M/s. Swayam Consultancy P. Ltd, Hyderabad v. ITO, Ward 3(2), Hyderabad

ITA 1242/HYD/2010 | 2007-2008
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 124222514 RSA 2010
Assessee PAN AAHCS5904P
Bench Hyderabad
Appeal Number ITA 1242/HYD/2010
Duration Of Justice 4 month(s) 9 day(s)
Appellant M/s. Swayam Consultancy P. Ltd, Hyderabad
Respondent ITO, Ward 3(2), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2007-2008
Appeal Filed On 21-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1242/H/2010 ASSESSMENT YEAR 2007-08 M/S SWAYAM CONSULTANCY (P) LTD. PASHAMYLARAM. (PAN AAHCS 5904 P) VS ITO WARD 3(2) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.V. RAGHURAM RESPONDENT BY : SHRI V. SRINIVAS O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT(A) IV HYDERABAD DATED 3.2 .2010 AND PERTAINS TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 10B OF THE ACT. 2. THE CIT(A) ERRED IN RELYING ON DECISIONS RELATIN G TO COUNTER SALES WITHIN THE COUNTRY AND ALSO OF A DECISION ON VALIDI TY OF EXPLANATION (AA) TO SECTION 80HHC WHICH ARE NOT RELEVANT TO THE FACTS OF ASSESSEES CASE. 3. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE SALE IS MADE TO ITALIAN COMPANY AND THAT CLEARANCE FROM EXCISE AUTH ORITIES WAS OBTAINED FOR MOVING MACHINERY OUT OF BOUNDED WARE H OUSE BEFORE DELIVERING THE MACHINERY TO LOCAL CONSIGNEE AND THA T PAYMENT IS RECEIVED AGAINST INVOICE RAISED ON THE ITALIAN COMP ANY AND THEREBY ERRED IN DENYING DEDUCTION U/S 10 . ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 2 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN MANUFACTURING AND ASSEMBLING OF WIRE AND CABLE DRAW ING/MANUFACTURING MACHINERY. DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE CLAIMED DEDUCTION U/S 10B OF THE ACT. IT WAS SUBMITTED BEF ORE THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAD BEEN APPROVED UNDER THE SPECIAL SCHEME OF THE GOVT. OF INDIA AS 100% EOU FOR THE PRODUCTION/MANUFACTURE OF MACHINES FOR PRODUCTION O F WIRE/CABLE/ENAMELED COATED WIRE/STRIPES. THE ASSESS EE ALSO SUBMITTED A COPY OF APPROVAL LETTER DATED 13.2.2006 ISSUED BY T HE COMMISSIONER VISAKHAPATNAMAN SPECIAL ECONOMIC ZONE ALONG WITH APPENDIX 14-IF (FORM FOR LEGAL AGREEMENT FOR EOU/SEZ UNITS) AND A COPY OF GREEN CARD BEARING NO.VSEZ/573 DATED 17.3.2006 WHICH IS VALID UPTO 16.2.2011. THE ASSESSEE CLAIMED DEDUCTION AT RS.1 28 97 161/- U/S 10B OF THE ACT. BEFORE THE ASSESSING OFFICER THE ASSESSEE FILED CER TIFICATE ISSUED BY THE STATE BANK OF HYDERABAD PATTANCHERU BRANCH AS PROO F FOR FOREIGN INWARD REMITTANCE RECEIVED BY IT INTO INDIA IN RESPECT OF EXPORT MADE BY THE ASSESSEE. HOWEVER NOT ABLE TO FURNISH A COPY OF F OREIGN INWARD REMITTANCE CERTIFICATE ISSUED BY THE SAID BANK THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED FOREIGN EXCHANGE IN EUROS ON VARIOUS DATES. SOME OF THE PAYMENTS HAD BEEN RECEIVED IN ADVANCE WHILE THE REMAINING WAS RECEIVED WITHIN SIX MONTHS FROM THE DATE OF INVOICE I.E. 4.11.2006. 