Decided on February 22,2008



K.C. Singhal, Judicial Member - (1.) THE only issue arising in this appeal relates to the claim of the assessee Under Section 80HHC of the I.T. Act, 1961 (the Act) in respect of counter sales made to foreign tourists in convertible foreign exchange.
(2.) Brief facts of the case are these. The assessee is engaged in the business of trading in jewellery. In the year under consideration, it showed the total turnover of Rs. 58,69,16,222/- which included export turnover at Rs. 3,30,92,088/-. The export turnover included direct sale to foreign parties amounting to Rs. 8,57,196/- while the remaining amount of Rs. 3,22,34,892/- represented counter sale made to the foreign tourists in convertible foreign exchange. The assessee claimed deduction Under Section 80HHC at Rs. 6,28,724/- in view of the Hon'ble Supreme Court judgment in the case of Silver and Art Palace 259 ITR 684. In the course of assessment proceedings, the assessee was asked to file documentary evidence showing custom clearance in respect of counter sales made to the foreign tourists. The assessee failed to produce such evidence. Accordingly, the Assessing Officer was of the view that counter sales made to the foreign tourists could not be considered as export out of India and consequently, the assessee was entitled to deduction Under Section 80HHC in respect of such sales. The Hon'ble Supreme Court judgment was held to be distinguishable on facts. The claim of the assessee Under Section 80 HHC was reduced to Rs. 14,685/-. The matter was carried in appeal before the learned CIT(A) before whom it was contended that all the relevant details regarding counter sales to the foreign tourists were given before the Assessing Officer i.e. the name, address of the foreign tourists, full description of the items sold i.e. quantity, purity and the rate, etc. Besides this, further details were given such as country to which goods were to be taken alongwith Passport Nos. of the tourists. The signature of the customers was also obtained on the bill issued by the assessee. The consideration was received in foreign exchange against which encashment certificate was given which also shows all the details of foreign tourists. It was also submitted that the customers make the necessary declaration and produce the bill to the custom authorities which is endorsed when a foreign tourists leaves India. Reliance was also placed on the judgment of Supreme Court in the case of Silver and Art Palace (supra).
(3.) THE learned CIT(A) referred to the judgment of Hon'ble Allahabad High Court judgment in the case of Ram Babu & Sons v. Union of India 222 ITR 606 which had considered the constitutional validity of the Explanation (aa) to Section 80HHC Considering the said judgment, the learned CIT(A) held that one of the essential conditions for constituting the export out of India is that the transaction should involve clearance at custom station. Since no evidence had been filed by the assessee to prove the custom clearance, it was held that the assessee was not entitled to deduction Under Section 80HHC. Aggrieved by the same, the assessee has preferred this appeal before the Tribunal.;

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