TaxTMI 
TaxTMI 
2006 (1) TMI 176
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....ss (Bank) Switzerland through airlines. The said bank, after physical checking of such currency, was required to pay the assessee into their NOSTRO account with some other bank in USA or UK as the case may be. Such transfer was in the currency of that country. Assessee could use such money for meeting its requirement in these countries. Whenever it had needed the fund, it had remitted the same to India from such NOSTRO account. On these facts, assessee claimed deduction under s. 80HHC qua the convertible foreign exchange brought to India out of NOSTRO account. It may be mentioned that such claim was not made in the return of asst. yr. 1989-90 but was claimed in assessment proceedings. In all other years, the claim was made in the return of income. The AO rejected the claim of assessee on the following grounds: "(a) The transfer of funds to the foreign accounts is only one of the methods for obtaining credit. Therefore, it is merely a procedure adopted by the assessee and does not amount to export. (b) What the assessee transfers is foreign exchange and what is credited to its accounts abroad is also foreign exchange. Therefore, the nature of the receipt does not change. (c) T....
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..... The assessee has filed details of his foreign travel which show that his travel was in connection with the said export business. The assessee, therefore, directed to be allowed weighted deduction on foreign tour expenses of Rs. 33,231". (b) The case of Imperial Tobacco Co. vs. IRC (1943) 25 Tax Cases 292 (CA) was referred for the following proposition: "We must decide this case having regard to the fact as found. In the light of those facts, the acquisition of these dollars cannot be regarded as colourless. They were an essential part of a completed commercial operation. That being so, what is the true analysis of the position? A manufacturer has provided himself with a commodity namely, dollars. I call dollars a 'commodity' not for the reason that they are not currency in this country, but they have a characteristic which is common to other commodities, and is not shared by sterling, namely, that their value from day to day varies in terms of sterling just in the same way as coal or bricks or anything else may do." (c) The case of R.R. Sen & Brothers vs. Jt. CIT (2005) 95 TTJ (Cal) 398 was referred for the following proposition: "11. We have considered the riv....
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....factured or processed item and, therefore, does not qualify for deduction under s. 80HHC does not appear to hold good in view of the provision of s. 80HHC(3)(b). Whereas s. 80HHC(3)(a) considers availability of deduction under this section of goods or merchandise manufactured (or processed) by the assessee, sub-cl. (b) of s. 80HHC(3) provides conditions in respect of export out of India of trading goods for the purpose of deduction under s. 80HHC. It is now clear that foreign currency is to be considered as 'goods' and these are 'traded goods'..... Therefore, the AO was wrong in not allowing deduction under s. 80HHC in the instant case and the CIT(A) was also in error in confirming such order when trading in foreign currency assumes the meaning of trading in goods and merchandise and is eligible for deduction under s. 80HHC(3) of the Act. In reversing the orders of the authorities below, we allow this ground taken by the assessee." (d) The case of CIT vs. Sooraj Mull Nagarmull (1981) 22 CTR (Cal) 8 : (1981) 129 ITR 169 (Cal) was referred for the following proposition: "It was held that the bonds were 'goods' or 'commodities' within the meaning of....
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....aving regard to the fact as found. In the light of those facts, the acquisition of these dollars cannot be regarded as colourless. They were an essential part of a contemplated commercial operation. That being so, what is the true analysis of the position? A manufacturer has provided himself with a commodity, namely, dollars. I call dollars a "commodity" not for the reason that they are not currency in this country, but because they have a characteristic which is common to other commodities, and is no shared by sterling, namely, that their value from day to day varies in terms of sterling, just in the same way as coal, or bricks, or anything else may do."' 6. In view of the above decisions, it was submitted that foreign exchange be considered as "goods" for claiming deduction under s. 80HHC. It was also submitted that this issue is concluded by the decision of co-ordinate Bench in the case of R.R. Sen which is binding on this Bench. If for any reason, different view is possible, then the matter be referred to Special Bench. 7. At this stage, a query was raised as to what is the scope of the word "goods" under Sale of Goods Act, 1930. In response to the same, it was submitt....
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....oods" under s. 80HHC of the Act. It was further submitted that definition of "goods" in the Customs Act, 1962, in an enlarged definition and, therefore, has to be restricted to that Act only. According to him, a word may be defined differently in different statutes depending upon the object/purpose of the Act. Consequently, such meaning should be restricted to these enactments only. Various decisions have been referred to in support of such submission. It was further submitted that sale implies two different things, i.e., goods on one hand and the consideration in the form of price on the other hand. If foreign exchange is to be understood as "goods", then it would be case of "Barter" not amounting to sale. According to him, "sale proceeds" in s. 80HHC refers to consideration in the form of money while export of goods refers to other things. Hence, it cannot be said that foreign exchange is "goods". Lastly, it was submitted that s. 80HHC was enacted with the object to augment the foreign exchange reserve. Therefore, if the contention of the assessee's counsel is accepted, then it would defeat the purpose of the enactment since it would deplete the foreign exchange reserve when ....