4. THE ASSESSING OFFICER NOTED THAT THE RELEVANT INVOICE WAS THE INVOICE CUM CHALLAN FOR CLEARANCE OF EXCISABLE G OODS FROM A FACTORY WAREHOUSE WITH/WITHOUT PAYMENT OF DUTY FOR HOME CON SUMPTION OR EXPORT AS PER RULE 11 OF THE CENTRAL EXCISE (NO.2) RULES 2 001. HE NOTED THAT AS PER THE SAID INVOICE THE DATE OF REMOVAL OF GOODS WAS 4.11.2006 AND THE PLACE OF DELIVERY HAS BEEN MENTIONED AS M/S CHANDRA PROTECO LTD. SURVEY NO.139/2 VILLAGE: ATTOLA UMERKUR ROAD SILVASA. IT WAS SUBMITTED BY THE AUTHORISED REPRESENTATIVE THAT ON EXPRESS INSTRUCTI ONS/REQUEST OF THE ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 3 3 IMPORTER OF THE MACHINERY I.E. M/S PROTECO ITALY THE SAID MACHINERY HAD BEEN DELIVERED TO M/S CHANDRA PROTECO LTD. AT SILVA SA. THE ASSESSING OFFICER NOTED THAT SILVASA IS LOCATED ONLY IN THE U NION TERRITORY OF DAMAN & NAGAR HAVELI IN UNION OF INDIA. HOWEVER THE ASSES SEE HAD CLAIMED DEDUCTION U/S 10B ON THE SAID TRANSACTION. HE ALSO NOTED THAT AS PER THE CERTIFICATE ISSUED BY THE BANK THE TOTAL AMOUNT REC EIVED IN FOREIGN CURRENCY WAS RS.2 66 892/- AS AGAINST RS.2 87 28 00 /- BEING THE EXPORT TURNOVER AS PER FORM 56G. THEREFORE THE ASSESSING OFFICER OPINED THAT THE LEGISLATURE INTENDS TO EXTENT THE DEDUCTION IN RESP ECT OF THE ARTICLES OF THINGS MANUFACTURED THAT ARE EXPORTED OUT OF INDIA BESIDES THE SALE PROCEEDS OF SUCH EXPORTS ARE REQUIRED TO BE BROUGHT TO INDIA IN CONVERTIBLE FOREIGN EXCHANGE WITHIN 6 MONTHS FROM THE END OF TH E PREVIOUS YEAR. HE OPINED THAT HAD THE LEGISLATURE INTENDED TO GRANT D EDUCTION U/S 10B IN RESPECT OF TRANSFER OF GOODS WITHIN INDIA THEN AN EXPLANATION TO THIS EFFECT WOULD HAVE BEEN INCORPORATED IN THE PROVISIONS OF S ECTION 10B ITSELF. THE EXPLANATION (3) TO SECTION 10A HAD BEEN INTRODUCED BY THE FINANCE ACT 2001 TO CLARIFY THAT THE PROFITS AND GAINS DERIVED FROM ONSITE DEVELOPMENT OF SOFTWARE OUTSIDE INDIA ALSO IS TO BE DEEMED AS D ERIVED FROM EXPORT OF COMPUTER SOFTWARE OUTSIDE INDIA. HOWEVER NO SIMIL AR EXPLANATION IN RESPECT OF CASES OF EXPORT AS SEEN IN THE CASE OF A SSESSEE EXISTS ON THE STATURE AND THEREFORE THE ASSESSEE DID NOT FULFIL THE CONDITIONS LAID DOWN IN THE PROVISIONS OF THE ACT. IN VIEW OF THE DECIS IONS OF THE HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. VS. C IT (196 ITR 188) EVEN THOUGH THE INCENTIVE PROVISIONS ARE TO BE LIBERALLY CONSTRUED IT WOULD BE IN APPROPRIATE TO ALLOW DEDUCTION IN VIEW OF A CLEAR N ON COMPLIANCE OF THE CONDITIONS AND PROVISIONS. THE ASSESSING OFFICER A LSO REFERRED TO THE DEFINITION OF THE WORD EXPORT AND CONCLUDED THAT TH E ASSESSEE HAD NOT EXPORTED THE GOODS AS ENVISAGED IN THE PROVISIONS O F SECTION 10B. HE OPINED THAT THE INVOICE CUM CHALLAN SHOWED THAT THE RE HAD BEEN NO EXPORT OUT OF INDIA AND THEREFORE THE ASSESSEE WAS NOT ELI GIBLE FOR DEDUCTION U/S 10B. ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 4 4 5. THE ASSESSING OFFICER FURTHER NOTED THAT IN OR DER TO AVAIL THE DEDUCTION U/S 10B THE ASSESSEE COMPANY WAS REQUIR ED TO FILE RATIFICATION OF LOP BY THE BOARD OF APPROVAL. EVEN THOUGH THE A SSESSEE FILED A LETTER DATED 31.12.2009 SIGNED BY THE ADC WHEREBY THE ASS ESSEE APPLICATION FOR SUCH RATIFICATION HAS BEEN FORWARDED IT WAS STATED THEREIN THAT THE SAME SHALL BE COMMUNICATED AS SOON AS IT IS RECEIVED FRO M THE BOARD OF APPROVALS. HE THEREFORE CONCLUDED THAT IN THE ABS ENCE OF SUCH RATIFICATION FROM THE BOARD OF APPROVAL THE DEDUCTION U/S 10B C OULD NOT BE ALLOWED. 6. ON APPEAL THE CIT(A) OBSERVED THAT IN RESPECT OF THE TRANSACTION CONTENDED TO BE EXPORT THE ASSESSEE HA D RAISED AN INVOICE CUM CHALLAN FOR CLEARANCE OF EXCISABLE GOODS FROM ITS FACTORY WAREHOUSE WITH/WITHOUT PAYMENT OF DUTY FOR HOME CONSUMPTION OR EXPORT AS PER RULE 11 OF THE CENTRAL EXCISE (2) RULES 2001. AS PER THE SAID INVOICE THE GOODS WERE REMOVED ON 4.11.2006 AND THE PLACE OF DE LIVERY WAS M/S CHANDRA PROTECO LTD. SILVASA. EVEN THOUGH THE ASS ESSEE CONTENDED THAT THE SAME WAS DELIVERED AT SILVASA AT THE EXPRESS IN STRUCTIONS OF THE IMPORTER I.E. M/S PROTECO SASS ITALY AND THE CONS IDERATION FOR THE SAME HAD BEEN RECEIVED IN FOREIGN EXCHANGE THE ASSESSIN G OFFICER HAD OPINED THAT THIS WOULD NOT AMOUNT TO EXPORT OUT OF INDIA. HE FELT THAT SINCE THE GOOD WERE NOT SENT OUT OF INDIA TO ANY OTHER COUNT RY/ABROAD OUT OF CUSTOMS TERRITORY THE ASSESSEE WOULD NOT BE ENTITL ED TO DEDUCTION U/S 10B. ON THE OTHER HAND IT IS THE CONTENTION OF THE ASSESSEE THAT THE GOODS HAVE MOVED FROM ONE EOU TO ANOTHER IE M/S CHANDRA P ROTECO LTD. SILVASA AND ONE BONDED WAREHOUSE TO ANOTHER AT THE SPECIFIC REQUEST OF A FOREIGN CUSTOMER AND THEREFORE SINCE THE CONSIDERAT ION WAS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE IT IS AN EXPORT EVEN THOUGH THE GOODS WERE DELIVERED IN INDIA ITSELF. ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 5 5 ON GOING THROUGH THE FACTS STATED ABOVE CIT(A) IS OF THE OPINION THAT THE CONTENTION RAISED BY THE ASSESSEE CANNOT BE ACCEPTA BLE. EVEN THOUGH IN TERMS OF EXIM POLICY SALE OF PRODUCE FROM ONE EOU TO ANOTHER IS DEEMED TO BE AN EXPORT IT IS CLEAR THAT FIRSTLY IT IS AN ADMITTED FACT THAT M/S CPL IS NOT THE BUYER OF THE GOODS. THE SAID CONCERN IS ON LY THE CONSIGNEE AT WHOSE PLACE THE DELIVERY OF THE GOODS SOLD BY THE A SSESSEE TO M/S PROTECO DE MARINO OZINO AND C SASS ITALY WAS TO BE GIVEN A T THEIR REQUEST OF SAI BUYER. THEREFORE IT IS NOT THE CASE THAT THE ASSE SSEE HAD SOLD THE GOODS TO OTHER EOU AGAINST RELEVANT DECLARATION IN FORM CT3 SO AS TO CONSIDER THE TRANSACTION AS AN EXPORT. ACCORDINGLY HE DISMISSE D THE APPEAL OF THE ASSESSEE NOT GRANTING THE BENEFIT U/S 10B OF THE AC T. AGAINST THIS THE ASSESSEE IS APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE AS SESSEE COUNSEL BEFORE US IS THAT AS PER FOREIGN TRADE POLICY 2004 - 2009 PUBLISHED BY GOVT. OF INDIA EVEN THE DEEMED EXPORT THOUGH THE