EIH LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal under Section 260A of the Income-tax (Act), 1961 is at the instance of an assessee and is directed against an order dated 26th February, 2004 passed by the Income-tax Appellate Tribunal, B Bench, Kolkata, in ITA No.1479/Kol/2002 for the Assessment Year 1998-99. Being dissatisfied, the assessee has come up with the present appeal.

(2.) THE facts giving rise to filing of this appeal may be summed up thus: a) THE assessee is engaged, inter alia, in the business of hotelier and runs and maintains several hotels of international standard in India. THE assessee is also engaged in the business of export of foods etc. to international airlines at Mumbai and New Delhi. THE assessee has separate units at Mumbai and New Delhi which supply food and beverages in sealed containers to international flights leaving India. Such foods and beverages in sealed containers are cleared for transmission to the aircrafts and are also escorted by the Customs Authorities at International Airports. After due clearance from the Customs Authorities, such food and beverages are put on board of the aircrafts going out of India. b) In its assessment for the Assessment Year 1998-99, the relevant previous year being the Financial Year ending on March 31, 1998, the assessee claimed deduction under Section 80HHC of the Act for Rs.5, 25, 71,710/- being the profits made from the sale of such food and beverages to such foreign airlines as according to the assessee such sale amounts to export within the meaning of the Section 80HHC of the Act. In the assessment made under Section 143(3) of the Act, the Assessing Officer disallowed such claim on the ground that the sale of such food and beverages to the foreign airlines did not amount to export out of India and that the payment received from the said foreign airlines in India in the form of rupees could not be treated as payment in convertible foreign exchange within the meaning of the provisions of Section 80HHC of the Act. c) Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) and the said authority upheld the order of the Assessing Officer observing that the sale of the food and beverages to the foreign airlines was completed within the Indian territory itself and that the payment received from such foreign airlines in rupees could not be considered as payment received in convertible foreign exchange. d) Being dissatisfied, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Kolkata and the said Tribunal by the order impugned herein upheld the order of the CIT(A). THE Tribunal held that the conditions for grant of deduction under Section 80HHC of the Act were not satisfied. e) Being dissatisfied, the assessee has come up with the present appeal under Section 260A of the Act. A Division Bench of this Court, at the time of admission of this appeal, formulated the following substantial questions of law: a) Whether on the facts and in the circumstances of the case the supply of food and beverages to the international airlines in sealed containers constitutes export of goods out of India for the purposes of Section 80HHC of the Act. b) Whether on the facts and in the circumstances of the case the sale proceeds received, for supply of such food and beverages, was in convertible foreign exchange within the meaning of Section 80HHC of the Act. c) Whether on the facts and in the circumstances of the case your petitioner is entitled to the deduction claimed under Section 80HHC of the Act.

(3.) MR. Shome, the learned Senior Advocate appearing on behalf of the Revenue, has, on the other hand, opposed the aforesaid contention of MR. Bajoria and has contended that the authorities below in the facts of the present case, rightly held that the assessee having received the consideration for sale of food and beverage items in Indian rupees, the same cannot, at any rate, be said to be export of those items. It is further contended that in order to export any item out of India, the formalities required for clearance of the goods provided in the Customs Act are to be complied with and in the case before us, the shipping bill required under the said Act for export could not be produced by the assessee. MR. Shome submits that the documents relied upon by the appellant show that those were merely bills for re-exporting of the imported items which were very much within the warehouse of the customs and as such, such transaction carried on by the assessee did not come within the purview of export. In support of his contention MR. Shome relied upon the decision of the Supreme Court in the case of Burmah Shell Oil Storage and Distributing Co. of India Ltd. (In C. A. 751 of 57) and Standatd Vaccum Oil Co. (In C. A. No. 10 of 58), Appellants Vs. The Commercial Tax-Officer and others, reported in AIR 1961 SC 315. MR. Shome, further submits that the assessee, as it appears from record, also charged sales tax on those items of food and beverage from the airlines authority and such conduct itself indicated that the transactions were sale of items within the country. MR. Shome, therefore, prays for dismissal of the appeal.