M/s. Epic Exports, Kolkata v. ACIT, Circle - 32, Kolkata, Kolkata

ITA 410/KOL/2011 | 2007-2008
Pronouncement Date: 11-11-2011

Appeal Details

RSA Number 41023514 RSA 2011
Assessee PAN AAAFE9780D
Bench Kolkata
Appeal Number ITA 410/KOL/2011
Duration Of Justice 8 month(s) 1 day(s)
Appellant M/s. Epic Exports, Kolkata
Respondent ACIT, Circle - 32, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 11-11-2011
Assessment Year 2007-2008
Appeal Filed On 10-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH A KOLKATA [ () . .. .'# '#'# '#. .. . $% ] ]] ] [BEFORE SRI N.VIJAYAKUMARAN JM & SRI C. D. RA O AM] ' / I.T.A NO. 410/(KOL) OF 2011 () *+/ ASSESSMENT YEAR : 2007-08 M/S.EPIC EXPORTS - - A.C.I.T. CIRCLE-32 KOLKATA KOLKATA -VERSUS- (PAN:AAAFE 9780 D) (-. / APPELLANT ) ( /0-. /RESPONDENT) -. 1 2 $/ FOR THE APPELLANT: SHRI A.K.TULISYAN /0-. 1 2 $/ FOR THE RESPONDENT: SHRI S.K.ROY 3 1 #% /DATE OF HEARING : 12.10.2011. 4* 1 #% /DATE OF PRONOUNCEMENT : 11.11.2011. $5 / ORDER ( (( ( . .. .'# '#'# '#. .. . ) )) ) $% PER SHRI C.D.RAO AM THE ABOVE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A)-XIX KOLKATA DATED 16/12/2010 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE RAISED BY ASSESSEE IN THIS APPEA L IS RELATING TO THE DISALLOWANCE OF DEDUCTION U/S 10AA OF THE IT ACT. 3. THE BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE W HILE FILING THE RETURN OF INCOME HAS CLAIMED THE EXEMPTION U/S 10A OF THE IT ACT. HO WEVER ASSESSING OFFICER OBSERVED THAT ASSESSEES CLAIM IS ALLOWABLE U/S 10A OF THE IT ACT. 3.1. AGAINST THIS ASSESSEE WENT IN APPEAL BEFORE TH E LD. CIT(A) AND ARGUED ALTERNATIVELY THAT IF ASSESEE IS NOT ENTITLED TO EX EMPTION U/S 10A OF THE IT ACT ASSESSEE HAS FULFILLED THE CONDITIONS LAID DOWN U/S 10A OF T HE IT ACT. IN ORDER TO STRENGTHEN THIS ARGUMENT HE FILED WRITTEN SUBMISSION. THE LD. CIT(A ) FORWARDED THIS WRITTEN 2 2 SUBMISSIONS TO AO. THE AO HAS CONTENDED THAT ASSESS EES INCOME IS NOT EXEMPT EVEN U/S 10AA OF THE IT ACT. AGAINST THE REMAND REPORT THE LD. COUNSEL FOR ASSESSEE HAS SUBMITTED SEVERAL ARGUMENTS IN REJOINDER WHICH WAS INCORPORATED AT PARA 5 OF THE ORDER OF THE LD. CIT(A) AND ULTIMATELY LD. CIT(A) HAS CON FIRMED THE ACTION OF AO. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) IN REJECTIN G THE CLAIM OF ASSESSEE U/S 10AA ARE AS UNDER :- 5.4. .. IN THE REMAND REPORT THE .A.O. HAS MENTIONED THAT EVEN U/S. 1OAA THE CLAIM OF THE APPELLANT IS NOT ALLOWABLE WHEREAS THE CONTENDED T HAT IT SATISFIES ALL THE CONDITIONS BEING THE EXPORT UNDERTAKING LOCATED IN A SEZ FALT A. