Arun Madan, J.
1. By this appeal under Section 260A of the Income-tax Act, 1961 (for short, 'the Act'), the Revenue has challenged the order dated September 22, 1999 (annexure 3), of the Income-tax Appellate Tribunal, Bench at Jaipur (for brevity, 'the ITAT').
2. The assessee (respondent) being a registered firm as manufacturer and exporters of precious and semi-precious stones, handicrafts, jewellery, etc., had filed its return for the assessment year 1996-97 declaring its total income of Rs. 1,51,000 while claiming deductions under Section 80HHC of the Act at Rs. 80,12,786. Its return was selected for scrutiny under Section 143(3) of the Act and during the assessment, the Assessing Officer found that its sales included counter sales of Rs. 9,76,40,672 on which the asses-see had claimed deduction under Section 80HHC of the Act which was disallowed by the Assessing Officer, who assessed the total income at Rs. 82,74,190 as per Explanation (aa) to Section 80HHC of the Act vide an order dated August 11, 1997 (annexure 1), against which the assessee preferred appeal before the Commissioner of Income-tax (Appeals), who by his judgment dated January 18, 1998 (annexure 2), has confirmed the order of the Assessing Officer disallowing the aforesaid deduction, after having held that since the counter sales were not eligible for relief under Section 80HHC as such counter sales could not have been treated as export sales with a view to qualify for the deduction under Section 80HHC as per Explanation (aa) to Section 80HHC of the Act. Again, the assessee went in appeal and the Income-tax Appellate Tribunal by its judgment dated September 22, 1999 (annexure 3), allowed the assessee's appeal directing the Assessing Officer to treat counter sales as sales so as to qualify for deductions under Section 80HHC of the Act. Hence, this appeal.
3. We have heard learned counsel for the parties and perused the impugned order of the Income-tax Appellate Tribunal so also the orders and judgments of the Assessing Officer and the Commissioner of Income-tax (Appeals). Explanation (aa) (which was inserted by the Finance (No. 2) Act, 1991, with effect from April 1, 1986) to Section 80HHC of the Act stipulates that 'export out of India' shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962). In the impugned order, the Income-tax Appellate Tribunal followed the decisions in : (1) Ram Babu and Sons v. Union of India : [1996]222ITR606(All) Civil Miscellaneous Writ Petition No. 58 of 1995, decided on May 17, 1996, decided by the Division Bench of the Allahabad High Court, and (2) Anil Exports Jaipur v. ITO (I. T. A. No. 1811/JP of 1992, dated July 30, 1998, decided by the Income-tax Appellate Tribunal Bench at Jaipur).
4. In Ram Babu and Sons v. Union of India : [1996]222ITR606(All) , the Allahabad High Court held that what Explanation (aa) of the Act means is that it will not be an export out of India if two conditions are satisfied : (i) it should be a transaction by way of sale otherwise in a shop, emporium or an establishment situate in India ; (ii) it should not involve clearance in the customs as defined in the Customs Act. Thus, according to the Allahabad High Court, both these conditions must be satisfied if the transaction is to be held to be not an export out of India and, therefore, if either of these two conditions is not satisfied it shall not (sic) be treated as an export out of India and if the transaction involves clearance at customs, it would be an export out of India within the meaning of Explanation (aa). It also held as under (page 607) :
'In our opinion, Explanation (aa) has nothing to do with the seller or purchaser. It is the transaction which should involve clearance at customs if it is to be an export out of India within the meaning of Explanation (aa). Thus, the interpretation being put to Explanation (aa) by the authorities, in our opinion, is not correct.'
5. After the aforesaid decision of the Allahabad High Court, special leave petition was also preferred before the Supreme Court but the same was rejected by order dated October 17, 1997 (Union of India v. Ram Babu and Sons--petition for special leave to appeal (Civil) No. 4801 of 1997 from the judgment and order dated May 17, 1996, in CMWP No. 58 of 1995 of the High Court of Allahabad).
6. In CIT v. Silver and Art Palace (D. B. Income-tax Reference Application No. 17 of 1996, decided on March 24, 1998), the assessee claimed a sum of Rs. 1,02,955 as deduction under Section 80HHC out of the profits earned on export of goods or merchandise, out of India and also the sales at the counter to foreign buyers, and the Assessing' Officer while assessing under Section 143(3) allowed such deduction but the Commissioner of Income-tax invoking his power under Section 263 of the Act, modified the assessment order by withdrawing deduction claimed under Section 80HHC, against which the assessee went in appeal and the same was allowed by the Income-tax Appellate Tribunal and against that judgment, the Revenue made an application to refer the question as to whether the Tribunal was justified in cancelling the order of the Commissioner of Income-tax, Jaipur under Section 263 notwithstanding the fact that the Assessing Officer in the assessment made under Section 143(3) allowed deduction under Section 80HHC on sates made in foreign exchange to foreigners at the business counter of the assessee in India. The reference application was also dismissed by the Income-tax Appellate Tribunal. This court also dismissed the application under Section 256(2) ofthe Act after taking into consideration, the aforesaid facts of the case and held that no question of law is involved as the order of the Income-tax Appellate Tribunal rejecting the application under Section 256(1) of the Act is perfectly correct.
7. Be that as it may, in the instant case, it is crystal clear that the assessee effected sales to foreigners against convertible foreign exchange inasmuch as the sale transactions in question did involve clearance at customs, therefore, such sales could not (sic) be an export out of India. Hence, we do not find that the Income-tax Appellate Tribunal has committed any error of law either in following the decision of the Allahabad High Court in Ram Babu and Sons' case : [1996]222ITR606(All) or in interpretating the provisions of Explanation (aa) to Section 80HHC of the Act while extending the benefit of relief/claim of deductions under Section 80HHC of the Act in favour of the assessee (respondent) on its counter sales to foreigners. Thus viewed, we do not find any merit in any of the contentions canvassed by learned counsel for the Revenue.
8. Resultantly, this income-tax appeal being devoid of any merit is dismissed with no order as to costs. The impugned order of the Income-lax Appellate Tribunal (annexure 3) stands upheld.