ACIT, CHENNAI v. M/s. Janani Holdings, CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE ACCOUNTANT MEMBER] I.T.A.NO.1094/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ACIT CIRCLE XV CHENNAI VS M/S JANANI HOLDINGS 500 32-38 CONGRESS BUILDINGS ANNA SALAI TEYNAMPET CHENNAI 600 006 [PAN AADFJ6634N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI V. SRINIVASAN O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSESSME NT YEAR 2007-08 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-XII C HENNAI DATED 29.4.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF EXPORTING GRANITE AND IT CLAIMED DEDUCTION U/S 10B OF THE INCOME-TAX ACT 1961 (HERE INAFTER REFERRED TO AS 'THE ACT' FOR SHORT) ON ITS PROFITS AMOUNTING T O ` 3 55 16 987/-. THE ASSESSEE EXPORTS GOODS AND IN THE SALES INVOICES IT DESCRIBED THE ITA 1094/10 :- 2 -: EXPORTED GOODS AS PROCESSED DIMENSIONAL ROUGH OR C RUDE GRANITE. THUS THE GRANITE HAS BEEN PROCESSED INTO BLOCKS AN D DRESSED BY THE ASSESSEE AND THESE WERE EXPORTED BUT STILL THEY WER E DESCRIBED AS ROUGH BLOCK OR CRUDE BLOCK IN SALES INVOICES WH ICH ACCORDING TO THE ASSESSING OFFICER IMPLIED THAT THE SAME HAD NOT BE EN POLISHED. THEREFORE HE WAS OF THE OPINION THAT THE GRANITE I S POLISHED AFTER THEY ARE CUT INTO SLABS AND TILES AND NOT WHEN THEY ARE A BLOCK POLISHING RESULTS IN A SMOOTH END PRODUCT. BUT UNDER SIMIL AR CIRCUMSTANCES THE ASSESSEE WAS ALLOWED THE BENEFIT OF SECTION 10B BY THE ITAT IN ASSESSMENT YEAR 2005-06 IN I.T.A.NO. 632/MDS/2009 VIDE ORDER DATED 13.8.2009 ON THE GROUND THAT THE ASSESSEE HAD EXPOR TED POLISHED GRANITE. WHILE DOING SO THE TRIBUNAL HAD OBSERVED THAT THE ASSESSEE EXTRACTS GRANITE BLOCKS FROM THE QUARRY DRESSES TH EM AND POLISHES THEM BEFORE EXPORTING. THE ASSESSING OFFICER TRIED TO DISTINGUISH THE FACTS OF THE YEAR 2005-06 BY OBSERVING THAT FROM TH E SALES INVOICES IN THIS YEAR IT IS SEEN THAT THE GOODS EXPORTED ARE NO T POLISHED GRANITES. CONSEQUENTLY HE DENIED THE DEDUCTION U/S 10B IN TH IS YEAR. AS AGAINST THIS THE LD. CIT(A) HAS OBSERVED THAT THE FACTS OF THIS YEAR AS COMPARED TO THE FACTS FOR ASSESSMENT YEAR 2005-06 A RE EXACTLY IDENTICAL AND THAT THE BUSINESS WAS IN CONTINUATION IN THE SAME FORM WITHOUT ANY DEVIATION OF ANY KIND AND THEREFORE TH E ASSESSEE IS ITA 1094/10 :- 3 -: ELIGIBLE FOR DEDUCTION U/S 10B. HE HAS ALSO RELIED ON THE TRIBUNAL ORDER (SUPRA). NOW THE REVENUE HAS RAISED GROUND NOS. 2 TO 4 IN THIS REGARD BY SUBMITTING THAT THE TRIBUNAL ORDER IN QUE STION HAS NOT BECOME FINAL AND THAT THE DEPARTMENT HAS NOT ACCEPT ED THE SAME AND HENCE HAS PREFERRED APPEAL BEFORE THE HON'BLE HIGH COURT WHICH IS PENDING. IT WAS NOT THE CASE OF THE REVENUE THAT T HE FACTS OF ASSESSMENT YEAR 2005-06 ARE DISTINGUISHABLE FROM TH E FACTS OF THIS YEAR 2007-08. A COPY OF THE TRIBUNAL ORDER DATED 3 0.8.2009 HAS BEEN PLACED BEFORE US FOR OUR PERUSAL. 