Income Tax Appellate Tribunal - Mumbai
Tangerine Exports vs Income-Tax Officer on 3 December, 1993
Equivalent citations: [1994]49ITD386(MUM)
ORDER
R.D. Agrawala, Judicial Member
1. This is an appeal by the assessee. They are a firm. During the relevant accounting period which ended on 31st March, 1990 the assessee-firm exported software to Moscow to the tune of Rs. 1,60,52,617. The assessee claimed exemption under Section 80HHC of the Income-tax Act, 1961 (referred as 'Act' for brief) in respect of their export earnings. It was denied by the Assessing Officer on the premises that the software which was exported by the assessee was neither "goods" nor "merchandise", which alone were entitled to this beneficial provision. On appeal, the learned CIT (Appeals) affirmed the above view. Hence the present appeal under Section 253 of the Act.
2. This second appeal thus raises an interesting issue which although lies in a narrow compass.
3. The fact that the assessee-firm exported Computer Software to Moscow to earn foreign exchange is not under dispute.
4. The Computer programme so sold was recorded on tapes/discs, which were produced before us as sample and to show that this had considerable weight and mass which occupied sufficient space and thus tangible like any other goods.
5. Section 80HHC(l) of the Act runs asunder: (relevant portion extracted).
80HHC(l). Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise.
6. The argument of the Assessing Officer in repelling the assessee's plea that the software exported by them fell within the purview of Section 80HHC emanates from the aid taken by him of another provision is subsection (1) of Section 80HHE introduced by the Finance (No. 2) Act, 1991. The relevant portion of this statutory provision reads as under :
80HHE(l). Where an assessee, being an Indian company or a person (other than a company) resident in India is engaged in the business of
(i) export out of India of Computer software or its transmission from India to a place outside India by any means;
(ii) providing technical services outside India in connection with the development or production of computer software, there shall, in accordance with a subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction of the profit derived by the assessee from such business:
Provided that no such deduction shall be allowed in relation to the assessment year commencing on the 1st day of April, 1994 or any subsequent assessment year;
7. The Assessing Officer thereafter hops on to the speech of the Hon'ble Finance Minister, the mover of the Bill for the enactment of Section 80HHE, delivered by him on the floor of the House on 24th July, 1991, a part of the Annual Budget, as per which Section 80HHE was introduced with a view to encourage export of a software and providing exemption to thef income earned therefrom. In the opinion of the Assessing Officer this being the objective achieved by Section 80HHE, computer software could not be said to fall within the phrase 'goods or merchandise* appearing in Section 80HHC. In appeal, the CIT(A) affirmed this view.
8. Strenuously challenging the stance of the department, Shri R.K. Tandon, the learned counsel for the assessee contended that the revenue authorities misdirected themselves in basing their decision on the strength of a subsequent provision of law, which had not taken birth till the end of the current accounting period and as such bore no relevance for the present adjudication. In his submission, the assessee's case could not be stymied by whipping up a non-existent provision (Section 80HHE came into force with effect from 1-4-1991) which ought to have been decided on the strength of the bare provision of relevant law (Section 80HHC), if not by adopting a beneficial construction thereon. According to him, there were no legal premises entitling the authorities below in applying a law posterior in time which vitiated their findings. The learned Departmental Representative, however, argued that Section 80HHE though a subsequent provision could be sought assistance of and the view taken by the learned CIT(A) was tenable.
9. We have given a very careful consideration to the issue before us.
10. As is obvious, the primary controversy for our adjudication rests on the view taken by us as to whether or not Section 80HHE which had not seen the sunshine during the relevant accounting period could be made the basis for resolving the dispute appearing for that accounting period.
11. One of the fundamental rules of interpretation is that in a taxing statute there is no room for any intendment and one is required merely to look at what is clearly said. Nothing is to be read in, nothing implied. The Supreme Court in CITv. Shahzada Nand & Sons [1966] 60 ITR 392 and CIT v. Vadilal Lallubhai [1972] 86 ITR 2 has held that the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein t ather than from any notions entertained by the interpreting authority as to what was just or expedient. Further, in the case of a reasonable doubt, the construction most beneficial to the subject should be adopted. In certain other cases the Court held that it was impermissible to read in a taxing provision any words which are not there and vice versa, i.e., exclude words which are there. No outside consideration could be called in aid to find out the legislative intent in CED v. R. Kanakasabai [1973] 89 ITR 251 (SC), Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC) and New Piece Goods Bazar Co. Ltd. v. CIT [1950] 18 ITR 516 (SC).
