Tribunal Grants Partial Appeal: Technology Sale Qualifies for Section 80HHC Deduction, Dual Deductions Allowed, Revenue Overruled.

The Tribunal partially allowed the appeal, determining that the amount received for the sale of design, development, and manufacturing technology qualifies for deduction under section 80HHC. It ruled that the assessee can claim deductions under both sections 80HHC and 80-IB, as long as the total does not exceed the profits included in the gross total income. Additionally, the Tribunal concluded that the profit from the sale of the DEPB licence should not be excluded under clause (baa) of Explanation to section 80HHC. The revenue's cross-objection was dismissed.

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Issues Involved:
1. Whether the technical know-how drawings, designs, and technology for the manufacture of segmented tyres transferred to M/s. Segmax, USA were goods or merchandise within the meaning of section 80HHCRs.
2. Whether the provisions of section 80HHC and section 80-IB can be claimed on the same income and the implication of section 80-IB(13) read with section 80-IA(9)Rs.
3. Whether the provisions of Explanation (baa) to section 80HHC apply to the sale consideration of DEPB licenceRs.
4. If the design, technical know-how, drawings, etc. sold by the assessee to Segmax, USA do not fall within the meaning of goods or merchandise for the purpose of deduction under section 80HHC, can the assessee be entitled to the alternate claim of deduction under section 80-ORs.

Detailed Analysis:

1. Technical Know-How as Goods or Merchandise:
The appellant argued that the design, development, and manufacturing technology transferred to Segmax, USA, were goods, citing the decision of the Supreme Court in *Associated Cement Co. Ltd. v. Commissioner of Customs* and the Bombay High Court in *Abdulgafar A. Nadiadwala v. Asstt. CIT*. The Tribunal agreed, noting that the amount received for the sale of design, development, and manufacturing technology of laminated tyres amounts to the sale of goods or merchandise. The Tribunal emphasized that the conjoint and harmonious reading of various definitions and the ratio laid down by the Supreme Court leads to the conclusion that the amount received by the assessee for such transfer is eligible for deduction under section 80HHC. The Tribunal concluded that the amount received is not for merely allowing the use of such drawing, design, or technology but for the sale of such product, which falls within the definition of "goods or merchandise" within the meaning of section 80HHC.

2. Deduction Under Both Section 80HHC and Section 80-IB:
The Tribunal referred to the decision in *Mittal Clothing Co.*, where it was held that deductions under section 80HHC and 80-IB should be computed independently. The Tribunal clarified that section 80-IA(9) only regulates the deductions allowable under Chapter VI-A and ensures that the sum total of the deductions does not exceed the profits and gains of the undertaking. The Tribunal concluded that the assessee could claim deductions under both sections 80HHC and 80-IB, provided the total deduction does not exceed the profit included in the gross total income, as governed by section 80AB.

3. Application of Explanation (baa) to DEPB Licence:
The Tribunal agreed with the appellant's contention that the sale consideration of DEPB licence does not fall under clause (iiia) of section 28 but falls under clause (iv). Since clause (baa) of Explanation to section 80HHC refers to clause (iiia) and not clause (iv), the profit on the sale of DEPB licence should not be excluded while computing profits of business for the purpose of section 80HHC. The Tribunal supported this view by referring to the decision of the ITAT, Delhi Bench in *P & G Enterprises (P.) Ltd. v. Dy. CIT*.

4. Alternate Claim Under Section 80-O:
Given the Tribunal's conclusion that the amount received for the sale of design, development, and manufacturing technology qualifies as goods or merchandise under section 80HHC, it was unnecessary to address whether the amount would be eligible for deduction under section 80-O. The Tribunal emphasized that the amount received is not for the use of any patent, invention, design, or registered trademark but for the sale of such items, thus qualifying for deduction under section 80HHC.

Conclusion:
The Tribunal allowed the appeal in part, holding that the amount received for the sale of design, development, and manufacturing technology qualifies for deduction under section 80HHC and that the assessee can claim deductions under both sections 80HHC and 80-IB, provided the total does not exceed the profits included in the gross total income. The Tribunal also held that the profit on the sale of DEPB licence should not be excluded under clause (baa) of Explanation to section 80HHC. The cross-objection by the revenue was dismissed.

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