The central legal point established in the judgment is that the property involved in the transaction, i.e., music software, qualified as 'goods' for the purpose of deduction under Section 80HHC of the Income Tax Act, based on the attributes of utility, capability of being bought and sold, and capability of being transmitted, transferred, delivered, stored, and possessed.

P.D. Dinakaran, J.

The above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal dated 12. 2006 made in ITA Nos.1363 & 1364/Mds/2002 and 1135 & 1136/Mds/2005 for the assessment years 1994-95 to 1997-98 respectively, raising the following common substantial questions of law:

"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that there was no dispute about the allowability of deduction under section 80HHC in respect of the transfer/export of the master copies of the film songs and music along with the rights to make copies and sell cassettes outside India.

2. Whether in the facts and circumstances of the case, the Tribunal was right in treating the transfer/export of the master copies of the film songs and music along with the rights to make copies and sell cassettes outside India as a sale of goods or merchandise for the purpose of deduction under section 80HHC?

1. The Revenue is the appellant. The relevant assessment years are 1994-95 to 1997-98. The assessee is a company engaged in the business of export of Digital Audio Tape Master (DAT Master) containing the recorded version of film songs from Tamil feature films for exploitation overseas and the assessee claimed deduction under Section 80HHC of the Income Tax Act (for brevity, "the Act"). The Assessing Officer disallowed the claim of the deduction under Section 80HHC of the Act on the ground that the exploitation rights in the film songs and music in feature films to overseas assignee would not constitute export of goods for the purpose of deduction under Section 80HHC of the Act.

2. 2. On appeals by the assessee, the Commissioner of Income Tax (Appeals) allowed the appeals directing the Assessing Officer to allow deduction under Section 80HHC of the Act.

2. 3. On further appeals by the Revenue, the Tribunal following the decision of the Bombay High Court in Abdulgafar A.Nadiadwala v. Assistant Commissioner of Income Tax and Others, [2004] 267 ITR 488 allowed the appeals in favour of the assessee. Hence the present appeals.

3. Mrs.Pushya Sitaraman, learned Senior Standing Counsel for the appellant contends that the deduction under Section 80HHC of the Act is applicable only for profits derived from export of goods and merchandise, and thus cannot apply to the transaction of the assessee, who has not exported any goods or merchandise, but only the master copies of film songs and music along with the rights to make copies and sell cassettes outside India.

4. In this regard, it would be apposite to determine whether the product involved in these cases can be said to be "goods” and/or "merchandise", as defined under Section 80HHC of the Act or not?

5. At this juncture, a reference to Section 80HHC of the Act is essential:

"Section.80HHC. Deduction in respect of profits retained for export business.--(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise:

....

(2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into, India by the assessee (other than the supporting manufacturer) in convertible foreign exchange, within a period of six months from the end of the previous year or, ~within such further period as the competent authority may allow in this behalf.

Explanation.--For the purposes of this clause, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for r