[CIT v. B. Suresh,
(2009) 313 ITR 149 (SC)]
During the relevant A.Y.
1993-94, the assessee, B. Suresh, transferred feature film rights for
exploitation outside India and earned income in foreign exchange. The assessee
claimed deduction u/s.80HHC in respect of the said receipts. The Assessing
Officer held that the assessee was not entitled to deduction u/s.80HHC,
inter alia, on the ground that the export was not of merchandise or goods
as contemplated u/s.80HHC, but was merely an export of ‘rights’ in the film.
This decision of the AO was overruled by the Commissioner of Income-tax
(Appeals). When the matter came before the Tribunal at the instance of the
Department, there was already a judgment of the Bombay High in the case of
Abdulgafar A. Nadiadwala v. ACIT, (2004) 267 ITR 488. Following the said
decision, the Tribunal and the High Court held that the assessee was entitled
to deduction u/s.80HHC. On an appeal by the Department, the assessee inter
alia invited attention of the Supreme Court to the scheme of S. 80HHC to
point out that the word ‘sale’ would also include ‘lease’ as indicated in Rule
9A(7) which states that for the purposes of Rule 9A, the ‘sale’ of the rights
of exhibition of feature films would include the ‘lease’ of such rights.
Similarly, under Rule 9B(6), it has been, inter alia, provided that
‘Sale’ of rights of exhibition of a feature film would include ‘lease’ of such
rights.
The Supreme Court held that
the basic requirement of S. 80HHC is earning in foreign exchange and retention
of profits for export business. Profits are embedded in the ‘income’ earned.
Earning of income depends on sale of goods and services. Today the difference
between the two is getting blurred with globalisation and cross-border
transaction. Today with technological advancement one has to change the
thinking regarding concepts like goods, merchandise and articles. In the
instant case the assessee had bought rights of various decoders and had
recorded movies on beta-cam tapes which were transferred as telecasting rights
to Star T.V. for five years (it has a limited life). Hence, such ‘rights’
would certainly fall in the category of articles of trade and commerce, hence,
merchandise. On the question as to whether transfer of the said rights by way
of lease would attract S. 80HHC, the Supreme Court found merit in the
contention that under Rule 9A and 9B, the word ‘lease’ is included in the
meaning of the word ‘sale’. In conclusion the Supreme Court observed that
there was no infirmity in the judgment of the Bombay High Court in the case of
Abdulgafar A. Nadiadwala (supra).