3. WE HAVE PERUSED THE TRIBUNAL ORDER AND HAVE CONSID ERED THE ENTIRE FACTS AND EVIDENCE AVAILABLE BEFORE US. WE ARE IN AGREEMENT WITH THE LD. CIT(A) THAT THERE IS NO CHANGE IN THE BUSINESS OF THE ASSESSEE FROM EARLIER YEARS AND SIMILAR TYPE OF EXP ORT IS BEING DONE IN THIS YEAR TOO. THEREFORE ASSESSEE BECOMES ENTITLE D TO DEDUCTION U/S 10B UNDER IDENTICAL FACTS AND CIRCUMSTANCES. THERE FORE BY RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER IN QUESTI ON WE CONFIRM THE IMPUGNED FINDING AND DISMISS THE GROUNDS RAISED IN THIS RESPECT. 4. THE SECOND ISSUE OF THIS APPEAL CONTAINED IN GROUND NOS. 5 & 6 IS REGARDING ALLOWING DEDUCTION U/S 10B ON SALES TO 100% EXPORT ITA 1094/10 :- 4 -: ORIENTED UNDERTAKINGS (EOU) WHERE THE ASSESSEE IS N OT THE EXPORTER ITSELF. 5. AGAIN THIS ISSUE STANDS COVERED IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF DY. CIT VS M/S INTERNATIONAL STONES INDIA PVT. LTD IN I.T.A.NO. 81 4/BANG/2009 ORDER DATED 19.3.2010 IN WHICH UNDER SIMILAR CIRCUMSTANCE S IT HAS BEEN HELD THAT EVEN THE THIRD PARTY EXPORTS ARE ELIGIBLE FOR THE BENEFIT U/S 10B OF THE ACT. THE THIRD PARTY EXPORTS ARE ALSO CONSIDER ED AS EXPORT WHEN SUCH EXPORTS ARE MADE 100% EOU WHICH MANUFACTURES T HE ARTICLES OR THINGS ARE RECEIVED OR BROUGHT INTO IN CONVERTIBLE FOREIGN EXCHANGE EITHER BY THE 100% EOU ITSELF OR THROUGH THE THIRD PARTY EXPORTER THEN SUCH EXPORTS AMOUNTS TO EXPORT TURNOVER AND ARE FUL LY ELIGIBLE FOR THE BENEFIT U/S 10B OF THE ACT. THE ASSESSEE HAS EXPOR TED GOODS WORTH ` 1 58 91 423/- THROUGH OTHER 100% EOU WITHIN A PERI OD OF SIX MONTHS. THUS THIS SALE MADE BY THE ASSESSEE TO 10 0% EOU HAS TO BE TREATED AS DEEMED EXPORT. THE TRADE POLICY WHICH H AS BEEN REFERRED BY THE LD. CIT(A) IS IN LINE WITH THE FOREIGN TRADE POLICY MINISTYR OF COMMERCE AND INDUSTRY. UNITS REGISTERED UNDER 100% EOU SCHEME ARE ALLOWED TO SELL TO ANOTHER 100% EOU AND SUCH SA LES ARE KNOWN AS DEEMED EXPORT IN TRADE PARLANCE. THIS DEEMED EX PORT IS ALSO CONSIDERED FOR ARRIVING AT NET FOREIGN EXCHANGE EAR NING OF THE EOU ITA 1094/10 :- 5 -: UNIT. THE ASSESSEE HAS SOLD ONLY 20% OF THE TOTAL TURNOVER AS DEEMED EXPORT TO OTHER 100% EOU AND EVIDENCE REGARDING RE ALIZATION OF FOREIGN EXCHANGE DULY CERTIFIED BY A CHARTERED ACC OUNTANT HAS BEEN PRODUCED ON RECORD. THUS THE GOODS IN QUESTION AR E MANUFACTURED BY A 100% EOU (WHICH IS THE ASSESSEE) AND GOODS HAVE B EEN EXPORTED OUT OF THE COUNTRY AS PER THE FOREIGN TRADE POLICY PROVISIONS FOR WHICH CONVERTIBLE FOREIGN EXCHANGE HAS BEEN BROUGHT INTO INDIA. HENCE AS PER THE CLEAR PROVISIONS STATED ABOVE THE ASSESSEE BECOMES ENTITLED TO DEDUCTION UNDER SECTION 10B. THE DECISION OF BANGALORE BENCH OF THE ITAT (SUPRA) ALSO SUPPORTS OUR ABOVE OBSERVATI ON. ACCORDINGLY GROUND NOS. 5 & 6 RAISED IN THIS APPEAL ARE DISMISS ED. 6. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.2.2011 SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 25 TH FEBRUARY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR