DCIT, Kollam v. Baby marine Sarass, Cochin

ITA 523/COCH/2010 | 2004-2005
Pronouncement Date: 27-07-2012

Appeal Details

RSA Number 52321914 RSA 2010
Assessee PAN AAAFB9936E
Bench Cochin
Appeal Number ITA 523/COCH/2010
Duration Of Justice 1 year(s) 10 month(s) 11 day(s)
Appellant DCIT, Kollam
Respondent Baby marine Sarass, Cochin
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2012
Appeal Filed By Department
Bench Allotted DB
Tribunal Order Date 27-07-2012
Date Of Final Hearing 27-06-2012
Next Hearing Date 27-06-2012
Assessment Year 2004-2005
Appeal Filed On 16-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND B.R.BASKAR AN AM I.T.A. NOS. 523 & 551/COCH/2010 ASSESSMENT YEAR : 2004-05 THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1 KOLLAM. VS. 1.M/S. BABY MARINE SARASS ADMIN OFFICE BABY MARINE COMPOUND THOPPUMPADY KOCHI-682005. [PAN:AAAFB 9936E] 2. M/S. BABY MARINE INTERNATIONAL KALLUVILA THANGASSERY KOLLAM. [PAN:AAAFB 9937F] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SMT. S. VIJAYAPRABHA JR. DR ASSESSEE BY NONE-WRITTEN SUBMISSIONS FILED DATE OF HEARING 27/06/2012 DATE OF PRONOUNCEMENT 27/07/2012 O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: BOTH THE APPEALS HAVE BEEN FILED BY THE REVEN UE CHALLENGING THE ORDER PASSED BY THE LD. CIT(A)-I TRIVANDRUM IN THE HANDS OF THE RE SPECTIVE ASSESSES REFERRED SUPRA AND BOTH THE APPEALS RELATE TO THE ASSESSMENT YEAR 200 4-05. 2. THE SOLITARY ISSUE URGED IN THESE APPEALS IS WH ETHER THE LD. CIT(A) IS JUSTIFIED IN HOLDING THAT FOR THE PURPOSE OF COMPUTING THE MONE TARY LIMIT AS PER THE PROVISO TO S.. 80HHC(3) OF THE ACT THE EXPORT TURNOVER WILL NOT INCLUDE SALES MADE TO EXPORT HOUSE/TRADING HOUSE. I.T.A.NOS. 523 & 551/COCH/200 2 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. BOTH THE ASSESSES ARE ENGAGED IN THE BUSINESS OF EXPORTING MARINE PRODUCT S. BOTH THE ASSESSES EXPORTED GOODS DIRECTLY AND THEY HAVE ALSO SUPPLIED GOODS TO THE EXPORT HOUSE/TRADING HOUSE AS SUPPORTING MANUFACTURERS. FOR THE PURPOSE OF THIS ORDER HE SALES MADE TO EXPORT HOUSE/TRADING HOUSE IS TERMED AS INDIRECT EXPORTS . AS PER THE SECOND AND THIRD PROVISOS TO SEC. 80HHC(3) THE COMPUTATION OF DEDUC TION U/S 80HHC WOULD DEPEND UPON WHETHER THE EXPORT TURNOVER DOES NOT EXCEED OR EXCEEDED RS. 10.00 CRORES DURING THE PREVIOUS YEAR. THE ASSESSING OFFICER CL UBBED THE TURNOVERS PERTAINING TO THE DIRECT EXPORTS AS WELL AS THE INDIRECT EXPORTS FOR THE PURPOSE OF COMPUTING THE LIMIT OF RS.10.00 CRORES REFERRED SUPRA. THE DIRECT EXPORT TURNOVER WAS LESS THAN RS.10.00 CRORES THE COMBINED TURNOVER OF BOTH DIRECT AND IN DIRECT EXPORTS EXCEEDED RS.10.00 CRORES. HOWEVER THE ASSESSEE CONTENDED