THE DCIT 8(2), MUMBAI v. M/S. TROPICATE TEXTILES PVT. LTD, MUMBAI

ITA 6303/MUM/2007 | 2001-2002
Pronouncement Date: 04-11-2011 | Result: Dismissed

Appeal Details

RSA Number 630319914 RSA 2007
Assessee PAN AAACT1870A
Bench Mumbai
Appeal Number ITA 6303/MUM/2007
Duration Of Justice 4 year(s) 23 day(s)
Appellant THE DCIT 8(2), MUMBAI
Respondent M/S. TROPICATE TEXTILES PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 04-11-2011
Date Of Final Hearing 17-10-2011
Next Hearing Date 17-10-2011
Assessment Year 2001-2002
Appeal Filed On 11-10-2007
Judgment Text
1 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BENCHES F MUMBAI BENCHES F MUMBAI BENCHES F : MUMBAI : MUMBAI : MUMBAI : MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND AND AND AND SHRI V. DURGA RAO JUDICIAL MEMBER SHRI V. DURGA RAO JUDICIAL MEMBER SHRI V. DURGA RAO JUDICIAL MEMBER SHRI V. DURGA RAO JUDICIAL MEMBER ITA NO.6303/MUM/2007 ASSESSMENT YEAR 2001-02 DCIT-8(2) R.NO.216-A AAYAKAR BHAVAN MK ROAD MUMBAI 400020 VS. TROPICATE TEXTILES (P) LTD. LEELA BAUG SIR M.V.ROAD ANDHERI (E) MUMBAI 400059 PAN: PAN: PAN: PAN: AAACT 1870A AAACT 1870A AAACT 1870A AAACT 1870A (APPELLANT) (RESPONDENT) ITA NO.7023/MUM/2007 ASSESSMENT YEAR 2004-2005 DCIT-8(2) R.NO.216-A AAYAKAR BHAVAN MK ROAD MUMBAI 400020 VS. TROPICATE TEXTILES (P) LTD(AMALGATED COMPANY) M/S LEELE SCOTTISH LACE (P)LTD. LEELA BAUG SIR M.V.ROAD ANDHERI (E) MUMBAI 400059 PAN: PAN: PAN: PAN: AAACT 1870A AAACT 1870A AAACT 1870A AAACT 1870A (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI NITESH JOSHI ADVO CATE FOR DEPARTMENT : SHRI SUBACHAM RAM CI T(DR) DATE OF HEARING : 17/10/2011 DATE OF PRONOUNCEMENT: 04/11/2011 ORDER ORDER ORDER ORDER PER P.M. JAGTAP A.M: PER P.M. JAGTAP A.M: PER P.M. JAGTAP A.M: PER P.M. JAGTAP A.M: 1. THESE TWO APPEALS PREFERRED BY THE REVENUE AGAIN ST TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT(A)-29 MUM BAI FOR ASSESSMENT YEAR 2001-02 AND 2004-05 INVOLVE SOME C OMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGET HER AND ARE 2 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 2. FIRST WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2001-02 BEING ITA NO.6303/M/2007 WH ICH IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT (A)-2 9 MUMBAI DATED 20.7.2007. 3. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY WHICH IS MAINLY ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS. THE RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2001-02 WAS FILED BY IT ON 30.10.20 01 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING DEDUCTION U/S 10 B. THE SAID RETURN WAS ORIGINALLY PROCESSED BY THE ASSESSING OFFICER U /S 143(1) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B. TH EREAFTER ASSESSMENT UNDER SECTION 143(3) WAS ALSO MADE BY TH E ASSESSING OFFICER ON 31.03.2003 ALLOWING THE DEDUCTION UNDER SECTION 10B. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY THE ASS ESSING OFFICER FOR THE REASON THAT THE ASSESSEE WAS NOT ELIGIBLE F OR DEDUCTION U/S 10B AND NOTICE UNDER SECTION 148 WAS ISSUED BY HIM TO THE ASSESSEE ON 30.3.2006. IN REPLY FILED VIDE LETTER DATED 4.4. 2006 THE ASSESSEE REQUESTED THAT THE RETURN FILED ORIGINALLY BY IT ON 30.10.2001 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE U /S 148. DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE VALIDITY OF NOTICE ISSUED BY THE ASSESSING OFFICER U/S 148 WAS CHALLENGED BY THE ASSESSEE BY RAISING CERTAIN OBJECTIONS. THE ASSESSING OFFICER H OWEVER OVERRULED 3 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI THE SAID OBJECTIONS AND PROCEEDED TO COMPLETE THE R EASSESSMENT U/S 147 R.W.S. 143(3) VIDE AN ORDER DATED 28.9.2006. IN THE SAID ASSESSMENT HE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B ON THE GROUND THAT THE ASSESSEE COMPANY WAS ELIGIBLE FOR SUCH DEDUCTION ONLY FOR A PERIOD OF 5 YEARS I.E. AS SESSMENT YEAR 1996-97 TO 2000-01 AND NOT FURTHER AS ALREADY HELD IN THE ASSESSMENT COMPLETED IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. HE HOWEVER ACCEPTED THE AL TERNATIVE CLAIM OF THE ASSESSEE THAT IN CASE THE DEDUCTION U/ S 10B WAS DENIED TO IT DEDUCTION U/S 80HHC HAD TO BE ALLOWED. ACCOR DINGLY THE ASSESSING OFFICER EXAMINED THE CLAIM OF THE ASSESSE E FOR DEDUCTION U/S 80HHC AND FOUND THAT WHILE COMPUTING THE SAID D EDUCTION THE ASSESSEE COMPANY HAD INCLUDED OTHER INCOME OF `26 9 4 250/- STITCHING CHARGES RECEIVED FOR `2 05 72 354/- AND I NTEREST INCOME OF `5 10 861/- IN THE PROFITS OF THE BUSINESS. HE ALSO FOUND THAT SIMILARLY THE INCOME RECEIVED BY THE ASSESSEE AS A RESULT OF FOREIGN EXCHANGE FLUCTUATION AMOUNTING TO `45 09 859/- WAS INCLUDED BY THE ASSESSEE IN THE PROFITS OF THE BUSINESS FOR COMPUTING DEDUCT ION U/S 80HHC. ACCORDING TO THE ASSESSING OFFICER THE INTEREST RE CEIVED BY THE ASSESSEE ON FIXED DEPOSITS WITH BANK AND ON INCOME TAX REFUND WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND ACCORDINGLY THE SAME WAS ENTIRELY EXCLUDED BY HIM F OR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. AS REGARDS FOREIG N EXCHANGE GAIN STITCHING CHARGES RECEIVED AND OTHER INCOME HE HELD THAT THE SAID INCOME TO THE EXTENT OF 90% WAS LIABLE TO BE E XCLUDED FROM THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS PER EXPL ANATION (BAA) TO 4 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI SEC.80HHC FOR THE PURPOSE OF COMPUTING DEDUCTION UN DER THE SAID SECTION. ACCORDINGLY THE EXPORT PROFIT OF THE ASSES SEE ELIGIBLE FOR DEDUCTION U/S 80HHC WAS WORKED OUT BY THE ASSESSING OFFICER AT `11 18 25 978/- AND DEDUCTION TO THE EXTENT OF ` 8 94 60 782/- BEING 80% OF THE ELIGIBLE PROFIT WAS ALLOWED BY HIM. THE TOTAL INCOME OF THE ASSESSEE THUS WAS COMPUTED BY THE ASSESSING OFF ICER AT `48 484 68/- IN THE ASSESSMENT COMPLETED U/S 147 R. W.S. 143(3). 