Per Pramod Kumar, Accountant Member. - This is an appeal filed by the assessee and is directed against the order dated 1st April, 2005 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2002-03.

2. In substance, the only grievance raised in this appeal is that, on the facts and in the circumstances of the case, the CIT(A) erred in upholding disentitlement to deduction under section 80HHF of the Act.

3. The assessee is engaged in the business of production and distribution of cine films. During the course of scrutiny assess ment proceedings, the Assessing Officer noticed that the assessee has, for the relevant previous year, claimed a deduction under section 80HHF on account of foreign exchange earning from Yashraj Films International Limited, UK relating to export of DVD, VCD and VHS rights of film ‘Prem Rog’. When the assessee was called upon to ‘furnish the mode of transport and certificate from telecasting authority along with the extract of log book’, it was pointed out that the deduction has been claimed in respect of transfer of DVD/VCD rights and as such the information requisitioned is not relevant for the purpose of this claim of deduction. The assessee also filed a confirmation from Yashraj Films International Limited, UK (YFIL) to the effect that VHS cassette in respect of the film ‘Prem Rog’ was, in terms of agreement dated 19-8-1999, was ‘transferred to us (i.e., YFIL), under our instructions and on your (the assessee’s) behalf by Yashraj Films Private Limited by courier’. The Assessing Officer noted that the assessee did not produce any evidence for the actual exports. The Assessing Officer then referred to Hon’ble Bombay High Court’s judgment in the case of Abdulgafar A. Nadiadwala v. Asstt. CIT [2004] 267 ITR 488¹ in support of his stand that in order to claim a deduction under section 80HHF, the evidence of export or transfer outside India is mandatory. The Assessing Officer further observed that since the assessee did not file any evidence in support of actual export of transfer of VHF cassette, the assessee is not entitled to deduction under section 80HHF of the Act. Aggrieved by the action of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A) but without any success. The CIT(A) confirmed the action of the Assessing Officer by observing as follows :

"I have considered arguments of the appellant and contentions of the Assessing Officer. The appellant has not adduced any evidence about the VHS cassettes claimed to have been received by Yashraj Films International, UK. The cassettes, even if they are being sent through courier, have to be screened and cleared by the custom authorities. No evidence to that effect has been produced. Section 80HHF of IT Act entitles the appellant for deduction in case exporter or transfer by any means outside India any television software or film software etc. However, the means of transfer have to be legitimate means and it was essential for the appellant to adduce evidence to the effect that the cassettes were cleared through the official channels."

The assessee is not satisfied with the stand so taken by the Assessing Officer and is in further appeal before us.

4. We have heard Shri Inamdar, learned counsel for the assessee, and Shri Patel, learned Senior Departmental Representative, for the revenue. We have also carefully perused the material on record and duly considered factual matrix of the case as also the applicable legal position.

5. We consider it desirable to reproduce, for ready reference, relevant provisions of section 80HHF of the Income-tax Act.

"80HHF. Deduction in respect of profits and gains from export or transfer of film software, etc.—(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 or transfer by any means out of India, of any film software, television software, music