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....ccordingly, the expression "sale of goods" in Entry 48 should be interpreted not in the narrow and technical sense in which it is used in the Indian Sale of Goods Act, 1930, but in a broad sense. However, their Lordships did not accept this contention and rather endorsed the view of the earlier decision of the Constitution Bench of the apex Court in the case of STO vs. Budh Prakash Jai Prakash AIR 1954 SC 459 and then held at p. 566 "we must accordingly hold that the expression 'sale of goods' in Entry 48 cannot be construed in its popular sense, and it must be interpreted in its legal sense. What its connotation in that sense is, must now be ascertained". Further, at p. 569, their Lordships observed "We think that true legislative intent is that the expression 'sale of goods' in Entry 48 should bear the precise and definite meaning it has in law, and that, that meaning should be left to fluctuate with the definition of 'sale' in laws relating to sale of goods which might be in force for the time being". Proceeding further, at p. 570, they observed "We are of the opinion that the provisions in the Government of India Act, 1935, relied on for the appellant ar....
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....heir Lordships at p. 478 "it is well settled that where the legislature uses a legal term which has received judicial interpretation, the Courts must assume that the term has been used in the sense in which it has been judicially interpreted." 16. Similar view in the case of Keshavji Ravji & Co. vs. CIT (1990) 82 CTR (SC) 123 : (1990) 183 ITR 1 (SC), the Hon'ble Supreme Court observed at p. 11 "when words acquire a particular meaning or sense because of their authoritative construction by superior Courts, they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context." 17. In view of the above authoritative judgments, it is clear that where a word or an expression has been defined in a particular enactment, then it is presumed that legislature was aware of such legal meaning of that word or expression while enacting a subsequent legislation and, therefore, if such word or an expression is not defined in the subsequent legislation, then the meaning of such word or expression has to be understood in that legal sense in which it was used in the earlier enactment. 18. In the present case, we are required to ascertain th....
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....eive cash, as, for example, sums standing to the credit of a bank account or invested in securities; and the term may in some cases be used in a popular sense to include all personal, or even, exceptionally, all real and personal property. The precise meaning of the term depends upon the context in which it is used so that, for example, it is usually given a wide meaning when used in a will and when that meaning gives effect to the intention of the testator, an intermediate meaning in connection with actions for money paid or for money had and received, and a narrow meaning in the criminal law and in relation to execution [27 Halsbury's Laws (3rd Edn.)]. "Money" includes a cheque, bank note, postal order or money order (Betting, Gaming and Lotteries Act, 1963, s. 55). (3) Black's Law Dictionary Special Deluxe Fifth Edition Money-In usual and ordinary acceptation it means coins and paper currency used as circulating medium of exchange, and does not embrace notes, bonds, evidences of debt, or other personal or real estate. Lane vs. Railey, 280 Ky. 319, 133 S.W. 2d 74,79,81. (4) Webster's Encyclopedic Unabridged Dictionary Money-1. Gold, silver or other metal in....
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....trates such purpose or object. Sec. 80HHC is a code by itself and was enacted with the sole purpose to promote the export of goods produced in India and to augment the foreign exchange reserve in order to improve the Indian economy. The ultimate purpose was to increase the foreign exchange reserves so that the Government may discharge its foreign debts in foreign currency. If the contention of assessee that foreign exchange amounts to goods is accepted, then, in our opinion, it would frustrate and defeat the purpose or object of s. 80HHC inasmuch as it would deplete the foreign exchange reserve by sending the same to outside countries. The object of s. 80HHC would be achieved only when the word "goods" is held to exclude money including foreign exchange. Thus, we would prefer the interpretation, which serves the purpose and object of the enactment. Even on this ground, we hold that "foreign exchange" cannot be considered as "goods" for the purpose of s. 80HHC. 23. The judgments of the High Courts relied upon by the learned counsel for the assessee are not on the point before us and, therefore, do not help the case of the assessee. The decision of the Hon'ble Karnataka High Cou....