THAT THE I NDIRECT EXPORTS I.E. THE SALES MADE TO THE EXPORT HOUSE/TRADING HOUSE SHOULD BE CONSIDE RED AS DOMESTIC TURNOVER FOR THE PURPOSE OF COMPUTING MONETARY LIMIT REFERRED ABOVE AND THE SAID CONTENTION WAS REJECTED BY THE AO. IN THE APPEAL FILED BY THE ASSE SSEE BEFORE THE LD. CIT(A) THE FIRST APPELLATE AUTHORITY ACCEPTED THE CONTENTION OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JANATHA CASHEW EXPORTING CO. LTD. VS. CI T 309 ITR 440 SUBMITTED THAT BOTH THE DIRECT EXPORT TURNOVER AS WELL AS THE INDI RECT EXPORT TURNOVER ARE REQUIRED TO BE CLUBBED FOR THE PURPOSE OF COMPUTING THE MONETAR Y LIMIT PRESCRIBED UNDER THE PROVISOS TO S. 80HHC(3) OF THE ACT. 5. ON THE CONTRARY THE LD. AR IN HIS WRITTEN SUBM ISSIONS PLACED RELIANCE ON THE THIRD MEMBER DECISION OF COCHIN BENCH OF ITAT DATED 25/05/2012 IN THE CASE OF BABY MARINE PRODUCTS IN I.T.A. NO.207/COCH/2009 WHEREIN IT HAS BEEN HELD THAT THE INDIRECT EXPORTS I.E. THE SALES MADE TO THE EXPORT HOUSE/T RADING HOUSE CANNOT BE TREATED AS EXPORT TURNOVER OF THE ASSESSEE FOR THE PURPOSE O F COMPUTING MONETARY LIMIT STATED ABOVE. I.T.A.NOS. 523 & 551/COCH/200 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE DEPARTMENT RELIED ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF JANATHA CASHEW EXPORTING CO. LTD REFERRED SUPRA BEFORE THE THIRD MEMBER IN THE CASE OF BABY MARINE PRODUCTS REFERRED SUPRA. THE THIRD MEMBER H AS REFERRED THIS FACT IN PARAGRAPH 5 AND 5.2 OF HIS ORDER. AFTER HEARING THE RIVAL CO NTENTIONS THE THIRD MEMBER HAS DECIDED THAT FOR THE PURPOSE OF COMPUTING THE MONET ARY LIMIT OF RS.10.00 CRORE THE TERM EXPORT TURNOVER THE INDIRECT EXPORTS I.E. E XPORTS MADE THROUGH EXPORT HOUSE CANNOT BE TREATED S EXPORT TURNOVER. FOR THE SAK E OF CONVENIENCE WE EXTRACT BELOW THE RELEVANT PORTIONS OF THE ORDER RENDERED BY THE THIRD MEMBER IN THE ABOVE CITED CASE: 8.1 NOW LET ME SEE WHETHER IT IS TRUE THAT THE E XPORT TURNOVER OF THE ASSESSEE WAS IN EXCESSS OF RS. 10 CRORES. IN THIS CASE THE AO AND THE CIT(A) WERE OF THE VIEW THAT THE EXPORT TURNOVER OF THE ASSESSEE WAS E XCEEDING RS. 10 CRORES DURING THE RELEVANT ASSESSMENT YEAR. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS INVOLVED BOTH IN DIRECT EXPORT AND SALES TO EXPORT H OUSE/TRADING HOUSE (EXPORTS THROUGH EXPORT HOUSE). THE CIT(A) HAS GIVEN THE BRE AK-UP FOR THE EXPORT TURNOVER AS UNDER: (I) DIRECT EXPORTS RS.24 11 003/- (II) EXPORTS THROUGH EXPORT HOU SE RS.21 84 60 650/- IN VIEW OF THE ABOVE POSITION IN MY VIEW THE ASS ESSEE IS ENTITLED FOR DEDUCTION 80HHC(3) IN RESPECT OF DIRECT EXPORTS AND U/S. 80H HC(3A) IN RESPECT OF EXPORTS THROUGH EXPORT HOUSE. 