12. It is only in case of ambiguity that a strict construction of the Statute is called for has been held by the Supreme Court in CWT v. Kripashankar Dayashankar Worah [1971] 81 ITR 763; the benefit of such ambiguity must go to the assessee.
13. In the case in hand, it is evident that the Legislature mandated by enacting Section 80HHC to provide exemption from tax on the income earned by the export of 'goods' or 'merchandise' which has not been controlled or clouded by any ifs or buts leaving the expression to be accorded proper and meaningful amplitude, the only exemption being mineral oil, minerals and ores, specifically excepted by Clause (b) of subsection (2) of Section'80HHC.
14. In such context of the matter, the language of Section 80HHC, which indisputably does not admit of or creates any ambiguity, is liable to be given a plain, simple and natural meaning.
15. However, before we embark on such an exercise, we must see as to where there existed any justification with the revenue authorities in inviting aid of Section 80HHE, the subsequent provision.
16. The Hon'ble Supreme Court in ITO v. Mani Ram [1969] 72 ITR 203, held that the newly added provision could not be construed to restrict the meaning of the earlier provision.
17. It was further held in this case that a subsequent legislation affords no useful guide in interpreting a former law which was permissible only in the event there was some ambiguity.
18. On leafing through the relevant law contained in Section 80HHC and the facts of the case, we are unable to disagree with the learned counsel for the assessee that there being no ambiguity whatsoever in the language of this provision which was unequivocal, clear, as well precise no other factor could be allowed to override or overtake such plain words.
19. Reliance placed by the learned CIT(A) on the ratio of the Gujarat High Court decision in CITv. R.M. Amin [1971] 82 ITR 194 does improve the situation in no way. In that case the Hon'ble High Court was referring to the consideration of other part of a statute while interpreting a particular provision thereof. It is based on the principle of harmonious construction of a statute and have nothing to do with the reading of a provision which was wholly non-existent at the relevant time.
Referring to the Supreme Court decision in the case of CIT v. S. Chenniappa Mudaliar [1969] 74 ITR 41 and the citation by the Court as to the observations in the case of Kemp Brandy Syndicate v. Inland Revenue Commission, by His Lordship Sterndale M.R. is similarly not appropriately conceived as it accords permissiveness to the use of subsequent legislation only where the previous legislation is ambiguous.
20. Putting a question to ourselves as to whether the language of Section 80HHC is ambiguous our answer on a circumspect consideration is an emphatic 'no'. An answer different than this will pare down and decimate the legislative intent which as seen by us on the basis of law laid down by the highest Court is impermissible.
21. On a due consideration of the matter, we find that if dehors the plain and precise language of Section 80HHC, we permit importation of Section 80HHE, the later provision, it may result in an embarrassingly analogous situation. As to why, our answer is that if the later provision is allowed to be engrafted in the earlier law, it would mean that an assessment, appeal, reference Writ or Special Leave Petition, stand governed by the earlier provision alone if it were to be decided before the codification of the later law (i.e. Section 80HHE) but if such an issue were to be adjudicated post codification Section 80HHE, the same would be governed by the later law. Why stop here? If in a subsequent year, the Legislature brings on the statute book yet another law and the issue survives whether in a reference or appeal, say even before the Apex Court, the result thereof could be still different. This will surely result in inequality,among equals inasmuch as, different persons exporting computer software in the same period under similar, rather identical circumstances would be subjected to three different treatments. Even otherwise, is it not enough for a good and law abiding citizen to check up the law of the land existing at a particular point of time and arrange his affairs accordingly. He should not be subjected to uncertainties or imponderables and remain on the ropes albeit without any ambiguity in the existing law.
22. As far as the speech of the introducer of the new law is concerned it cannot have a better footage than such law itself which as we have seen in the foregoing paragraphs cannot be looked into. As a passing reference it may however be added that such speech could be made use of where there is absence of clarity or if some ambiguity exists. It would be but proper to reproduce below the law laid down on the subject by the Supreme Court in the case ofAnandji Haridas & Co. (P.) Ltd. v. Engg. Mazdoor Sangh [1975] 99 ITR 592 :
Where the language of a provision is manifestly clear and unequivocal, it has to be, construed as it stands, according to its plain grammatical sense without addition or deletion of any words. It would not be permissible to use the speech of the Finance Minister to construe the clear language of the statute.
23. Even in the case of K.P. Varghesev. ITO [1981] 131 ITR 597 (SC) relied on by the CIT(A) permitting use of the speech made by the mover of the Bill, the Apex Court held such use was allowed for the purpose of ascertaining the mischief sought to be remedied by the legislation and purpose for which the legislation was enacted.
