Law:

Section:

Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1996-97 - Whether counter sales made against foreign exchange which are subject to custom clearance are entitled to deduction under section 80HHC - Held, yes FACTS The assessees were dealers engaged in the business of handicraft items and marble goods in the city of Agra. They catered to the needs of foreign tourists who visited the city. The goods sold against foreign exchange while taking the goods out of the country required custom clearance at the airport. The assessees claimed benefit of special deduction under section 80HHC in respect of the turnover and profit of counter sales made against convertible foreign exchange to the foreign tourists. The assessing authority in the original assessment accepted the claim and granted deduction. However, he issued notices under section 148 seeking to withdraw the deduction granted to the assessees under section 80HHC. On writ : HELD It was not in dispute that notices under section 148 had been issued only to withdraw the deduction granted to the petitioners under section 80HHC in respect of the counter sales made against foreign exchange. A Division Bench of the High Court in the case of Ram Babu & Sons v. Union of India [1996] 222 ITR 606 has held that the benefit of special deduction under section 80HHC is avail able in respect of the counter sales effected against the convertible foreign exchange if the goods are taken out of the country and the transaction is subjected to custom clearance. Since the view taken by the Court in the case of Ram Babu & Sons ( supra) has been approved by the Supreme Court in the case of CIT v. Silver & Arts Palace [2003] 259 ITR 684/ 129 Taxman 56 and the instant High Court has taken a view that even the counter sales made against foreign exchange and which are subjected to custom clearance, are entitled for deduction under section 80HHC, there could not be any reasonable belief upon which the Assessing Officer could form the opinion that any income had escaped assessment to tax or any deduction had been wrongly allowed so as to fall under section 148 and, thus, only on that ground if the…

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