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW I AM INCLINED TO AGREE WITH THE A CTION OF THE AO. IT IS OBSERVED THAT NEITHER IN ITS ORIGINAL SUBMISSION MADE DURING THE APPELLATE PROCEEDINGS NOR IN THE REPLY SUBMITTED IN RESPONSE TO THE REMAND REPORT T HE APPELLANT HAS FILED ANY REBUTTAL OF THE OBSERVATIONS MADE BY THE A.O. THAT THE APPEL LANT ITSELF HAS NOT EXPORTED ANY GOODS OR THINGS AND IT HAS NOT RECEIVED THE SALE CO NSIDERATION IN CONVERTIBLE FOREIGN EXCHANGE. THE PROVISIONS OF SECTION 1OAA OF THE ACT WERE INSERTED BY THE SPECIAL ECONOMIC ZONE ACT 2005 W.E.F. 102.2006. THE HEADING OF THE SAID SECTION SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED UNITS IN SPECIAL ECONOMIC ZONES AS PER SUB-SECTION (1) OF SECTION 1OAA SUBJECT TO THE PRO VISIONS OF THIS SECTION IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE BEING AN ENTREPRENEUR AS REFERRED TO IN CLAUSE (J) OF SECTION 2 OF SPECIAL ECONOMIC ZONES A CT 2005 FROM HIS UNIT WHO BEGINS THE MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR PR OVIDE ANY SERVICES DURING THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR COMME NCING OR AFTER THE FIRST DAY OF APRIL;: 2006 A DEDUCTION OF -(I) 100%:OF PROFITS . AND GAINSDERIVED FROM THE EXPORT OF SUCH ARTICLES OR THINGS OR FROM SERVICES FOR A PER IOD OF FIVE CONSECUTIVE. ASSESSMENT YEARS BEGINNING ASSESSMENT YEAR RELEVANT TO THE PRE VIOUS YEAR IN WHICH THE UNITS BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR T HINGS OR PROVIDES SERVICES OR AS THE CASE MAY BE AND (II) 50% OF SUCH PROFITS AND GAINS FOR FURTHER FIVE ASSESSMENT YEARS AND THEREAFTER. THE SUB-SECTION (2) OF SECTION 1OAA HAS PROVIDED CERTAIN CONDITIONS WHICH ARE TO BE FULFILLED TO CLAIM DEDUCTION UNDER SUB-SECTION (1) OF THE SAID SECTION. THE SUB-SECTION (7) OF SECTION IOAA HAS PROVIDED TH AT FOR THE PURPOSE OF SUBSECTION (1) THE PROFITS DERIVED FROM THE EXPORT OF ARTICLE S OR THINGS OR SERVICES (INCLUDING COMPUTER SOFTWARE) SHALL BE THE AMOUNT WHICH BEARS TO THE PROFIT OF THE BUSINESS OF THE UNDERTAKING BEING THE UNIT THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR SERVICES BEARS TO THE TO TAL TURNOVER OF THE BUSINESS CARRIED ON BY THEE ASESSEE. AS PER CLAUSE (I) OF EXPLANATION-I OF SECTION 1OAA EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EX PORT BY THE UNDERTAKING BEING THE UNIT OF ARTICLES OR THINGS OR SERVICES RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE BUT DOES NOT INCLUDE FREIGHT TELE-COMMUNICATION CH ARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDI A OR EXPENSES IF ANY INCURRED ON FOREIGN EXCHANGE IN RENDERING OF SERVICES OUTSIDE I NDIA. CLAUSE (II) OF EXPLANATION-I SAYS THAT EXPORT IN RELATION TO SPECIAL ECONOMIC Z ONE MEANS TAKING THE GOODS OR 3 3 PROVIDING SERVICES OUT OF INDIA FROM A SPECIAL ECON OMIC ZONE BY LAND SEA OR AIR OR BY ANY OTHER MODE WHETHER PHYSICAL OR OTHERWISE. (5.5) FROM THE ABOVE IT IS APPARENT THAT: TO CLAI M DEDUCTION U/S. 1OAA THERE MUST BE PROFITS AND GAINS DERIVED FROM THE EXPORT OF ANY AR TICLES OR THINGS OR FROM THE SERVICES. IN THE CASE OF APPELLANT THE A.O. HAS OBSERVED THA T IT HAS NOT MADE EXPORT OF ANY ARTICLES OR THINGS DIRECTLY ON ITS OWN ACCOUNT BUT THE EXPORT WAS MADE BY OTHER PARTIES AND THE APPE1LLANTS NAME WAS MENTIONED IN THE EXPO RT INVOICES AS SUPPORTING MANUFACTURER. THE SAID OBSERVATION OF THE A.O .HAS NOT BEEN REFUTED BY THE APPELLANT. FURTHER IN THE PROVISIONS OF SECTION 1OAA THE MEA NING OF PROFITS DERIVED FROM EXPORT MEANING OF EXPORT TURNOVER AND MEANING PF E XPORT IN RELATION TO SEZ HAS ALSO BEEN PROVIDED. SINCE THE APPELLANT HAS NOT MADE THE EXPORT OF ARTICLES OR THINGS ON ITS OWN ACCOUNT AND IT HAS NOT RECEIVED THE SALE PROCEE DS IN CONVERTIBLE FOREIGN EXCHANGE FROM THE FOREIGN PARTIES I AM OF THE OPINION THAT THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S. 10AA OF THE ACT. THE APPELLANT HAS M ERELY ACTED AS SUPPORTING MANUFACTURER TO THE ACTUAL EXPORTERS AND THEREFORE IT HAS RECEIVED THE MONEY IN INDIAN RUPEES FROM THE INDIAN CUSTOMERS. UNDER THE CIRCUMS TANCES I UPHELD THE ACTION OF THE A.O; AND THE APPELLANT IS NEITHER ENTITLED FOR DEDU CTION U/S. 10AA U/S. NOR I0A OF THE ACT. THE GROUND NO. 2 IS DISMISSED. 3.2. AGGRIEVED BY THIS ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS CONTENDED THAT THE ONLY REASON FOR REJECTING THE CL AIM OF ASSESSEE BY THE REVENUE IS THAT NO SALE PROCEEDS OF ASSESSEE COMPANY WERE RECE IVED BY HIM IN CONVERTIBLE FOREIGN EXCHANGE AND THE REVENUE HAS FURTHER OBSERVED THAT THE RECEIPTS TREATED BY THE LD. CIT(A) FOR SUCH UNIT WERE MAINLY ON ACCOUNT OF STIT CHING CHARGES OR FINISHING/ PACKING CHARGES. AS PER CLAUSE (I) OF THE EXPLANATION-I OF SECTION 10AA OF THE IT ACT EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXP ORT BY THE UNDERTAKING BEING THE UNIT OF ARTICLES OR THINGS OR SERVICES RECEIVED IN OR BROUGHT INTO INDIA BY ASSESSEE BUT DOES NOT INCLUDE FRIGHT TELE-COMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDIA. H OWEVER BY REFERRING TO THE SPECIAL ECONOMIC ZONE ACT 2005 THE LD. COUNSEL APPEARING F OR ASSESSEE HAS CONTENDED THAT IN THE SAID ACT NOWHERE IT IS MENTIONED THAT IN ORDER TO EXEMPT U/S 10AA OF THE IT ACT THE SALE PROCEEDS OF ASSESSEE SHOULD BE IN THE FORM OF CONVERTIBLE FOREIGN EXCHANGE. THEREFORE HE REQUESTED TO ALLOW THE CLAIM OF ASSESS EE U/S 10AA OF THE IT ACT BY SETTING ASIDE THE ORDERS OF THE REVENUE AUTHORITIES . 4 4 5. ON THE OTHER HAND THE LD. DR APPEARING ON BEHAL F OF THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6.AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFU L PERUSAL OF MATERIALS AVAILABLE ON RECORD IT IS OBSERVED THAT IN THE CASE OF ITO VS ANITA SYNTHETICS PVT. LTD. REPORTED IN 100 TTJ 277 HAS HELD AS UNDER :- EXPORT OF GOODS VIS--VIS SALE OF GOODS TO ANOTHER EOU- THE REQUIREMENT UNDER S. 10B AS IT EXISTED AT THE RELEVANT TIME TO RECEIVE S ALE PROCEEDS ____________CONVERTIBLE FOREIGN EXCHANGE IN THE A BSENCE OF ANY SPECIFIC DEFINITION IN THE ACT THE WORD ______HAS TO BE INTERPRETED IN ACCORDANCE WITH THE MEANING ASCRIBED TO IT UNDER RELEVANT EXIM___________WHIC D EEMS THE SALE BY ONE EOU TO ANOTHER AS EXPORT FURTHER ASSESSEE IS CLAIMING E XEMPTION ONLY IN RESPECT OF PROFITS ACCRUING TO IT FROM THE UNDERTAKING AFTER THE DATE OF GRANT OF APPROVAL AS EOU AND THE PROFITS FROM TRADING ACTIVITIES ARE NOT CONSIDERED FOR EXEMPTION THEREFORE THE FACT THAT THE ASSESSEE IS ALSO ENGAGED IN TRADING CANNOT DISENTITLE IT IN RESPECT OF ITS OTHERWISE VALID CLAIM-CONTENTION OF AO THAT THE UND ERTAKING WAS NOT A NEW ONE AND WAS FORMED BY SPLITTING OR RECONSTRUCTION OF BUSINE SS ALREADY IN EXISTENCE IS NOT CORRECT-OWNERSHIP MANAGEMENT AND CONTROL OF THE A SSETS OF THE BUSINESS CONTINUED TO VEST IN THE HANDS OF SAME ASSESSEE BOTH PRIOR TO AND SUBSEQUENT TO ITS BEING ACCORDED APPROVAL HENCE ASSESSEES CLAIM FOR EXE MPTION UNDER S.10B COULD NOT BE DISALLOWED ON ANY OF THE AFORESAID GROUNDS. 6.1. AGAIN THE ITAT COCHIN BENCH IN THE CASE OF M/ S.ELECTRONIC CONTRALS AND DISCHARGE SYSTEMS PVT. LTD. VS ITO.WARD-1(1)ERNAKUL AM VIDE ITA NOS.415&416/COCH/09 ORDER DATED 6 TH NOVEMBER 2009 HAS HELD AS UNDER :- 12. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AND PERUSED THE CITED TRIBUNAL ORDER. THE TRIBUNAL WHILE INTERPRETING THE BENEFICI AL DEDCUCTION APPROACHED THE ISSUE ON LIBERAL CONNOTATION AS THE SALE TO ANOTHER SEZ B Y THE ASSESSEE SEZ WHICH RECOGNIZED DEEMED EXPORT. THE DECISIONS OF THE AHEM EDABAD AND MUMBAI BENCH OF THE ITAT SUPPORT THE ASSESSEES CONTENTIONS. RESPEC TFULLY FOLLOWING THESE DECISIONS OF THE TRIBUNAL WE HAVE NO HESITATION TO DECIDE THAT THE ASSESSEE HAS FULFILLED THE REQUIREMENTS AND HENCE THE ASSESSEE IS ENTITLED TO 10A DEDUCTION AS CLAIMED. UNDER THE ABOVE FACTS AND CIRCUMSTANCES THE ORDER OF THE AUTHORITIES ARE SET ASIDE AND ALLOW THE APPEALS OF THE ASSESSEE. 6.2. KEEPING IN VIEW OF THE ABOVE TWO TRIBUNAL DECI SIONS AND THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITL ED FOR DEDUCTION U/S 10AA OF THE IT ACT. THEREFORE WE SET ASIDE THE ORDERS OF THE REVE NUE AUTHORITIES AND DIRECT THE AO TO ALLOW THE CLAIM OF ASSESSEE U/S 10AA OF THE IT ACT. 5 5 7. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11.11.2011. SD/- SD/- ( ( ( ( N.VIJAYAKUMARAN JUDICIAL MEMBER . .. .'# '#'# '#. .. . $% $% $% $% C.D.RAO ACCOUNTANT MEMBER. ( (( (#% #% #% #%) )) ) DATE: 11.11.2011. $5 1 /(( 6$*7- COPY OF THE ORDER FORWARDED TO: 1. M/S. EPIC EXPORTS 25 PARK LANE KOLKATA-700016. 2 THE A.C.I.T. CIRCLE-32 KOLKATA. 3. THE CIT 4. THE CIT(A)-XIX KOLKATA. 5. DR KOLKATA BENCHES KOLKATA 0 /(/ TRUE COPY $5/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES R.G.(.P.S.)