| SooperKanoon Citation | sooperkanoon.com/73602 |
| Court | Income Tax Appellate Tribunal ITAT Delhi |
| Decided On | Nov-22-2004 |
| Judge | K Singhal |
| Reported in | (2005)93ITD30(Delhi) |
| Appellant | Smt. Mona Rai |
| Respondent | income-tax Officer |
Local sale and export sale were shown at Rs. 89,800/- and Rs. 2,43,038/- respectively. The total income from sale of painting was shown at Rs. 1,89,969/- out of which deduction of Rs. 1,38,051/- was claimed Under Section 80HHC of the Act. Since the assessee could not furnish any evidence regarding custom clearance, she was asked to show cause as to why her claim Under Section 80HHC be not rejected. In response to the same, the reply of assessee was as under: a) The assessee had sold paintings by displaying them in exhibition at Amsterdam, Netherlands. This sale qualifies for deduction Under Section 80HHC since Section 80HHC(2)(b) excludes export of only mineral oils and mineral and ores. The items exported by the assessee does not fall under the exclusion provided Under Section 80HHC. b) The export turnover as defined in explanation (b) to Section 80HHC(4B) means the amount of sale proceeds received in or brought into India in convertible foreign exchange in respect of sale of goods mentioned in Section 80HHC(1). The assessee has received the sale proceed of Rs. 2,43,038.25 in convertible foreign exchange through proper banking channels as per the details filed vide our letter dated 24.11.2000. Therefore, the export turnover made by the assessee qualifies for deduction Under Section 80HHC. c) The assessee had carried several paintings with her to the exhibition. These were carried as a part of baggage to avoid damage in transportation. Photocopy of the photographs of the paintings carried by the assessee to the exhibition have already been filed vide our letter dated 19.12.2000. These were not sent as cargo to save these from possible damage by rough handling.
d) The assessee has export code number allotted by the RBI. Photocopy of the same is already filed vide our letter dated 22.1.2001.
e) Certificates issued by the bank have already been filed vide our letter dated 24.11.2000.
f) That the letter from the organizing gallery i.e. Foundation for Indian Artist, Amsterdam, Netherlands to the effect that the assessee had carried paintings with her to the exhibition is already filed vide our letter dated 22.1.2001.
g) Photocopy of the passport of the assesses was also filed vide our letter dated 24.11.2000.
2. On examining the relevant materials produced, the AO observed as under: "1. From the passport produced, it is seen that the assessee had traveled to Netherlands but the purpose of visit is not spelled out from the same. The travel could have been undertaken for mere tourism or even if it was undertaken for visiting the said exhibition, then also it does not prove that the painting had accompanied her to Amsterdam since there is no mention of the same.
2. From the Bank FIRCs, the purpose of remittance as declared by the remitter/beneficiary is stated as export proceeds, which is a self declaration of the assessee and by itself does not prove that the said remittances were actually made against export proceeds or otherwise.
3. From the photographs of paintings furnished, it transpires that the assessee is present in some art gallery, where some paintings are displayed, but the name or place of the said art gallery, where the paintings were displayed is not known from the photograph. It can be the photograph of any art gallery, even situated in India.
4. From the perusal of the sale bills produced, the export is not evidenced since there is no signature or acknowledgment of the buyer or any other party like the organizer of the exhibition. The bills were simply hand written on the letter heads of the assessee and do not contain any third party evidence to accept the genuineness of the same.
5. Letter from Foundation for Indian Artist The Netherlands produced in support of her claim for proof of carrying painting is certifying that the paintings were brought there but said Foundation is not authority which can certify that the same were brought from India and hence cannot be considered as export evidence.
6. The assessee's claim that she has export code allotted by RBI vide letter dated 3.8.89 and claiming export income for so many years does not make her entitled to get the benefit for this year also without fulfilling other conditions for getting the benefit Under Section 80HHC. 7. The vital evidence of custom clearance was not produced by the assessee, which could have established the actual movement of goods for export from India to Amsterdam." 3. Coming to the legal; position the AO referred to the provisions of Section 50 of Customs Act, 1962 according to which it is mandatory upon any exporter of any goods to make entry thereof by presenting a shipping bill or bill of export to the proper officer of customs department. Therefore, it was opined by him that there could be no export without the custom clearance. As assessee could not produce the customs clearance in support of export of her painting, her claim Under Section 80HHC could not be allowed. He also referred the provisions of Clause (aa) of the Explanation to Section 80HHC, Explanation 2 to Section 80HHC(2) and the judgment of Allahabad High Court in the case of Ram Babu & Sons v. UOI, 222 ITR 606 in support of the above conclusion. Accordingly, he disallowed the claim of assessee. On appeal, disallowance made by AO was confirmed by CIT(A), Aggrieved by the same, the assessee has preferred the second appeal before the Tribunal.
4. The learned counsel for assessee, Mr. Goel, has vehemently assailed the order of CIT(A) by raising various submissions. Firstly, he took me through the entire material placed in the paper book to point out that there is enough evidence on record to prove the factum of export. This material comprises of (i) copy of passport valid from 4.4.97 to 3.4.2017 (Page 12 of Paper book); (ii) Entry in the passport dated 8.5.97 to prove the visit to Amsterdam (Page 14); (iii) Invitation to exhibition held at Gallery Foundation for Indian Artists, Amsterdam (Page 15); (v) Photograph to show the presence of assessee at the Gallery (Page 16); (vi) Certificate from Gallery Foundation for Indian Artists dated 20.12.00 to the effect that assessee had an exhibition in their Gallery from 26th April, 1997 to 28th May, 1997 and she brought the paintings with her when she arrived at Amsterdam (Page 17), Allotment of Code No. of exporters by Reserve Bank of India dated 3.8.89 (page 18) and Bank certificates for remittance of convertible foreign exchange (pages 19 & 20). According to him. such material is sufficient to establish the export of paintings by the assessee.
5. Proceeding further, it was submitted by him that AO had wrongly relied upon the provisions of Explanation (aa) to see 80HHC in as much as such Explanation can be applied only when there is counter sale in India which is not the case of assessee. The judgment of Allahabad High Court also cannot be applied for the same reasons. Regarding Section 50 of Customs Act, it was pleaded by him that such provisions fall under Chapter VII of the said Act and the same cannot be applied where goods are carried as part of the baggage in view of Section 44 which in clear terms provides that provisions of Chapter VII would not apply to baggage. At this stage, a query was raised whether there are any provisions, for declaration of the contents of the baggage, in the Customs Act or rules made thereunder. In response to the same, it was stated that there is no such provision.
6. Lastly, it was contended that provisions of Section 80HHC, being incentive provisions, should be construed liberally so as to achieve the objects and not to frustrate the same. Various decisions were referred to in support of such provisions.
7. Alternatively, it was pleaded that CIT(A) should have allowed his alternate claim Under Section 80RR raised before him by way of Ground No. (1 A).
8. On the other hand, the learned DR has strongly supported the order of AO and CIT(A) by contending that export and import of goods is strictly governed by the provisions of Customs Act and no goods can cross the territory of India without the custom clearance. Hence, claim of assessee Under Section 80HHC cannot be allowed in the absence of custom clearance. Regarding the provisions of Explanation (aa), it was stated that no doubt such provisions can be applied to counter sale but the intention of legislature can be inferred from the same that custom clearance is mandatory to prove the factum of export.
9. Rival submissions of the parties have been considered carefully. The question for consideration is whether, on facts and in law, can it be said that assessee had exported her paintings from India to Germany for the purpose of claiming deduction Under Section 80HHC of the Act. The business of import and export in India is totally governed by the provisions of Customs Act, 1962 as well as Foreign Exchange Regulation Act, 1973 (FERA) and, therefore, no goods for export can leave Indian territory without the custom clearance. In order to appreciate the controversy, it would be appropriate to refer the relevant provisions of the above enactments. The relevant provisions of Customs Act, 1962 are reproduced as under: The provisions of this Chapter shall not apply to (a) baggage, and (b) goods imported or to be exported by post.
(1) The exporter of any goods shall make entry thereof by presenting to the proper officer in the case of goods to be exported in a Vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in the prescribed form.
(2) The exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.
Where the proper officer is satisfied that any goods entered for expert are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance and loading of the goods for exportation.
SPECIAL PROVISIONS REGARDING BAGGAGE. GOODS IMPORTED OR EXPORTED BY POST AND STORES BAGGAGE The owner of any baggage shall, for the purpose of clearing it, make a declaration of its contents to the proper officer.
Section 78: Determination of rate of duty and tariff valuation In respect of baggage.- The rate of duty and tariff valuation, if any, applicable to baggage shall be the rate and valuation in force on the date on which a declaration is made in respect of such baggage under Section 77.
(1) The proper officer may subject to any rule made under Sub-section (2), pass free of duty- (a) any article in the baggage of a passenger or a member of the crew in respect of which the said officer is satisfied that it has been in his use for such minimum period as may be specified in the rules; (b) any article in the baggage of a passenger in respect of which the said officer is satisfied that it is for the use of the passenger or his family or is a bona fide gift or souvenir: Provided that the value of each such article and the total value of all such articles does not exceed such limits as may be specified in the rules.
(2) The Central, Government may make rules for the purpose of carrying out fee provisions of this section and, in particular, such rule may specify (a) the, minimum period for which any article has been used by a passenger or a member of the crew for the purpose of Clause(a) of Sub-section (1); (b) the maximum value of any individual article and the maximum total value of all the articles which may be passed free of duty under Clause(b) of Sub-section (1); (c) the conditions (to be fulfilled before or after clearance) subject to which any baggage may be passed free of duty.
(3) Different rules may be made under Sub-section (2) for different classes of persons.
(a) provided for the manner of declaring the contents of any baggage; (b) providing for the custody, examination, assessment to duty and clearance of baggage; (c) providing for the transit or transshipment of baggage front one customs station to another or to place outside India." "Section 18(1)(a) : The Central Government may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing - (ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export of not) has been, or will within the prescribed period be, paid in the prescribed manner.