GOODS SUPP LIED DO NOT LEAVE THE COUNTRY AND THE PAYMENT FOR SUCH SUPPLIES RECEIVED EITHER IN INDIAN RUPEES OR IN FREE FOREIGN EXCHANGE IS ELIGIBLE FOR BENEFITS U/S 10B OF THE IT ACT. FOR THIS PURPOSE HE RELIED ON THE SAID POLICY . HE ALSO DREW OUR ATTENTION TO THE FOLLOWING DOCUMENTS: 1. PURCHASE ORDERS FROM M/S PROTECO DI MARINO ITALY 2. PROFORMA INVOICE TO M/S PROTECO ITALY 3. EXCISE GATEPASS (ARE 3) DATED 4.11.2006 IN FAVOUR O F M/S CHANDRA PROTECO LIMITED SILVASA. 4. REQUEST LETTER ADDRESSED TO SUPERINTENDENT OF CENTR AL EXCISE FROM M/S CHANDRA PROTECO LTD. 5. E MAIL COPY FROM M/S PROTECO ITALY REQUESTING DELI VERY OF GOODS TO M/S CHANDRA PROTECO SILVASA INDIA. ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 6 6 7. WE HAVE CAREFULLY GONE THROUGH THE ABOVE DOCUM ENTS. AFTER GOING THROUGH THE DOCUMENTS WE ARE NOT CONVINCED A BOUT THE CLAIM OF THE ASSESSEE. FIRST OF ALL THE WORD EXPORT IS NOT D EFINED IN SECTION 10B OF THE IT AC OR UNDER SECTION 2 OF THE IT ACT. THEN WE HAVE TO RELY ON ONLY THE PROVISIONS U/S 80HHC WHEREIN AS EXPLANATION TO SUB SECTION (4C) OF 80HHC OF THE UT ACT 1961 THE WORD EXPORT AND THE EXPORT TURNOVER WHICH HAS BEEN DEFINED AS FOLLOWS: EXPLANATION TO SECTION 80HHC (4C): A) CONVERTIBLE FOREIGN EXCHANGE MEANS FOREIGN EXCHAN GE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF INDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF THE FOREIGN EX CHANGE REGULATION ACT 1973 (46 OF 1973) AND ANY RULES MA DE THERE UNDER. (AA) EXPORT OUT OF INDIA SHALL NOT INCLUDE ANY TRANSAC TION BY WAY OF SALE OR OTHERWISE IN A SHOP EMPORIUM OR ANY OTHE R ESTABLISHMENT SITUATED IN INDIA NOT INVOLVING CLEA RANCE AT ANY CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT 1962 (52 OF 1962). (B) EXPORT TURNOVER MEANS THE SALE PROCEEDS (RECEIVED IN OR BROUGHT INTO INDIA) BY ASSESSEE IN CONVERTIBLE FOREIGN EXC HANGE (IN ACCORDANCE WITH CLAUSE (A) OF SUB SECTION (2) OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES AND WHICH ARE EXPORTED OUT OF INDIA BUT DOES NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TR ANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATION AS DEFINED I N THE CUSTOMS ACT 1962 (52 OF 1962). 8. IN OUR OPINION IN VIEW OF THE ABOVE PROVISION S OF THE IT ACT DEEMED EXPORT IS NOT RECOGNIZED BY THE PROVISIONS O F THE IT ACT. EVEN OTHERWISE AS SEEN FROM THE FACTS OF THE CASE IT I S AN ADMITTED FACT THAT M/S CHANDRA PROTECO LTD. IS NOT THE BUYER OF THE GO ODS. THE SAID CONCERN ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 7 7 IS ONLY THE CONSIGNEE AT WHOSE PLACE THE DELIVERY OF THE GOODS SOLD BY THE ASSESSEE TO M/S PROTECO DE MARINO OZINO AND C S ASS (ITALY) WAS TO BE GIVEN AT THEIR REQUEST OF SAID BUYER. THEREFORE I T IS NOT THE CASE THAT THE ASSESSEE HAD SOLD THE GOODS TO OTHER EOU AGAINST RE LEVANT DECLARATION IN FORM CT 3 SO AS TO CONSIDER THE TRANSACTION AS AN EXPORT. IN VIEW OF THIS FACT WE DO NOT FIND ANY MERIT IN