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....the Customs Act, 1962. Such definition has specifically included the currency and encashable instrument. In view of such enlarged meaning of the word "goods", the Tribunal held that currency was "goods". Since it has been held by us that currency forms part of money, it has to be excluded from the definition of "goods". Accordingly, the aforesaid decision of the Tribunal is quite distinguishable and cannot be applied in the present case. 26. The only decision which favours the case of assessee is the decision of the Tribunal, Calcutta Bench, in the case of R.R. Sen & Brothers vs. Jt. CIT. In this case, it has been held that the foreign exchange falls within the scope of "goods". The perusal of the said order shows that such finding is based on the dictionary meaning as well as the decision of Imperial Tobacco Co., the decision of the Hon'ble Karnataka High Court in the case of Kirloskar Asea Ltd. and the Hon'ble Calcutta High Court in the case of CIT vs. Oil India Ltd. (1982) 30 CTR (Cal) 85: (1983) 143 ITR 848 (Cal). The learned counsel for the assessee has contended that this decision being a decision of co-ordinate Bench is binding on us and, therefore, different view c....
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....he Act. Since this condition is not satisfied, the assessee is not entitled to deduction under s. 80HHC. The orders of the learned CIT(A) for all the years are, therefore, upheld on this issue. 28. The next issue which is common to all the appeals relates to computation of deduction under s. 80HHD of the IT Act, 1961 (Act). 29. Briefly stated the facts are these: The facts relating to this issue are almost similar in all the appeals except the figures on various counts. Therefore, for the sake of convenience, we are narrating the facts relating to asst. yr. 1989-90. Accordingly, the facts as narrated in the orders of the lower authorities and also taken from the paper book are stated hereinafter. 30. The assessee is a well-known company engaged in the business of conducting tours and consequently providing services to both foreign tourists as well as domestic tourists. In addition, the assessee derives income by way of booking of cargo and dealing in foreign exchange. Thus, the assessee was entitled to deduction under s. 80HHD of the Act. It claimed deduction amounting to Rs. 84,44,292 by applying the formula prescribed in sub-s. (3)(b) of s. 80HHD. The computation of deduction ....
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....d thus the total business receipts were taken at Rs. 6,67,12,67,118/-. In the similar manner, he computed total sale to foreign tourist at Rs. 33,53,61,833/- on the basis of average rate of profit of 1.2 per cent shown by the assessee while computing exchange profit at Rs. 40,24,342/-. Thus, the receipts in convertible foreign exchange were computed at Rs. 40,15,95,358/- as against Rs. 7,02,57,867 declared by the assessee. Thus, the deduction under s. 80HHD was computed at Rs. 12,58,863/- as under: 32. The matter was carried in appeal before the learned CIT(A) for all the issues, before whom two contentions were raised. The first contention was that in the total business receipts of Rs. 6,67,12,67,118/- certain figures were taken twice. According to the assessee, the total receipts amounted to Rs. 4,62,22,20,820/-. The second contention was that AO should not have taken the gross figures of foreign exchange received by the assessee in consideration of sale of currency since the assessee had received only the difference between purchase and sale of foreign currency and the same should have been taken as the total receipt. The learned CIT(A) found merit in th....
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....in, the sale proceeds of goods sold on auction were considered to be trading receipts even though assessee was acting as an auctioneer and was entitled to commission only. If the sale proceeds in the case of an auctioneer can be considered as a business receipt, we failed to understand as to how in the present case, the assessee can contend that sale proceeds of a currency would not amount to business receipts. In view of the same, we uphold the orders of the learned CIT(A) on this issue. 35. The next issue relates to disallowance of depreciation in respect of office premises as well as residential premises purchased by the assessee. This issue pertains to asst. yrs. 1989-90 to 1992-93. In some years, the disallowance is only in respect of one property while in some other years, the disallowance is in respect of both the properties. The main ground on which the disallowance was made was that the conveyance deed has not been executed in respect of the properties purchased by the assessee. However, in respect of asst. yr. 1989-90, the disallowance was made in respect of office premises on the factual ground that it was not used in the business of assessee inasmuch as it was found by....
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....arned CIT(A) is set aside and the AO is directed to consider the claim of the assessee in accordance with the Supreme Court judgment. 38. The next issue arising in this appeal for the asst. yr. 1989-90, relates to disallowance of Rs. 4,20,000/- being incentive payable to Taj Group of Hotels. This issue has not been pressed before us. Accordingly, the ground raised in this behalf is dismissed. 39. The next issue arising in appeal for the asst. yr. 1992-93, relates to disallowance of entertainment expenses to the extent of Rs. 12,88,230/- and club subscription amounting to Rs. 52,706/-. From the audit report under s. 44AB of the Act, it was seen that entertainment expenditure was worked out at Rs. 4,00,484/-. Apart from this, there were certain expenses by way of lunch, refreshment at annual general meeting, staff get-together, etc., which were not considered as entertainment expenses. These expenses amounted to Rs. 2,57,646/-. Considering the past history, the AO disallowed 50 per cent of the same. This disallowance was challenged before the learned CIT(A) but no finding has been given by him. Hence, this issue has been raised before the Tribunal. Apart from this, club....