G.S.R.78 In exercise of the powers conferred by Sub-section (1) of Section 18 of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Economic Affairs) No. GSR 2641 dated 14th November 1969, the Central Government hereby prohibits the export otherwise than by post, of all goods, either directly or indirectly, to any place outside India, other than Nepal and Bhutan: unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing- (ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been,-or will within the prescribed period be, paid in the prescribed manner: (b) Personal effects of travelers, whether accompanies or unaccompanied; (c) Ships' stores, transshipment cargo and goods shipped under the orders of the Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements; (d) Goods dispatched by air freight and accompanied by a declaration by the sender that they are not more than ten thousand rupees in value and that their dispatch does not involve any transaction in foreign exchange; (e) Goods dispatched by air freight and covered by a certificate issued by any authorized dealer that their export does not involve any transaction in foreign exchange; (f) Goods the export of which in the opinion of the Reserve Bank do not involve any transaction in foreign exchange, and which the Reserve Bank has, by a general or special order, permitted to be exported without furnishing a declaration as provided for herein.
(g) The following goods which are permitted- by the Development Commissioner of the Santacruz Electronics Export Processing Zone, the Kandla Free Trade Zone, the Noida Free Trade Zone, the Falta Free Trade Zone, the Madras Free Trade Zone or the Cochin Export Processing Zone, as the case may be, to be exported without furnishing a declaration as provided for herein, namely - (i) imported goods found defective, for the purpose of replacement by the foreign supplier or collaborator; (ii) imported goods which were imported from foreign collaborators on loan basis; (iii) surplus goods which were earlier imported from foreign suppliers or collaborators free of cost, after production operations."' 10. The combined reading of the above provisions reveals that no export of good could be effected from India without custom clearance.
According to Sections 50 & 51 of Customs Act, the exporter is required to make entry thereof by presenting to the proper officer a, shipping bill or bill of export in the prescribed forms. On being satisfied, the officer may make order permitting clearance for exports. No doubt, these provisions are not applicable where goods are carried to other countries as part of the baggage but in such cases the passenger is under obligation to declare the contents of goods carried in the baggage as per Section 77 of the Customs Act. The only effect of Section 44 is that the goods in the baggage need not be accompanied by shipping bill or bill of export as required by Section 50. Even Under Section 18(1) of FERA read with the notification issued by the Central Government, the passenger cannot export any goods without making declaration before .the custom authorities in respect of the contents of baggage except in the circumstances mentioned in the notification.
The exception relevant to the present case is only in respect of personal effects of the passenger, which is not the case before the Tribunal. In view of the above discussion, it has, therefore, to be held that no export of goods or merchandise, intended for sale, could be effected without custom clearance. This view is also fortified by the decision of the Tribunal in the case of Sanjeev Malhotra v. DCIT, 91 ITD 76 (Del)(TM).
11. To buttress the above finding, reference can be made to Explanation (aa) after 80HH(4B) which defines "export out of India" as under: "Explanation (aa) : "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);" The above clause was inserted by Finance (No. 2) Act. 1991 w.e.f.
1.4.86. Prior to insertion of this clause, there was a controversy as to whether counter sale effected, in a shop/emporium or any other establishment in India, to a foreign tourist could be considered as expert out of India. In order to resolve this controversy, the legislature inserted the above clause with retrospective effect from 1.4.86. No-doubt, this clause cannot be applied to the facts of the present case. However, reference to this clause is relevant to infer the intentions of the legislature. This clause, in clear terms, provides that counter sale to a person leaving India cannot be considered as an export sale unless it involves the custom clearance.
My finding given in the preceding para is in consonance with such legislative intention.
12. Coming to the facts of the case, I am in complete agreement with the conclusion of the lower authorities that assessee has failed to prove the actual export of paintings from India to Germany. There is no evidence to prove the custom clearance despite the legal obligation on her to declare the contents of the baggage before the custom authorities. The other evidence produced by the assessee have been rightly rejected for the reasons given by AO. Even assuming for the sake of arguments, there was sale of her paintings in Germany, the possibility of making paintings by assessee herself in Amsterdam itself cannot be ruled out. In such case the assessee would not be entitled to any deduction Under Section 80HHC. 13. In view of the above discussion, the claim of assessee Under Section 80HHC cannot be accepted. The order of the CIT(A) is, therefore, upheld on this issue.
13. The next issue arising in this appeal is whether CIT(A) was justified in ignoring the additional ground raised before him. We find that additional ground, being Ground No. 1A, was raised to the following effect.
"1A-That without prejudice to Ground 1 above, with regard to claim of the assessee for deduction Under Section 80HHC, the assessee being an artist is entitled to a deduction Under Section 80RR of the Income-tax Act, 1961 equivalent to Rs. 1,82,278/- being 75% of Rs. 2,43,038.25, as income derived by her in the exercise of her profession from 3 person not resident in India." 14. The written submissions filed before CIT(A) also shows that assessee had raised such ground. In all fairness, CIT(A) should have adjudicated such ground. Accordingly, we direct the CIT(A) to dispose of the additional ground after hearing the assessee.