Foreign tourist counter sales qualified for section 80HHC deduction where customs clearance was implicit before goods left India.

Counter sales made in a showroom to bona fide foreign tourists, paid for in foreign exchange, were treated as qualifying export sales for deduction under section 80HHC of the Income-tax Act, 1961. The benefit could not be denied merely because the sale occurred in India, since the goods were required to be cleared by customs before being taken out of India. Relying on the Supreme Court decision in Silver and Arts Palace and the earlier High Court ruling in Jewels Emporium, the court held that the necessary customs clearance requirement was satisfied and allowed the deduction.

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Issues: Whether the assessee was entitled to deduction under section 80HHC of the Income-tax Act, 1961 on counter sales made in its showroom to foreign tourists, and whether such sales could be denied the benefit for want of proof of clearance at a customs station.

Analysis: The sale was made against payment in foreign exchange to bona fide foreign tourists, and the goods were required to be cleared by the customs authorities before being taken out of India. The claimed deduction had already been upheld on the basis of the Supreme Court decision in Silver and Arts Palace and the earlier decision of the same High Court in Jewels Emporium. On that footing, the counter sales were treated as involving the necessary customs clearance and the benefit of section 80HHC could not be refused merely because the transaction took place at a shop in India.

Conclusion: The assessee was held entitled to the deduction under section 80HHC of the Income-tax Act, 1961, and the questions were answered against the Revenue.

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