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R U/S 147 R.W.S. 143(3) AN APPEAL WAS PREFERRED BY THE ASSES SEE BEFORE THE LEARNED CIT (A) CHALLENGING THEREIN THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS THE ACTION OF THE ASSESSING O FFICER IN DENYING DEDUCTION UNDER SECTION 10B AND RESTRICTING ITS CLA IM FOR DEDUCTION U/S 80HHC. THE LEARNED CIT (A) DID NOT FIND ANY MER IT IN THE PRELIMINARY OBJECTION RAISED BY THE ASSESSEE CHALLE NGING THE VALIDITY OF REOPENING OF ASSESSMENT ON THE GROUND THAT IT WA S BASED MERELY ON A CHANGE OF INFORMATION. HE HELD THAT FOR REOPEN ING THE ASSESSMENT VALIDILY ONLY PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER WAS REQUIRED AND SUCH SATISFACTION WAS VERY MUCH THERE IN THE CASE OF THE ASSESSEE SINCE EXCESSIVE RELIEF WAS APPARENTLY GRANTED TO THE ASSESSEE IN THE ORIGINAL ASSESSMENT BY ALLOWING ITS CLAIM FOR DEDUCTION U/S 10B WRONGLY. HE THEREFORE UPHELD THE VALIDITY OF REASSESSMENT MADE BY THE ASSESSING OFFI CER. AS REGARDS THE OTHER ISSUES RAISED BY THE ASSESSEE RELATING TO COMPUTATION OF DEDUCTION U/S 80HHC THE LEARNED CIT (A) HELD THAT FOREIGN EXCHANGE GAIN AND STITCHING CHARGES RECEIVED BY THE ASSESSEE WERE FORMING 5 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI PART OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE AND AS ALREADY HELD BY HIM IN ASSESSEES OWN CASE FOR ASSESSMENT Y EAR 2003-04 THE SAME WAS NOT TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. AS RE GARDS OTHER INCOME REPRESENTING PREMIUM RECEIVED ON LICENSE/QUO TA THE LEARNED CIT (A) DIRECTED THE ASSESSING OFFICER TO TREAT THE SAME AS THE ITEMS MENTIONED IN SEC. 28 (IIIA) (IIIB) AND (IIIC) FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC AS CLARIFIED IN THE CBDT INSTRUCTIONS ISSUED ON 23-02-1998. AS REGARDS INTER EST INCOME THE LEARNED CIT (A) HELD THAT THE ASSESSING OFFICER WAS RIGHT IN TREATING THE SAID INCOME AS INCOME FROM OTHER SOURCES AND CO NSEQUENTLY DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80HHC THEREON. THE LEARNED CIT (A) HOWEVER ALLOWED THE CL AIM OF THE ASSESSEE FOR DEDUCTION U/S 10B RELYING ON HIS ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 WHEREIN IT WAS HELD THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 10B FOR A P ERIOD OF 10 YEARS AS PER THE AMENDMENT MADE IN THE RELEVANT PROVISION S IN THE YEAR 1999. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. IN GROUND NO.1 OF ITS APPEAL THE REVENUE HAS CH ALLENGED THE ACTION OF THE LEARNED CIT (A) IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B AND IN GROUND NO.2 IT HAS RAISED THE ISSUE RELATING TO COMPUTATION OF DEDUCTION U/S 80HHC WHIC H HAVE BEEN DECIDED BY THE LEARNED CIT (A) IN FAVOUR OF THE ASS ESSEE. THE ASSESSEE HAS ALSO FILED AN APPLICATION CHALLENGING THE VALIDITY OF 6 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 147 R. W.S. 143(3) WHICH ISSUE HAS BEEN DECIDED BY THE LEARNED CIT (A) AGAINST THE ASSESSEE. THE SAID APPLICATION IS FILED UNDER RULE 27 OF THE APPELLATE TRIBUNAL 1963 WHICH ALLOWS THE RESPONDENT TO SUPPOR T THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAI NST HIM EVEN THOUGH HE HAS NOT FIELD ANY APPEAL AGAINST THE SAID ORDER. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE MAIN ISSUE INVOLVED IN THIS APPEAL AS RAISED IN GROUND NO.1 RE LATING TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 10B IT IS OBSER VED THAT THE SAME HAS BEEN DECIDED BY THE LEARNED CIT (A) VIDE HIS IM PUGNED ORDER IN FAVOUR OF THE ASSESSEE FOLLOWING HIS APPELLATE ORDE R IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 ON A SIMILAR I SSUE. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE A T THE TIME OF HEARING BEFORE US THE REVENUE HAD FILED AN APPEAL AGAINST THE ORDER OF THE LEARNED CIT (A) FOR ASSESSMENT YEAR 2002-03 BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 30.9 .2011 PASSED IN ITA NO.2544/MUM/2006 HAS UPHELD THE ORDER OF THE LE ARNED CIT (A) FOR ASSESSMENT YEAR 2002-03 DECIDING THE SIMILAR IS SUE IN FAVOUR OF THE ASSESSEE. A COPY OF THE SAID ORDER IS ALSO PLAC ED ON RECORD BEFORE US BY HIM AND A PERUSAL OF THE SAME SHOWS TH AT SIMILAR ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL VID E PARAGRAPH NOS.18 TO 23 WHICH READ AS UNDER: 18. THE UNDISPUTED FACTS RELATING TO GROUND NO.1 A RE THAT THE ASSESSEE WAS INCORPORATED IN ASSESSMENT Y EAR 1993-94 AND DURING THAT YEAR IT JUST DID SOME JOB WORKS 7 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI OF GARMENTS. NO MACHINERY WAS PURCHASED. DURING THE ASSESSMENT YEAR 1994-95 THE ASSESSEE STARTED PRODUCTION OF GARMENTS AND CLAIMED EXEMPTION UNDER SECTION 80HHC. SIMILAR IS THE CASE FOR ASSESSMENT Y EAR 1995-96. FOR THE FIRST TIME IN ASSESSMENT YEAR 1996 -97 THE ASSESSEE OPTED TO CLAIM DEDUCTION UNDER SECTION 10B. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 1 0B FOR FIVE CONSEQUENT ASSESSMENT YEARS I.E. FROM ASSESSMENT YEAR 1996-97 TO 2000-01 AND THE SAME WAS ALLOWED. 19. NOW WE CONSIDER THE AMENDMENT BROUGHT IN STATU TE W.E.F. 1 ST APRIL 1999. SUB SECTION (3) OF SECTION 10B READS AS FOLLOWS:- PROFITS AND GAINS REFERRED TO IN SUB-SECTION (1) S HALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF ANY TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINNING TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS 20. THE WORD TEN WAS SUBSTITUTED FOR THE WORD FIVE BY THE I.T. (2 ND AMENDMENT) ACT 1998 W.E.F. 1 ST APRIL 1999. THE STATEMENT OF OBJECTS AND REASONS CLAUSE (3) R EADS AS FOLLOWS:- 3. CLAUSE 3 SEEKS TO AMEND SECTION 10A OF THE ACT. UNDER THE EXISTING PROVISIONS TAX HOLIDAY IS AVAIL ABLE TO NEWLY ESTABLISHED INDUSTRIAL UNDERTAKINGS SET UP IN FREE TRADE ZONES AND TO UNITS SET UP IN SOFTWARE TECHNOLOGY PARKS FOR FIVE YEARS OUT OF THE BLOCK OF INITIAL EIGHT YEARS SUBJECT