24. This ratio also does not come to the rescue of the department, inter alia, for these reasons:
Firstly that it speaks of the speech made by the mover of the Bill that governs a particular issue and surely cannot be stretched to encompass a speech given by the mover of the Bill of the subsequent law, which, as held by us is of no relevance for the disposal of the present list. Secondly because of the crystal clear and unambiguous language of Section 80HHE this provision of law did not contain any mischief therein which required to be remedied.
25. However even if the issue is examined from the revenue's point of view that the subsequent legislation would be looked into, it may be stated that quoting from a CBDT Circular bearing No. 621, dated 19-12-1991 para 34 of Explanatory Notes available at pages 7146-7182, 7164-65 in Volume 6 of the learned Author Chaturvedi Pithisaria, Section 80HHE was inserted by Finance (No.2) Act, 1991 for the following purpose:
Finance (No. 2) Act, 1991 - Explanatory Notes on the Provisions relating to Direct Taxes.
Circular No. 621, dated 19-12-1991...
34. With a view to providing fiscal incentive for promoting export of Computer software a new Section 80HHE has been inserted in the Income-tax Act for providing tax concession similar to those available under Section 80HHC of the Income-tax Act in relation to commodity exports.
26. The plain language of Section 80HHC as has already been seen by us provided with effect from 1 -4-1989 an incentive only to the export of "goods and merchandise". Interestingly Section 80HHE extended this concession specifically to software exports w. e.f. 1 -4-1991. If the two terminologies are independent and exclusive of each other it could perhaps be said that an item could either be "software" or "goods and merchandise", but never both. Else an item of software could also fall within the phrase "goods and merchandise".
The explanatory circular referred to supra is further revealing.
Para 34.2 of the Explanatory Notes pertaining to introduction of Section 80HHE supra reads as under:
34.2 The broad features of the new provisions are as under :
(i) Tax concession will be available with regard to profits from exports of software not only through magnetic media or on paper but also through satellite data linked and consultancy delivered at the location of foreign client outside India.
In fact, this part of the note clears the mist inasmuch as it goes to suggest, that software could be of 2 types. One physical and the other non-physical. What is exported through satellite data links or consultancy delivered at the location of the foreign client outside India could never be termed as "goods or merchandise" and therefore this sort of software which was not covered by the provisions of Section 80HHC got the benefit of concession by the new provisions namely Section 80HHE.
27. In saying that software could be of 2 types namely in a physical form and otherwise, we are fortified by Sub-para 3 of the aforesaid circular, the relevant portion of which runs as under :
34.3 At present the value of software in a physical form such as magnetic tape/disc imported into India is subjected to Customs Duty on the ground that what is imported is commodity.
28. It may further be pointed out that Section 80HHE was brought on the statute book with a view to give some temporary relief to a particular type of software as is evident from the fact that the section provided that no deduction contemplated by it shall be allowed in relation to the assessment year commencing on the 1st day of April 1994 (later on deferred to 1995 by Finance Act, 1993) or any subsequent assessment year. It may also be pointed out that the Legislature also took into consideration the possibility of some overlapping in the two provisions, viz., Section 80HHC and Section 80HHE as is clear from Sub-section 5 of Section 80HHE reproduced below which will go to suggest that where a deduction was claimed by an assessee under Section 80HHE, he will not be entitled to claim deduction in relation to such profits under any other provisions :
Section 80HHE Sub-section 5:
Where a deduction under this section is claimed and allowed in respect of profits of business referred to in Sub-section 1 for any assessment year, no deduction shall be allowed in relation to such profits under any other provisions of this Act for the same or any other assessment year.
All the above facts clearly go to point out that the provisions of Sections 80 HHC and 80HHE are independent of each other and they were brought on the statute book for serving different purposes. As already held by us Section 80HHE would have to be given a plain meaning as there is absolutely no ambiguity in the language of the section.
29. As seen, Section 80HHC grants deduction in respect of the export of "goods and merchandise". These words have not been defined by the statute. Undefined words have to be construed in the sense in which they are understood in the trade or they may be given the normal dictionary meaning. Reference be made in support of this proposition to the ratio of Evershine Granites (P.) Ltd. v. 1TO [1991] 39 ITD 421 (Hyd.).
