According to the department, movies/films are not goods. Hence Section 80HHC cannot be invoked which grants benefit only to sale. The department further argued that the tape (cassette) was only a medium of transfer; that, there was no "sale" of the film in beta-cam format and that the film companies had only transferred the right to use for a period of five years and since the title remained with the exporters. The assessees (B Suresh and others) contended that the deduction/concession is given in cases where they derive profits from exports and earns foreign exchange. The court agreed with them and said that the rights held by them would certainly fall in the category of articles of trade and commerce, hence, merchandise.
Source : Newspapers