C I T JAIPUR vs. M/S THE GEM PLACE

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 u/s 80HHC to the assessee on counter sales made to foreign tourists, ignoring the specific provisions of Explanation (aa) to Section 80 HHC of the Act, when the assessee has failed to prove that the goods have under gone custom clearance? (ii) Whether on the facts and circumstances of the case, the Tribunal as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC of the Act, when there is no finding to the effect that the goods were cleared at any of the custom station?”

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 2 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.

We have heard learned counsel appearing for the parties.

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.)].

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.)], [(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 3 & Ors. [(2005) 272 ITR 81 (All.)] following its earlier judgments.

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 sub- section (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.

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).”

In the present case, the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded the name and address of the customer (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods sold at counter at the shop/emporium were sold to be taken out of the 4 country, which necessarily involved clearance of baggage, by the customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale To Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station. The Explanation (aa) is not a rule of evidence, nor raises any presumption. It also does not require any proof of clearance at any Customs Station. The explanation is couched in double negative. It is a rule of exclusion and excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under section 80HHC of the Income Tax Act.

The question of law is even otherwise covered by judgment of the Supreme Court in Commissioner of Income Tax vs. Silver & Arts Palace (supra), which has been followed by the Rajasthan High Court consistently. The facts

The Income Tax Appeal is dismissed.