THE CONTENTION TH AT THERE WAS A CASE OF SALE FROM ONE EOU TO ANOTHER. THEREFORE FOR THE MERE FACT THAT THERE WAS MOVEMENT OF GOODS FROM ONE BONDED WAREHOUSE TO ANOT HER CANNOT BE TAKEN TO MEAN THAT THERE WAS AN EXPORT. IN ORDER TO CLAIM DEDUCTION U/S 10B IT MUST BE PROVED BY THE ASSESSEE THAT SUCH SA LE TRANSACTION MUST INVOLVE CLEARANCE AT ANY CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT. OTHERWISE THERE WAS POSSIBILITY THAT GOODS AFTER T HE PURCHASE MAY NOT BE EXPORTED AT ALL AND YET THE BENEFIT MAY BE CLAIMED. SINCE IN THE PRESENT CASE THE TRANSACTION INVOLVES NO CLEARANCE AT THE CUSTOMS STATION IT CANNOT BE TREATED AS EXPORT OUT OF INDIA. THE OTHER GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO PLACING RELIANCE BY CIT( A) ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S TRIBHOVANDAS BHIMJI ZAV ERI (DELHI) LTD. VS. CIT (308 ITR (AT) 18) WHEREIN THE TRIBUNAL DECIDING ON AN ISSUE RELATING TO DEDUCTION U/S 80 HHC IN RESPECT OF COUNTER SALES MA DE BY THE ASSESSEE TO FOREIGN TOURISTS WHO WERE TO TAKE THE GOODS PURCHA SED BY THEM IN FOREIGN CURRENCY TO THEIR RESPECTIVE FOREIGN COUNTRIES IT WAS HELD THAT IF THE TRANSACTION DOES NOT INVOLVE CLEARANCE AT CUSTOMS S TATION THEN SUCH TRANSACTION SHALL NOT BE TREATED AS EXPORT OUT OF INDIA. THE TRIBUNAL FURTHER OPINED THAT MERE DECLARATION BY FOREIGN TOU RISTS WOULD NOT BE ENOUGH FOR GETTING DEDUCTION AND THAT THE SELLER MU ST OBTAIN THE EVIDENCE OF CLEARANCE OF CUSTOMS STATION AND FURNISHES THE S AME BEFORE THE TAX AUTHORITIES. FROM THIS JUDGEMENT HE DREW SUPPORT FOR THE LIMITED PURPOSE TO HOLD THAT IN THE PRESENT CASE ALSO THER E IS NO EVIDENCE TO SHOW THAT THE GOODS MOVED OUT OF INDIA SO AS TO FALL WIT HIN THE DEFINITION OF EXPORTS. FURTHER DELIVERING OF THE MACHINERY TO LOCAL CONSIGNEE AFTER CLEARANCE FROM EXCISE AUTHORITIES CANNOT BE CONSIDE RED AS EXPORT. IN OUR ITA NO.1242/H/2010 M/S SWAYAM CONSULTANCY P LTD. PASHAMYLARAM 8 8 OPINION THE CIT(A) CONSIDERED THE ALL RELEVANT FAC TS OF THE CASE AND NOT CONSIDERED ANY IRRELEVANT MATERIAL AND THE CONCLUSI ON ARRIVED BY HIM IS NOT PERVERSE AND IS BASED ON THE FACTS OF THE CASE. THE ORDER OF THE CIT(A) NEED NOT BE SCRUTINIZED WORD BY WORD MERELY TO FIND OUT WHETHER ALL THE FACTS HAVE BEEN SET OUT BY HIM IN DETAIL OR NOT. THE READING OF THE CIT(A) SHOWS THAT HE HAS TAKEN INTO ACCOUNT THE RELEVANT F ACTS OF THE CASE AND CAME TO RIGHT CONCLUSION. WE CANNOT FIND ANY INFIR MITY IN HIS ORDER. THUS ALL THE GROUNDS RAISED BY THE ASSESSEE ARE REJECTED . 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO.1242/H/2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 31.1.2011 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 31 ST JANUARY 2011 COPY FORWARDED TO: 1. SHRI V. VASANT KUMAR SHRI AV RAGHURAM & OTHERS FLAT NO.610 6 TH FLOOR BABHUKAN ESTATE HYDERABAD-500001. 2. THE ITO WARD 3(2) HYDERABAD 3. CIT(A)-IV HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP