Commissioner of Income Tax vs R.K. Exports

K. Raviraja Pandian, J.—The Revenue filed the appeals u/s 260A of the Income Tax Act, 1961, against the orders of the Income Tax Appellate Tribunal, Madras, "A" Bench, dated October 13, 2004, in I.T.A. Nos. 1370 and 1371/Mds/2004 for the assessment years 1995-96 and 1996-97 and Madras "B" Bench dated March 20, 2008, in I.T.A. No. 606/Mds/2006 for the assessment year 1999-2000 by formulating the following questions of law:

Whether, in the facts and circumstances of the case, the Tribunal was right in treating the transfer of the right to exhibit the films, as a sale of goods or merchandise for the purpose of deduction u/s 80HHC?

Whether, in the facts and circumstances of the case, a transaction for transfer of exploitation rights, entered into in India can be eligible for the benefit of Section 80HHC only because the consideration was received in foreign exchange?

The facts of the case as stated in the memorandum of grounds of appeals are as follows:

(i) The assessee is a company doing distribution of films. For the respective assessment years, the assessee assigned the overseas film rights of Veera, Batsha and Padayappa in the territories of Europe, Canada, Malaysia, Singapore and Australia for a consideration of Rs. 1,19,47,418 and Rs. 3,33,80,000, respectively, and claimed the benefit u/s 80HHC on the profit thereon to the tune of Rs. 83,70,893 and Rs. 2,73,09,324, respectively. The Assessing Officer was of the view that since the only right to exhibit the films in the specified territories were assigned and that too only for a period of ten years, no sale of goods or merchandise took place and on that reasoning disallowed the claim.

(ii) The assessee carried the matter on appeal to the Commissioner of Income Tax (Appeals), who dismissed the appeals of the assessee in respect of the assessment years 1995-96 and 1996-97 but set aside the order of assessment for the assessment year 1999-2000 and remanded back the case to the Assessing Officer with a direction to verify that the foreign exchange on account of sale proceeds on export of film prints with right to exhibit films under invoices, has actually been received within the time stipulated u/s 80HHC(2)(a) of the Act before allowing the deduction.

(iii) The assessee in respect of the assessment years 1995-96 and 1996-97 and the Revenue in respect of the assessment year 1999-2000 filed appeals before the Income Tax Appellate Tribunal. The Appellate Tribunal, following the very same assessee''s own case in I.T.A. Nos. 1370 and 1371/M/04, wherein the Bombay High Court decision in Abdulgafar A. Nadiadwala Vs. Assistant Commissioner of Income Tax and Others, has been applied to the effect that even profits on transfer of rights of exploitation of films would be eligible for the benefit of Section 80HHC, allowed the appeals filed by the assessee and dismissed the appeal filed by the Revenue. The correctness of the same is now canvassed in these appeals.

We have heard the argument of the learned Counsel for the Revenue, who fairly submitted that the assessee''s own case in I.T.A. Nos. 1370 and 1371 of 2004 followed by the Tribunal has been agitated before this court in T.C. No. 2692 of 2006 CIT v. R. Rajinikanth [2007] 295 ITR 523 and this court dismissed the appeal on January 2, 2007, and in respect of other assessee on the very issue in the case of The Commissioner of Income Tax Vs. A.V.M. Production, a Division Bench of this court has held in favour of the assessee to the effect that the assessee is entitled to deduction u/s 80HHC in regard to export of one print of a film for exhibition outside India.

Following the same, these appeals are also dismissed.