- (1.) BY this petition the petitioner has challenged the constitutional validity of Section 80HHC, Explanation (aa), of the Income-tax Act, 1961. We have heard Sri V.B. Upadhyay, learned counsel for the petitioner, and Sri Rajesh Kumar Agrawal, learned counsel for the respondents.
(2.) SECTION 80HHC was made to give certain benefits to exporters. However, Explanation (aa) was inserted by the Finance (No. 2) Act of 1991, with effect from April 1, 1986. An exception was carved out from the main provision of SECTION 80HHC. In our opinion, Explanation (aa) was to plug a loophole in the Act since there was possibility that the goods after purchase may not be exported at all and yet the benefit may be claimed. In our opinion, Explanation (aa) is constitutionally valid as it was made to plug a loophole in SECTION 80HHC. It is settled law that in fiscal statutes greater latitude is given to the Legislature and the Legislature has an option to pick and choose the item which is to be taxed. Learned counsel for the petitioners then submitted that a correct interpretation of Explanation (aa) of Section 80HHC should be given by this court because a wrong interpretation has been put by the authorities. In our opinion, what Explanation (aa) means is that it will not be an export out of India if two conditions are satisfied : (i) it should be a transaction by way of sale otherwise in a shop, emporium or an establishment situate in India; (ii) it should not involve clearance in the customs as defined in the Customs Act. Both these conditions must be satisfied if the transaction is to be held to be not an export out of India. Hence, if either of these two conditions is not satisfied, it is an export out of India. Hence, if the transaction involves clearance at customs, it will be an export out of India within the meaning of Explanation (aa). Sri V.B. Upadhyay, learned counsel for the petitioners, submitted that the authorities are taking the view that it is only if the seller gets clearance from customs that it can be treated an export out of India. In our opinion, Explanation (aa) has nothing to do with the seller or purchaser. It is the transaction which should involve clearance at customs if it is to be an export out of India within the meaning of Explanation (aa). Thus, the interpretation being put to Explanation (aa) by the authorities, in our opinion, is not correct.
(3.) IF the goods are required to be cleared through the customs station either by purchaser or by seller, it would be an export out of India. With these observations, this petition is disposed of finally.;