Category: In the High Courts: Part A-Reported Decisions

[CIT v. Tarun R. Tahiliani (Bom.); dated 14-6-2010]

The assesse is a dress designer. For the A.Ys. 1999-00 to
2001-02 the assessee claimed deduction u/s.80RR of the Income-tax Act, 1961 in
respect of the design fees received from persons not resident in India in
convertible foreign exchange. The Assessing Officer rejected the claim holding
that the assessee is not an author, or a playwright, artist, musician, actor or
a sportsman, and hence did not fall within one of the categories to whom a
deduction can be allowed. The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :

“(i) Counsel appearing on behalf of the Revenue submitted
that (i) The expression ‘artist’ in S. 80RR must be restricted to the field of
fine arts; (ii) The purpose of the provision is to showcase Indian culture
abroad; and (iii) The field of design is an area of technical expertise and
not an art form.

(ii) In a circular (No. 31) of the Board dated 25-10-1969,
it was clarified that the expression artist includes photographers and T.V.
cameramen for S. 80RR. By circular (No. 675) dated 3-1-1994, the Board
clarified that a script writer is a playwright and that a director is an
artist for the purpose of S. 80RR. However, a producer does not fall in any of
the stated categories.

(iii) The expression ‘artist’ is not defined by the
statute. Hence, the Parliament must have intended that an artist must be
understood in its ordinary sense. No artificial constructs or deeming
fictions. There is nothing in the statutory provision which would confine the
meaning of the expression to a person
engaged in fine arts.

(iv) Simply stated, an artist is a person who engages in an
activity which is an art. Artist, as we understand them, use skill and
imagination in the creation of aesthetic objects and experience. Drawing,
painting, sculpture, acting, dancing, writing, film-making, photography and
music all involve imagination, talent and skill in the creation of works which
have an aesthetic value. A designer uses the process of design and her work
requires a distinct and significant element of creativity. The canvass of
design is diverse and includes graphic design and fashion design. An artist as
part of his or her creative work, seeks to arrange elements in a manner that
would affect human senses and emotions. Design, in a certain sense, can be
construed to be a rigorous form of art or art which has a clearly defined
purpose. Though the field of designing may be regarded as a rigorous facet of
art, creativity, imagination and visualisation are the core of design.

(v) Dress designing has assumed significance in the age in
which we live, influenced as it is by the media and entertainment. As a dress
designer, the assessee must bring to his work a high degree of imagination,
creativity and skill. The fact that designing involves skill and even
technical expertise does not detract from the fact that the designer must
visualise and imagine. A designer is an artist.

(vi) The Tribunal was not in error in holding that the
assessee is an artist for the purposes of S. 80RR.”

[CIT v. King Metal Works (Bom.); ITA(L) No. 801 of 2010,
dated 7-7-2010]

In this case, the following question was raised before the
Bombay High Court :

“Whether on the facts and in the circumstances of the case
and in law, the Tribunal has erred in holding that while computing direct cost
attributable to export, the freight and insurance amounting to Rs.1,71,87,614
should be excluded for arriving at export profits while computing the
deduction u/s.80HHC ?”

The High Court answered the question in favour of the
assessee and held as under :

“(i) U/s.80HHC(3)(b), the export turnover has to be reduced
by the direct and indirect cost attributable to export in order to arrive at
profits derived from export.

(ii) While defining the expression ‘export turnover’, the
Parliament has evinced an intent to exclude freight and insurance attributable
to the transport of goods or merchandise beyond the customs station. Such
freight and insurance has to be excluded from the sale proceeds received in
India by the assessee in convertible foreign exchange. The object of the
exclusion of freight and insurance is to ensure that the benefit of the
deduction u/s.80HHC is confined to profits derived from export.

(iii) The case of the Revenue is that though freight and
insurance is excluded from the export turnover as a result of Explanation (b)
to Ss.(4C) of the Section, freight and insurance must be treated as direct
cost and must then be deducted from the export turnover. According to the
Revenue, freight and insurance would be ‘cost directly attributable to the
trading goods exported out of India’ within the meaning of Explanation (d) to
Ss.(3).

(iv) In considering the tenability of the submission which
has been urged on behalf of the Revenue, it has to be noted that for the
purposes of the formula in clause (b) of Ss.(3), the export turnover has to be
reduced by direct and indirect cost attributable to export. Freight and
insurance is expressly to be excluded from the sale proceeds received by the
assessee, in computing the export turnover. Freight and insurance cannot be
regarded as costs directly attributable to the trading goods within the
meaning of clause (b) of Explanation to Ss.(3).

(v) As a matter of fact, freight and insurance attributable
to the transport of goods or merchandise beyond the customs station is already
excluded from the sale proceeds in computing the export turnover. Such freight
and insurance cannot be regarded as part of the direct costs attributable to the
trading goods. To do so, would result in a situation where freight and insurance
attributable to the transport of the goods beyond the customs station, which has
already been reduced from the sale proceeds received by the assessee, would, in
addition, be added back as a part of the direct cost incurred by the assessee.
The language of the Section, in our view, does not warrant such a conclusion.”

[CIT v. Gurnam Singh, 170 Taxman 160 (P&H)]

In the relevant period, the assessee had sold agricultural
land and out of the sale proceeds, the assessee, along with his son, had
purchased another agricultural land and claimed deduction u/s.54B of the
Income-tax Act, 1961. The Assessing Officer disallowed the claim on the ground
that exemption from capital gains was available only in case the sale proceed
was invested by the assessee for purchasing another agricultural land and not in
respect of the land purchased by any other person. The Tribunal allowed the
assessee’s claim.

On appeal by the Revenue, the Punjab and Haryana High Court
upheld the decision of the Tribunal and held as under :