Foreign currency was not "goods" for export deduction, while currency trading proceeds counted as business receipts under section 80HHD.

Foreign currency was not treated as "goods" for deduction under section 80HHC because the term was read in its settled legal sense, and money or currency fell outside the Sale of Goods Act definition; the broader Customs Act meaning could not be imported into that provision. Deduction on that basis was therefore unavailable. For section 80HHD, sale proceeds from trading in foreign currency were treated as business receipts, so the computation was based on gross receipts rather than only the net trading margin. The article thus states that statutory language and context control the tax treatment of currency dealings, with the assessee receiving no relief on either issue.

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Issues: (i) Whether foreign currency exported and brought back through NOSTRO accounts constituted "goods" for deduction under section 80HHC of the Income-tax Act, 1961. (ii) Whether, for deduction under section 80HHD of the Income-tax Act, 1961, the sale proceeds of foreign currency had to be taken as business receipts or only the net profit on such dealings.

Issue (i): Whether foreign currency exported and brought back through NOSTRO accounts constituted "goods" for deduction under section 80HHC of the Income-tax Act, 1961.

Analysis: The word "goods" in section 80HHC was held to be used in its legal sense and not in the widest popular sense. The definition in the Sale of Goods Act, 1930 excludes money, and foreign currency was treated as money notwithstanding that it may also function as a commodity in some contexts. The enlarged definition in the Customs Act, 1962 was confined to that statute and could not be borrowed for section 80HHC. Since the export incentive provision was meant to promote export of goods and augment foreign exchange reserves, treating foreign currency itself as goods would defeat the statutory purpose.

Conclusion: Foreign currency was not "goods" for section 80HHC, and the assessee was not entitled to deduction on that basis.

Issue (ii): Whether, for deduction under section 80HHD of the Income-tax Act, 1961, the sale proceeds of foreign currency had to be taken as business receipts or only the net profit on such dealings.

Analysis: Section 80HHD(3)(b) uses the concept of business receipts. The assessee carried on trading in foreign currency, and the sale proceeds received in such trading activity constituted receipts of the business. The provision did not justify restricting the computation to the net margin between purchase and sale. The character of the receipts as trading receipts supported adoption of the gross sale proceeds in the computation.

Conclusion: The gross sale proceeds of foreign currency were correctly taken as business receipts for section 80HHD, and the assessee's claim for computation on net profit basis was rejected.

Final Conclusion: The common order sustained the disallowance under section 80HHC and upheld the computation approach under section 80HHD, leaving no relief on the substantive issues raised by the assessee.

Ratio Decidendi: Where a fiscal provision uses a legal term not defined in the Act, the term must ordinarily be understood in its settled legal sense from the relevant general law, and money or currency cannot be treated as goods unless the statute clearly enlarges that meaning; further, business receipts in a trading activity are to be computed according to the statutory language actually employed.

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