- (1.) ON an application filed under s. 256(1) of the IT Act, 1961, the Tribunal has referred the following question for our opinion : "Whether, on the facts, in totality of the circumstances and in view of detailed explanations/clarifications, the learned Tribunal was right in law in holding that remittances received by the assessee in convertible foreign exchange from abroad as advertisement charges were not on account of sale proceeds of any goods which are exported out of India and hence would not be export turnover under Expln. (B) to s. 80HHC of the IT Act, 1961 ?"
(2.) THE other questions proposed in the application were rejected. Thereafter the petitioner has also moved an application under s. 256(2) of the IT Act, 1961, before us and raised the following questions : 1. "Whether the learned Tribunal was right in law in holding that the action by the CIT under s. 263 of the IT Act, 1961, is with jurisdiction ?" 2. "Whether on the facts, in totality of the circumstances and in view of detailed explanations/clarifications, the learned Tribunal was right in law in holding that remittances received by the assessee in convertible foreign exchange from abroad as advertisement charges were not on account of sale proceeds of any goods which are exported out of India and hence would not be export turnover under Expln. (B) to s. 80HHC of the IT Act, 1961 ?" 3. "Whether the learned Tribunal was right in law in directing the AO to recompute the deduction as per the decision of the Special Bench in the case of International Research Park Laboratories Ltd. vs. Asstt. CIT (1994) 50 TTJ (Del)(SB) 661 : (1994) 50 ITD 37 (Del)(SB) ?"4."Whether the learned Tribunal was right in law in holding that the CIT was within his power to invoke the jurisdiction under s. 263 though the CIT(A) had decided issue relating to deduction under s. 80HHC of the Act before initiation of action under s. 263 of the Act ?" As all the aforesaid questions are arising out of the same impugned order of the Tribunal, we hear and dispose of the reference as well as reference application under s. 256(2) of the Act by this common order. The assessee is a firm constituted in the month of September, 1990. The business of the firm is publication of journal known as "Diamond World". The relevant assessment years are 1991-92 and 1992-93. During these assessment years, assessee received subscription from abroad against the supply of this publication "Diamond World". The assessee also received substantial amount against the advertisement published in this publication. This "Diamond World" is circulated in India as well as abroad. The assessee claimed the benefit of s. 80HHC on the amount of subscription received from abroad against this magazine/journal "Diamond World" and also the amount received against advertisement given by foreigners for publication in this journal. The AO allowed the benefit of s. 80HHC on both the amounts. On scrutiny of assessment orders for 1991-92 and 1992-93, CIT found that the order of the AO is erroneous and prejudicial to the interest of Revenue. He issued the notice to the assessee to show-cause as to why the benefit of s. 80HHC should not be withdrawn. After considering his submissions, CIT has directed the AO to withdraw the benefit of s. 80HHC given to the assessee on the amount received against advertisement which has been published in the journal. Thereafter, assessee carried the matter before the Tribunal. The Tribunal has also upheld the view taken by CIT under s. 263 of the IT Act, 1961.
