SECTION 80HHC/INCOME-TAX ACT

[2008] 166 TAXMAN 30 (MAD.)

High Court of Madras

Commissioner of Income-tax

v.

Giza Impex (P.) Ltd.

P.D. Dinakaran and P.P.S. Janarthana Raja, JJ.

T.C.(A) Nos. 639 to 642 of 2007

June 15, 2007

Section 80HHC, read with section 80HHF, of the Income-tax Act, 1961 - Deductions - Exporters - Assessment years 1994-95 to 1997-98 - Whether transfer/export of master copies of film songs and music along with rights to make copies and sell cassettes outside India would be a sale of goods or merchandise for purpose of deduction under section 80HHC - Held, yes - Whether merely because section 80HHF was not on statute book during assessment years in question and it came to be inserted with effect from 1-4-2000, that, by itself, does not mean that benefit of section 80HHC could be denied to assessee in respect of transactions which are governed under section 80HHF - Held, yes

Facts

The assessee-company was engaged in the business of export of Digital Audio Tape Master containing the recorded version of film songs from Tamil feature films for exploitation overseas. It claimed deduction under section 80HHC. The Assessing Officer, however, disallowed the claim of the deduction on the ground that the exploitation rights in the film songs and music in feature films to overseas assignee would not constitute export of goods for the purpose of deduction under section 80HHC. The Commissioner (Appeals) as well as the Tribunal allowed the claim of the assessee.

On appeal, the revenue contended that the deduction under section 80HHC is applicable only for profit derived from export of goods and merchandise, and, thus, could not apply to the transaction of the assessee, who had not exported any goods or merchandise, but only the master copies of film songs and music along with the rights to make copies and sell cassettes outside India. Alternatively, it was contended by the revenue that the deduction could be claimed by the assessee only under section 80HHF but not under section 80HHC, and that since section 80HHF was inserted by the Finance Act, 1999, with effect from 1-4-2000, the assessee was not entitled to deduction even under section 80HHF for the assessment years 1994-95 to 1997-98.

Held

From the law as enunciated from the decisions of the Apex Court in Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401/141 Taxman 132 and in Bharat Sanchar Nigam Ltd. v. UOI [2006] 282 ITR 273/152 Taxman 135, ‘goods’ may be tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. If the above attributes are satisfied, the same would be goods. [Para 11]

In the instant case, the Commissioner (Appeals) after careful consideration of the facts of the case, found that the assessee exported music software and, therefore, the transaction comes within the purview of section 80HHC and the said view was also affirmed by the Tribunal. Therefore, the attributes required for bringing the property involved within the meaning of goods was satisfied with reference to its utility; capability of being bought and sold; and capability of being transmitted, transferred, delivered, stored and possessed. [Para 12]

The above finding that the property involved is “goods” is fortified with the decision of Madras High Court in CIT v. Superstar Music [2007] 291 ITR 8. Accordingly, the assessee was entitled to deduction under section 80HHC. [Para 13]

In view of the ratio laid down by the Apex Court in Tata Consultancy Services’ case (supra) and Bharat Sanchar Nigam Ltd.’s case (supra), it was to be opined that merely because section 80HHF came to be inserted with effect from 1-4-2000, that, by itself, does not mean that the benefit of section 80HHC, could be denied to the transactions which are governed under section 80HHC. Of course, it goes without saying that in view of the specific provision under section 80HHF for deductions in respect of profits and gains from export or transfer of any film software, television software, music software, television news software, including telecast rights, the assessee could very well in future claim such deductions and the same would be taken care of under section 80HHF(5) to prevent double benefits being claimed by the assessee in such events. However, in view of finding that the transaction in question was covered under section 80HHC, it was inappropriate to hold that merely because section 80HHF was not on the statute book during the assessment years in question, the assessee was not entitled to claim deduction without any hindrance under section 80HHC in spite of compliance of the ingredients thereunder. [Para 16]

In the result, no substantial question of law arose for consideration of the High Court and, therefore, the appeal was to be dismissed.