TO FULFILLMENT OF CERT AIN CONDITIONS. THE PROPOSED AMENDMENT SEEKS TO EXTEND THE PERIOD OF TAX HOLIDAY FROM FIVE YEARS TO TEN YE ARS IN ORDER TO GIVE ADDED THRUST TO EXPORTS. CLAUSE 4 SEEKS TO SIMILARLY EXTEND THE FIVE YEAR TAX HOLIDAY PERIOD TO TEN YEARS TO THE EXPORT ORIENTED UNITS UN DER SECTION 10B OF THE ACT (EMPHASIS OWN) 21. FROM THE ABOVE IT IS CLEAR THAT THE PERIOD OF TAX HOLIDAY HAS BEEN EXTENDED FROM FIVE YEARS TO TEN YE ARS. THE MUMBAI BENCH OF THE TRIBUNAL IN M/S CONSINDIA P VT. LTD. (SUPRA) VIDE PARAS 2.3 AND 2.4 HELD AS FOLLO WS:- 8 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI 2.3 AFTER CONSIDERING THE SUBMISSIONS OF BOTH PART IES AND ORDERS OF THE AUTHORITIES BELOW INCLUDING THE DECISIONS OF THE TRIBUNAL IN CASE OF TATA TEA LTD. AND IN CASE OF TECH BOOKS ELECTRONICS SERVICES PVT. LTD . WE FIND THAT HE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B. THERE IS NO DISPUTE AS PER ORIGINAL PROVISION OF LA W THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION U/S 10B FOR FIVE YEARS. THE ASSESSEE HAD ALREADY CLEARED THE DEDUCTION FOR FIVE YEARS I.E FROM 1993-94 TO 1997-9 8. FOR THE ASSESSMENT YEAR 1998-99 THE DEDUCTION WAS CLAIMED UNDER SECTION 80HHC INSTEAD OF DEDUCTION UNDER SECTION 10B. WITH EFFECT FROM 1.4.1999 PROVISIONS OF SECTION 10B WERE AMENDED AND THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION FOR TEN YE ARS. AS PER AMENDED PROVISIONS WHICH IS VERY CLEAR THAT THE PERSONS WHO ARE CLAIMING DEDUCTION U/S 10B EARLIER THEY CAN CLAIM DEDUCTION FOR TEN YEARS. SUPPOSE ANY PERSON HAVE CLAIMED DEDUCTION FOR FIVE YEARS THEN H E CAN CLAIM DEDUCTION FOR NEXT FIVE YEARS AND NOT TEN YEARS FROM THE DATE I.E. 1.4.1999. THIS ISSUE HAS B EEN DISCUSSED IN DETAIL BY THE DELHI BENCH IN CASE OF T ECH BOOKS ELECTRONICS SERVICES (P) LTD.(SUPRA). IN THAT CASE THE FACTS ARE SIMILAR AS A PARTNERSHIP FIRM IN THE NAME OF TECH BOOKS ELECTRONICS SERVICES (P) LTD.(SUPRA) WAS FORMED FOR CARRYING BUSINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE DATA PROCESSING ON 14.12.1992 T HE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) GRANTED PERMISSION FOR THE FIRM FOR SETTING UP 100% EOU UND ER THE SOFTWARE TECHNOLOGY PARK SCHEME. LATER ON STPI HAS ALSO GRANTED APPROVAL UNDER SECTION 14 OF THE INDUSTRIES ACT TO ENABLE IT TO AVAIL APPROVAL UNDE R SECTION 14 OF THE INDUSTRIES ACT TO ENABLE IT TO A VAIL THE BENEFITS UNDER SECTION 10A AND 10B FROM FINANCI AL YEAR 1993-94 UPTO 18.9.1997 THE FIRM WAS EXCLUSIVE LY EXPORTING ITS SOFTWARE TO AN AMERICAN COMPANY. ON 19.9.1997 THE FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY AND ALL THE ASSETS AND LIABILITY OF THE FIRM BECAME THE PROPERTY OF THE ASSESSEE COMPANY. CONSEQUENTLY ALL THE PARTNERS BECAME SHARE HOLDERS IN THE ASSESSEE COMPANY AND THE CAPITAL OF THE FIRM BECAME PAID UP CAPITAL OF THE ASSESSEE COMPANY. IN ASSESSMENT YEAR 2000-01 THE