(3.) MR. Ranka, learned counsel for the assessee-petitioner submits that when assessee received the amount against the advertisement in journal which is circulated out of India and amount is also received from abroad, assessee is entitled for deduction under s. 80HHC in respect of the amount received from abroad against advertisement. He further submits that when two views are possible CIT cannot set aside the order of AO under s. 263 of the IT Act, 1961. He also submits that Tribunal has confirmed the order of CIT on the basis that it does not come under the definition of export turnover given in sub-s. (4B) of s. 80HHC. MR. Ranka placed reliance on the decisions published in published in CIT vs. Trinity Hospital (1996) 131 CTR (Raj) 328 : (1997) 225 ITR 178 (Raj), Associated Cement Companies Ltd. vs. Commissioner of Customs 124 STC 59, Shri Dipak Dhar & Ors. vs. State of West Bengal & Anr. 61 STC 165, P.S. Apparels vs. Dy. CTO 94 STC 139, Scientific Engineering House (P) Ltd. (1985) 49 CTR (SC) 386 : (1986) 157 ITR 86 (SC) and State of Andhra Pradesh vs. National Thermal Power Corporation Ltd. & Ors. 127 STC 280. Mr. Mathur, learned counsel for the Department submits that whatever the goods the assessee exports in the form of journal, he got deduction under s. 80HHC. He further submits that if any information or advertisement is to be published at the instance of non-resident of India and any amount is received from abroad, that amount does not come within the definition of `goods' and CIT as well as the Tribunal has rightly disallowed that amount under s. 80HHC of the Act. Mr. Mathur, learned counsel for the Department brought to our notice paras 8 and 9 of the CIT wherein he has dealt with the argument whether the assessee is entitled for deduction under s. 80HHC. Paras 8 and 9 of the order of the CIT reads as under : "After due consideration it appears that the proposed action under s. 263 is well justified and the plea of the assessee referred to earlier is devoid of any merit. It is no doubt true that relief under s. 80HHC is envisaged with reference to export of goods/merchandise, of which the sale proceeds are received in convertible foreign exchange. But it is farfetched to construe advertisements as goods. Such an argument can hardly be accepted as logical. A book in the form of journal published by the assessee may be considered as `goods' but the question is, whether an advertisement published in the journal which is sent outside, can be treated as supply of goods outside India ? The assessee was doing the business of publishing a journal in India and in this journal advertisements given by different persons living in India and outside were being published. The advertisements obviously, were not free of cost, but for a price consideration which, in common parlance is known as advertisement charges. This would mean that the petitioner was in reality, rendering the service of publishing the advertisements of different persons in its journal and the persons giving such advertisements were paying advertisement charges in lieu of advertisements so published. As per the common practice, a copy of the journal has to be given to the advertiser so that he may know that his advertisement has been duly published in the journal for which he was paying advertisement charges. Thus, the copy of journal supplied to the advertiser is mere voucher copy and solely for the purpose of collecting the advertisement charges. By no stretch of imagination, it can be treated as supply of goods though contended by the assessee. Even in commercial media like T.V., etc. the advertisements of persons living outside India are displayed and for the purpose of collecting the charges, necessary intimation in regard thereto is given to the advertiser. The same, in general terms, is considered a service rendered by the media to the advertiser for a monetary consideration and this is what the assessee has done. So far as the remittance in convertible foreign exchange, but it was in lieu of the advertisement so published in journal and not in lieu of the supply of journal. The contention of the assessee of the payment in convertible foreign exchange in lieu of supply of goods is misconstrued inasmuch as firstly, there was no supply of goods or export business done by the assessee who otherwise was engaged in publication of journal, and, secondly the payment of convertible foreign exchange was in lieu of the advertisement published, which constituted advertisement charges and not in lieu of supply of any goods outside India." "It may also be stated that whenever there is export of goods abroad, there will be purchasers placing order for such goods and seller supplying the goods in regard to sales abroad either independently or in lieu of orders received. In the instant case, there was no iota of evidence to show any orders for goods placed by a foreign buyer and it is only the advertisements given by the parties outside India that otherwise appeared in the shape of an advertisement, in the journal published by the assessee. Whatever book was given by the assessee to the persons giving advertisements was only by way of evidence to show that the advertisements charges were to be collected. It was only a `Voucher copy' as known in commercial circles and not supply of goods so as to qualify for deduction under s. 80HHC. It was, in other words, a short of service contract or service charges for the purpose of advertising in the journal and in lieu of which the payments made by persons living outside the country constituted the advertisement charges or the charges in lieu of the service rendered in the form of giving advertisements in the journal. By no stretch of imagination, the journal so given with a view to make the person concerned aware of the advertisement having been published could have been construed as supply of goods though contended by the assessee." ;