Foreign tourist sales in India with goods taken abroad qualify as export sales under section 80HHC.

The High Court held that sales made to foreign tourists at the assessee's counter in India against foreign currency, with the goods subsequently taken outside India by the tourists, qualify as export sales for claiming a deduction under section 80HHC of the Income-tax Act, 1961. This decision aligned with a precedent set by the apex court in a similar case, emphasizing the importance of the goods leaving India with the tourists for eligibility. The ruling favored the assessee, confirming the availability of the special deduction in such transactions.

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Issues:
Whether sales to foreign tourists against foreign currency should be considered as export sales for the purposes of allowing deduction under section 80HHC of the Income-tax Act, 1961Rs.

Analysis:
The case involved a reference from the Income-tax Appellate Tribunal, Allahabad, regarding the treatment of sales made to foreign tourists at the assessee's counter in India against foreign currency for the purpose of claiming a deduction under section 80HHC of the Income-tax Act, 1961. The respondent, a firm dealing in embroidery, marble goods, and precious stones, had made such sales during the assessment year 1983-84. The Income-tax Officer disallowed the deduction claimed by the respondent, but the Commissioner of Income-tax (Appeals) allowed it, a decision upheld by the Tribunal.

The key question was whether these sales should be considered as export sales for the purpose of claiming the deduction under section 80HHC. The High Court referred to a decision by the apex court in CIT v. Silver and Arts Palace [2003] 259 ITR 684, where it was held that the special deduction under section 80HHC is available for counter sales made to foreign tourists against foreign exchange when the goods are subsequently taken by the tourists outside India. Based on this precedent, the High Court answered the question in the affirmative, favoring the assessee and ruling against the Revenue.

The judgment clarified that sales made to foreign tourists at the assessee's counter in India against foreign currency, with the goods being taken outside India by the tourists, qualify as export sales for the purpose of claiming the deduction under section 80HHC of the Income-tax Act, 1961. This decision aligned with the interpretation provided by the apex court in a similar case, providing a clear precedent for such transactions to be eligible for the deduction. The High Court's ruling favored the assessee, confirming the availability of the special deduction in this scenario and emphasizing the importance of the goods being taken outside India by the foreign tourists as a crucial factor in determining the eligibility for the deduction under section 80HHC.

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