015
Mr. Anuroop Singhi, Mr.Sandeep Pathak, Mr.Saurabh Jain, counsel for appellant-Income Tax Department.
Mr.T.C.Jain, counsel for respondent.
The counter sale to foreign tourists against convertible foreign exchange in India is eligible for deduction under section 80HHC of the Income Tax Act, 1961, and the Explanation (aa) to section 80HHC does not require any proof of clearance at any Customs Station.
Headnote:
INCOME TAX ACT, 1961 - SECTION 80HHC - COUNTER SALES TO FOREIGN TOURISTS - DEDUCTION - PROOF OF CLEARANCE AT CUSTOMS STATION NOT REQUIRED - EXPLANATION (AA) TO SECTION 80HHC - INTERPRETATION.
Fact of the Case:
The assessee, a dealer of jewellery and handicrafts, sold goods by counter sale to foreign tourists in the showroom against convertible foreign exchange in India. The Assessing Officer denied the deduction under section 80HHC of the Income Tax Act, 1961, on the ground that there was no proof of clearance of the goods at any Customs Station.
Finding of the Court:
The court held that the counter sale to foreign tourists against convertible foreign exchange in India is eligible for deduction under section 80HHC of the Income Tax Act. The court also held that the Explanation (aa) to section 80HHC does not require any proof of clearance at any Customs Station. The explanation is couched in double negative and is a rule of exclusion that excludes only those transactions which do not involve clearance at any Customs Station.
Issues: Whether the assessee was entitled to deduction under section 80HHC of the Income Tax Act, 1961, on counter sales to foreign tourists without proof of clearance at any Customs Station.
Ratio Decidendi: The court relied on the judgment of the Supreme Court in Commissioner of Income Tax vs. Silver & Arts Palace [(2003) 259 ITR 684 (SC)] and the Rajasthan High Court in Jewels Emporium & Ors. vs. Union of India & Ors. [(2003) 262 ITR 304 (Raj.)] to hold that the counter sale to foreign tourists against convertible foreign exchange in India is eligible for deduction under section 80HHC of the Income Tax Act. The court also held that the Explanation (aa) to section 80HHC does not require any proof of clearance at any Customs Station.
Final Decision: The court dismissed the Income Tax Appeal filed by the Commissioner of Income Tax.
1. This Income Tax Appeal has been preferred by the Commissioner of Income Tax against the order passed by the Income Tax Appellate Tribunal, in which the following
substantial questions of law have been framed:
“(i) Whether on the facts and circumstances of the case, the ITAT was justified in allowing the deduction of Rs.24,01,108/-u/s 80HHC to the assessee on counter sales inspite of the specific provisions of Explanation (aa) to Section 80 HHC of the Act of 1961?
(ii) Whether on the facts and circumstances of the case, the ITAT as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC of the Act of 1961, when there is no finding to the effect that the goods were cleared at any of the custom station and further the assess itself has made a note to the effect that counter sales have not been considered as export out of India for the purpose of claiming deduction u/s 80HHC?
(iii) Whether on the facts and circumstances of the case, the finding of the ITAT as well as the CIT(A) is perverse, contrary to the record and untenable in the eye of law?”
2. The facts, given rise to the present appeal, are that the respondent-assessee is a dealer of jewellery and handicrafts from shops/emporium at Jaipur. The assessee sold the goods by counter sale to foreign tourists in the showroom against the convertible foreign exchange in India. The deduction under section 80HHC of the Income Tax Act, 1961 was not allowed by the Assessing Officer, on the ground that though the goods were sold at the counter of the shop/emporium, for which the sale voucher was signed by the tourists which provided their passport number and declaration to the effect that the goods will not be gifted or sold in India, the exemption cannot be allowed until the proof of clearance of the goods at the Customs Station was produced.
3. We have heard learned counsel appearing for the parties.
4. We find that the Apex Court in CIT vs. Silver & Arts Palace [(2003) 259 ITR 684 (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 High Court in the case of Ram Babu & sons vs. Union of India [(1996) 222 ITR 606 (All.)].
5. The Rajasthan High Court in several decisions, has consistently taken the same view, in Jewels Emporium & Ors. vs. Union of India & Ors. [(2003) 262 ITR 304 (Raj.)], Commissioner of Income Tax vs. Jewels Emporium [(2003) 131 TAXMAN 266 (Raj.)], Commissioner of Income Tax vs. Rajendra Kasliwal [(2004) 271 ITR 448 (Raj.)], Commissioner of Income Tax vs. Motilal R. Minda [(2001) 250 ITR 831 (Raj.)] and Income Tax Officer vs. Vaibhav Textiles [(2002) 258 ITR 346 (Raj.)]. The Allahabad High Court has also taken the same view in Marble Men vs. Commissioner of Income Tax & Ors. [(2005) 272 ITR 81 (All.)] following its earlier judgments.
6. Learned counsel appearing for the Income Tax Department-appellant tried to distinguish the decisions, on the ground of the language used in the Explanation (aa) of subsection (4C) of section 80HHC of the Income Tax Act, is that unless there is proof of the clearance at any Customs Station, as defined under section 2(13) of the Customs Act, 1962, the exemption was not allowable by the assessing authority. He submits that the burden of proof of clearance at any Customs Station was on the assessee, and that since there no documents were produced recording any clearance at any Customs Station, the exemption was denied under section 80HHC 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 any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962).”
8. In the present cas