8.2 SUB-SEC. (4C) OF 80HHC DEFINES VARIOUS TERMS. ACCORDING TO CLAUSE (B) OF EXPLANATION TO SUB-SECTION (4C) OF SEC. 80HHC EXPO RT TURNOVER MEANS THE SALE PROCEEDS RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH CLAUSE (A) OF S UB-SECTION (2) OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES AND WH ICH ARE EXPORTED OUT OF INDIA BUT DOES NOT INCLUDE FREIGHT OR INSURANCE AT TRIBUTABLE TO THE TRANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATIO N AS DEFINED IN THE CUSTOMS ACT 1961 (52 OF 1962). 8.3 ACCORDING TO CLAUSE (D) OF EXPLANATION TO SUB- SECTION (4C) OF SEC. 80HHC SUPPORTING MANUFACTURER MEANS A PERSON BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA MANUFACT URING (INCLUDING PROCESSING) GOODS OR MERCHANDISE AND SELLING SUCH GOODS OR MER CHANDISE TO AN EXPORT HOUSE OR A TRADING HOUSE FOR THE PURPOSE OF EXPORT. I.T.A.NOS. 523 & 551/COCH/200 4 8.4 AS ALREADY OBSERVED THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE IS INDULGED IN DIRECT EXPORT SALES AS WELL AS SALES TO EXPORT HOUSE. SO IN RESPECT OF SALES TO EXPORT HOUSE THE ASSESSEE IS YET TO BE TRE ATED AS SUPPORTING MANUFACTURER AS PER CLAUSE (D) TO SUB-SECTION (4C) OF SEC. 80HHC. SECTION 80HHC(3) IS MEANT FOR EXPORT HOUSE AND NOT FOR SUPPO RTING MANUFACTURER TO WHOM SECTION 80HHC(3A) IS APPLICABLE. 8.5 IN THE CASE OF THIS ASSESSEE THE ASSESSEE HAS PRODUCED DISCLAIMER CERTIFICATE FROM THE EXPORT HOUSE. THIS STRENGTHENS THE CASE OF THE ASSESSEE THAT THE ASSESSEE IS A SUPPORTING MANUFACTURER ALSO. HE NCE THE ASSESSEE IS ENTITLED FOR DEDUCTION AS EXPORT HOUSE AND ALSO THE DEDUCTIO N AS SUPPORTING MANUFACTURER. 8.6 THE SECOND PROVISO INSERTED BY THE TAXATION LA WS (AMENDMENT) ACT 2005 IS APPLICABLE TO ASSESSES WHOSE EXPORT TURNOVER IS NOT EXCEEDING RS.10 CRORES. FROM THE BREAK-UP GIVEN ELSEWHERE OF THIS ORDER I T CAN BE SEEN THAT DIRECT EXPORTS OF THE ASSESSEE WERE RS.3 24 11 003/- ONLY WHEREAS SALES AS SUPPORTING MANUFACTURER TO EXPORT HOUSE WAS RS. 21 84 60 650/-. THE AUTHORITIES BELOW HAVE CLUBBED BOTH THE THINGS AND CONCLUDED THAT TH E EXPORT TURNOVER OF THE ASSESSEE WAS ABOVE RS. 10 CRORES AND HENCE THE ASSE SSEE HAS NOT COMPLIED WITH THE CONDITIONS CITED IN THIRD AND FOURTH PROVISO IN SERTED BY THE TAXATION LAWS (AMENDMENT) ACT 2005. 8.7 IT IS TRUE THAT THE EXPORT HOUSES TO WHOM ASSES SEE HAS SOLD MATERIALS HAVE ENDORSED THE FOREIGN EXCHANGE TO BE CREDITED TO THE PACKING CREDIT ACCOUNT OF THE ASSESSEE. BUT THIS NEED NOT BE TREATED AS EXPOR T TURNOVER BECAUSE THE ASSESSEE WAS NOT RECEIVING THE FOREIGN EXCHANGE DIR ECTLY AND IT WAS RECEIVING FROM THE EXPORT HOUSE ONLY AS A SUPPORTING MANUFACT URER. WHATEVER THE SUPPORTING MANUFACTURER SELLS TO EXPORT HOUSE ARE ON LY DOMESTIC TURNOVER AND NOT