C I T vs. M/S JEWELLS EMPORIUM

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ITA/357/2005HC RajasthanRJHC02039460200516 February 2015Bench: SUNIL AMBWANI,PRAKASH GUPTA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that counter sales to foreign tourists against convertible foreign exchange in India are eligible for deduction under Section 80HHC. The Court relied on the Supreme Court's decision in CIT vs. Silver & Arts Palace and various Rajasthan High Court judgments, including CIT vs. Jewels Emporium. The Court found that the Sale To Foreign Tourists Voucher, containing the tourist's passport number and a declaration that the goods would not be gifted or sold in India, was sufficient proof for export out of India. The Court interpreted Explanation (aa) to Section 80HHC as a rule of exclusion, stating it only excludes transactions not involving clearance at any Customs Station and does not mandate the production of customs clearance documents by the assessee. The Court found no contrary allegations or proof from the department and concluded that it was not necessary for the assessee to produce documents of clearance at any Customs Station. The questions of law were decided in favour of the assessee. The appeal was dismissed.

What were the facts?

The assessee, M/s. Jewels Emporium, a dealer of jewellery and handicrafts, sold goods through counter sales to foreign tourists in their Jaipur showroom. These sales were made against convertible foreign exchange within India. The Assessing Officer denied the deduction under Section 80HHC of the Income Tax Act, 1961, arguing that proof of clearance at a Customs Station was required, despite the sale voucher containing the tourist's passport number and a declaration that the goods would not be gifted or sold in India. The appeal is filed by the Commissioner of Income Tax against the order of the Income Tax Appellate Tribunal (ITAT) which allowed the deduction.

What were the issues?

1. Whether on the facts and circumstances of the case, the ITAT was justified in allowing the deduction of Rs.24,01,108/- under Section 80HHC to the assessee on counter sales, despite the specific provisions of Explanation (aa) to Section 80HHC of the Act of 1961? 2. Whether on the facts and circumstances of the case, the ITAT as well as the CIT(A) were justified in allowing the deduction under Section 80HHC, when there is no finding that the goods were cleared at any customs station and the assessee itself noted that counter sales were not considered export out of India for the purpose of claiming deduction? 3. 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? Assessee's contentions: The assessee argued that counter sales to foreign tourists against convertible foreign exchange in India are eligible for deduction under Section 80HHC. The Sale To Foreign Tourists Voucher, containing passport details and a declaration not to resell in India, is sufficient proof. The department's argument that proof of customs clearance is mandatory was countered by stating that Explanation (aa) is a rule of exclusion and does not require such proof. The Rajasthan High Court and Supreme Court have consistently held this view. Revenue's contentions: The Revenue contended that deduction under Section 80HHC is not allowable unless there is proof of clearance at any Customs Station, as defined under Section 2(13) of the Customs Act, 1962. The burden of proof for such clearance was on the assessee, and since no documents were produced, the exemption was denied.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 2(13)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR D.B. Income Tax Appeal No.357/2005 Commissioner of Income Tax-I vs. M/s. Jewels Emporium Date of Judgment : 16.02.2015 REPORTABLE HON'BLE THE ACTING CHIEF JUSTICE MR.SUNIL AMBWANI HON'BLE MR. JUSTICE PRAKASH GUPTA Mr. Anuroop Singhi, Mr.Sandeep Pathak, Mr.Saurabh Jain, counsel for appellant-Income Tax Department. Mr.T.C.Jain, counsel for respondent.

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

2 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

3 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 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. 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 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

4 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 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. 9. The question of law is even otherwise covered by

5 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 and circumstances of the case are not distinguishable to take a different view in the matter. The questions are, thus, decided in favour of the assessee and against the Department. 10. The Income Tax Appeal is dismissed.

(PRAKASH GUPTA),J. (SUNIL AMBWANI),ACTING C.J. Mohit All corrections made in the judgment/order have been incorporated in the judgment/order being emailed. Mohit Tak, P.A.

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