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....de by the AO for the above years. On appeal, the same has been confirmed by the learned CIT(A) for the reasons given in his order. According to him, the case was covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd. (1996) 136 CTR (SC) 444 : (1996) 222 ITR 344 (SC). Aggrieved by the same, the assessee is in appeal before the Tribunal for all the three years. 44. After hearing both the parties, we find merit in the appeal of the assessee in view of the latest judgment of the Hon'ble Supreme Court in the case of Chief CIT vs. Kesaria Tea Co. Ltd. (2002) 173 CTR (SC) 394 : (2002) 254 ITR 434 (SC), wherein it has been held that unilateral act on the part of the assessee by way of writing off the liability in its accounts did not necessarily mean that the liability had ceased in the eye of law. It is the stand of the assessee before the learned CIT(A) as well as before us that none of the amounts relates to receipts by the assessee and, therefore, the judgment of the Hon'ble Supreme Court relied upon by the learned CIT(A) has no application. According to assessee's counsel, the unclaimed balances and cheques suspen....
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..... 48. The next issue, common to appeals for asst. yrs. 1990-91 to 1992-93, relates to disallowance under r. 6B, which has been deleted by the learned CIT(A). Disallowances had been made by AO in respect of expenditure incurred on gift articles costing more than Rs. 50 each. The learned CIT(A) has deleted the disallowance following Delhi High Court decision reported as CIT vs. Associated India Exports (1992) 107 CTR (Del) 170 : (1991) 188 ITR 125 (Del). Aggrieved by the same, the Revenue is in appeal. After hearing both the parties, we find that the issue is covered by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Allana Sons (P) Ltd. (1993) 114 CTR (Bom) 448 : (1995) 216 ITR 690 (Bom), wherein it has been held that no disallowance can be made where there is no logo on the gift articles. There is no finding that gift articles carried the logo of assessee-company. Therefore, following the same, the issue is decided in favour of assessee. The orders of the learned CIT(A) are, therefore, upheld on this issue. 49. The next issue arising from appeal for the asst. yr. 1989-90, relates to disallowance of Rs. 1,18,314/- made by the AO on account of interio....
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....enses on up gradation of software do not result into acquisition of any asset nor acquisition of enduring benefit as such software becomes obsolete very quickly. Accordingly, we hold the same as revenue expenditure. The order of the learned CIT(A) is, therefore, upheld on this issue. 53. The next issue in appeal for asst. yr. 1990-91 relates to disallowance of penalty and fine of Rs. 6 lacs. The learned counsel for the assessee has not objected to the ground raised by the Revenue. The fines and penalties are not allowable as expenditure. Accordingly, the order of the learned CIT(A) is set aside and the disallowance made by AO is restored. 54. The next issue relates to disallowance of Rs. 39,199/- being payments made by way of club subscription. This issue is covered by the Hon'ble Bombay High Court in the case of Oils Elevator Co. (India) Ltd. Following the same, we do not find merit in the appeal of the Revenue. CROSS-OBJECTION OF ASSESSEE 55. The first objection in asst. yr. 1989-90 relates to the disallowance of interior decoration expenses. The learned CIT(A) has directed the AO to allow the expenditure. Accordingly the assessee cannot be said to be aggrieved for ....
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....with the return of income. The claims were duly certified by the auditors and the working of the claims and the basis on which the claims were made were also provided. The fact that the claim had been made in earlier years also is not disputed as the AO has mentioned the same in the order itself. Therefore, the contention of the appellant, that only on account of legal differences on interpretation of the claims leading to rejection of the claims, it cannot be said that the same has concealed the particulars of income, has substantial force. The AO also mentions that submissions have been made during the assessment proceedings only when asked for. However, looking at the details which were part of the return of income and the assessment records, it is not correct to say that the basis of the claims and the relevant facts and figures were not furnished along with the return of income. Even if some further material is sought by way of elaboration or clarification of certain issues, it cannot be surmised that the particulars to that extent were concealed by the assessee. Concealment in my view has to be of substantial and relevant facts and it has to be such that it can keep the AO in....