EXPORT TURNOVER. THIS VIEW IS FORTIFIED BY TH E DECISION OF THE APEX COURT IN THE CASE OF SEA PEARL INDUSTRIES & OTHERS VS. CIT ( SUPRA) WHEREIN IT HAS BEEN OBSERVED AS UNDER: SECONDLY THE PHRASE SALE PROCEEDSRECEIVABLE BY THE ASSESSEE IN S. 80HHC SUB-SEC. (2) CANNOT BE CONSTRUED TO MEAN SA LE PROCEEDS ULTIMATELY RECEIVED. PAYMENT FOR THE EXPORT WAS BY THE LETTER OF CREDIT. THE LETTER OF CREDIT BEING IN FAVOUR OF THE EXPORT HOUSE THE FOREIGN EXCHANGE WAS RECEIVABLE BY IT. THAT THE EXPORT H OUSE MAY HAVE CHOSEN TO TRANSFER THE FOREIGN EXCHANGE TO A THIRD PARTY U NDER SOME INDEPENDENT ARRANGEMENT WOULD NOT MAKE THE THIRD PARTY THE EXP ORTER. WHATEVER BE THE INTERNAL ARRANGEMENT BETWEEN THE EXPORT HOUSE AND THE APPELLANT AS FAR AS THE IT AUTHORITIES WERE CONCERNED THE EX PORT HOUSE AND THE APPELLANT AS FAR AS THE IT AUTHORITIES WERE CONCE RNED THE EXPORT HOUSE WOULD CLEARLY BE THE EXPORTER. I.T.A.NOS. 523 & 551/COCH/200 5 8.8 THERE IS A FORCE IN THE SUBMISSION OF THE LE ARNED COUNSEL FOR ASSESSEE THAT THE DECISION OF THE TRIBUNAL DATED 29-7-2008 IN THE CASE OF M/S. BABY MARINE INTERNATIONAL (SUPRA) SISTER CONCERN OF THE ASSESS EE WOULD SQUARELY APPLY TO THE ASSESSEES CASE SINCE IT WAS HELD THAT EXPORT TURNO VER WAS BELOW RS. 10 CRORES WHEN THE INDIRECT EXPORT TURNOVER WAS RS. 13 71 103 /- AND THE DIRECT EXPORT TURNOVER RS. 2 53 55 685/- . 8.9 HENCE IN VIEW OF THE ABOVE DISCUSSION TURNO VER OF RS.21 84 60 650/- BEING EXPORTS THROUGH EXPORT HOUSE CANNOT BE TREATED AS EX PORT TURNOVER OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S. 80HHC. IF IT IS SO THE EXPORT TURNOVER OF THE ASSESSEE REMAINS RS. 3 24 11 003/- (BEING DIRECT EXPORTS). SINCE THIS EXPORT TURNOVER IS LESS THAN RS. 10 CRORES TH E ASSESSEE IS ENTITLED FOR PROVISO (SECOND) DEDUCTION U/S. 80HHC OF THE ACT. 7. WE NOTICE THAT THE VIEW TAKEN BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE THIRD MEMBER DECISION IN THE CASE OF M/S BABY MARINE PROD UCTS REFERRED SUPRA. HENCE WE DO NOT FIND ANY INFIRMITY IN THE SAID DECISIONS OF THE LD. CIT(A). 8. IN THE RESULT BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. PRONOUNCED ACCORDINGLY O N 27-07-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 27TH JULY 2012 GJ COPY TO: 1.M/S. BABY MARINE SARASS ADMIN OFFICE BABY MARIN E COMPOUND THOPPUMPADY KOCHI-682005. 2.M/S. BABY MARINE INTERNATIONAL KALLUVILA THANGA SSERY KOLLAM. 3.THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 KOLLAM. 4.THE COMMISSIONER OF INCOME-TAX(APPEALS)-I TRIVAN DRUM.. 5.THE COMMISSIONER OF INCOME-TAX TRIVANDRUM. 6. D.R. I.T.A.T. COCHIN BENCH COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT COCHIN I.T.A.NOS. 523 & 551/COCH/200 6