30. Taking up the word "goods" it may be pointed out that as per Concise Oxford Dictionary 1972 Edition 'goods' mean movable property; merchandise, wares, things for transaction by rail, etc. Similarly the term "merchandise" is defined as commodities of commerce, goods for sale.
As per the Reader's Universal Dictionary the term "goods" have been defined as under:
(i) merchandise wares (ii) portable personal property (iii) merchandise to be transferred (iv) physical commodities usually movable and only consumed sometimes after production.
The term "Merchandise" has been defined here as commodities of commerce; goods that may be bought or sold.
From the above definitions it transpires that 'goods' would mean any movable property and the goods which are meant for commerce or for sale would fall within the definition of merchandise'.
We may also go to the definition of the term 'goods' in the Sale of goods Act, i.e., take recourse to the statutory definitions.
Section 2(7) of the Sale of Goods Act, 1930 defines the term "goods" as means every kind of movable property other than actionable claims and money.
Similarly our magnacarta, i.e., the Constitution of India in Article 366( 12) states that unless the context otherwise require, "goods" includes all materials commodities and articles.
31. Last but not the least, we must refer to the interpretation of the term "goods" by the Apex Court with reference to Section 3 of the General Clauses Act, 1897 on which strong reliance has been placed by the learned counsel for the assessee wherein it has been held that in view of Clauses 26 and 36 of Section 3 of the General Clauses Act defining "Immovable properties" and "Movable property" respectively and Section 2(7) of the Sale of Goods Act, 1930, the expression 'goods' should mean property of every description except immovable property.
32. Applying the rule of ejusdem generis it must be said that the two terms goods or merchandise are susceptible of analogous meaning and they have to be understood to be used in their cognate sense. They take their colour from each other, i.e., the more general is restricted to a sense analogous to the less general. We are supported in saying so by several decisions such as CITv. A.P. Parukutty Mooppilamma [1984] 149 ITR 131 (Ker.), Kerala Co-operative Consumers' Federation Ltd. v. CIT [1988] 170 ITR 455 (Ker.) and CITv. Kacker 171 ITR 129 (SC) (sic).
33. In the case in hand as already pointed out the term 'goods' is very general while the term merchandise less. Applying the aforesaid rule the term "merchandise" would also have to be understood in the same background, context and meaning as accorded to the word "goods". This conclusion is further fortified by the decision of the Supreme Court in the case of ScientificEngg. House (P.) Ltd.v. CIT[1986] 157ITR 86. In that case the question arose whether documentation service comprised of drawings, designs, plans, processing data, etc., could be treated as "Book" and constitute "Plant" within the meaning of Section 43(3) of the Act and whether depreciation was allowable on documentation service. It was held that the various documents such as drawings, designs, charts, plans, processing data and other literature included in documentation service, the supply whereof was undertaken by the foreign collaborator, more or less from the tools by using which the business of manufacturing instruments was to be done by the assessee and for acquiring such technical know-how through these documents a lump sum payment was made. The expenditure was of a capital nature. Further, in order to qualify as "plant" the particular article had to have some degree of durability. The test to be applied was whether it was a tool of assessee's trade with which the assessee carried on his business. The documentation service was held to be "book" and fell within the definition of "plant" under Section 43(3) of the Act. In the present case also the Computer programme contained in the software, whether recorded on tapes/discs or otherwise, constituted technical instructions to the computer of the user and was therefore a tool of the assessee's trade with which he carried on his business. It would as such qualify to be called a "Book" within the meaning of "Plant" and would therefore also be 'Goods or Merchandise' within the meaning of Section 80HHC.
34. It may be pointed out even at the cost of repetition that Explanatory Circular issued by the CBDT for the effective implementation of Section 80HHE clearly sets out the background, i.e., the Legislature itself took the Computer Software forming two categories - Physical and Non-Physical. It was the non-physical category which as stands amply demonstrated by para 34.2 and 34.3 of the Explanatory Circular, relevant provisions reproduced above not found to be covered by the provisions of Section 80HHC in respect of which the benefit was extended for a specified period by the New provisions of Section 80HHE. In the case of the assessee as stated above their Computer Programme was recorded on Tapes/Discs which have considerable weight and mass occupying sufficient, space and thus tangible and consequently fell within both the terms "goods" as well as "merchandise" used by Section 80HHC. In our considered opinion therefore from all angles - the Dictionary meaning, the meaning accorded to the relevant word by other statutes and the Constitution of India arid/ or interpretation by the Apex Court, the Computer Software exported by the assessee unmistakably fell within the purview of Section 80HHC entitling them to the deduction specified therein.
35. In the result the appeal is allowed.