ASSESSEE COMPANY FOR THE FIRST TIME CLAIMED EXEMPTION UNDER SECTION 10B. THE A.O DENIED THE EXEMPTION U/S 10B. THE CIT (A) ALSO CONFIRMED THE ACTION OF THE A.O. ON SECOND APPEAL BEFORE THE TRIBUNAL THE TRIBUNAL AFTER DISCUSSING THE ISSUE IN DETAIL HELD THAT THE ASSESS EE IS ENTITLED FOR DEDUCTION UNDER SECTION 10B. THE PROVISIONS OF SECTION 10B BEFORE AMENDMENT AND AFTE R AMENDMENT WERE TAKEN INTO CONSIDERATION. AFTER TAKING INTO CONSIDERATION ALL THE ASPECTS INCLUDING THE 9 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI DECISION OF CALCUTTA BENCH IN THE CASE OF TATA TEA THE TRIBUNAL HAS HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B FOR THE YEARS INVOLVED I.E. ASSESSMENT YEAR 2000-01 AND 2001-02 THE TRIBUNAL HAS CATEGORICALLY HELD THAT FIRST YEAR OF EXEMPTION U/S 10B WAS ASSESSMENT YEAR 1994-95 AS ASSESSEE IS ENTITLED FOR EXEMPTION UPTO ASSESSMENT YEAR 2003-04 . THEREFORE THE CLAIM OF THE ASSESSEE FOR TWO YEARS AS MENTIONED ABOVE WAS ALLOWED. 2.4 AS STATED ABOVE SIMILAR FACTS ARE INVOLVED HER E BEFORE US. THE FIRST YEAR OF EXEMPTION U/S 10B WAS 1993-94 AND IN THIS WAY THE ASSESSEE IS ENTITLED F OR EXEMPTION UPTO ASSESSMENT YEAR 1993-94. THE YEAR UNDER CONSIDERATION IS ASSESSMENT YEAR 2001-02 THEREFORE WE HOLD THAT ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10B FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE DIRECT THE A.O TO ALLOW THE DEDUCTI ON UNDER SECTION 10B AS CLAIMED BY THE ASSESSEE. 22. THE DELHI BENCH OF THE TRIBUNAL IN TECH BOOKS ELECTRONICS SERVICES (P) LTD. (SUPRA) HELD AS FOLLO WS:- 10. WE HAVE CAREFULLY CONSIDERED THE ENTIRE RELEVA NT MATERIAL AND THE RIVAL SUBMISSIONS. ON GOING THROUG H THE RELEVANT PROVISIONS OF LAW AND THE DECISIONS OF VARIOUS COURTS ON WHICH RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE WE FIND FORCE IN HIS SUBMISSIONS AND ACCEPT THE SAME. OUR FINDINGS A ND OBSERVATIONS ARE AS UNDER. 10.1 THE EXEMPTION UNDER S. 10B AS THE HEADING OF SECTION SUGGESTS IS IN RESPECT OF NEWLY ESTABLISH ED HUNDRED PER CENT EOUS. SECTION 10 WAS INSERTED IN THE FINANCE ACT 1988 W.E.F. 1 ST APRIL 1989 AND LATER ON IT WAS AMENDED FROM TIME TO TIME. ACCORDING TO THIS PROVISION ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM A HUNDRED PER CENT EOU SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. AS PROVIDED IN CL.(2) OF S.10B THE EXEMPTION IS AVAIL ABLE TO UNDERTAKINGS WHICH FULFILL ALL THE FOLLOWING CONDITIONS NAMELY: (I) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THI NG; (II) IN RELATION TO AN UNDERTAKING WHICH BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING ON OR A FTER THE 1 ST DAY OF APRIL 1994 ITS EXPORTS OF SUCH ARTICLES AND THINGS ARE NOT LESS THAN SEVENTY FIVE PER CENT OF THE TOTAL SALES THEREOF DURING THE PREVIOUS YEAR ( III) IT 10 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI IS NOT FORMED BY THE SPLITTING UP OR THE RECONSTRU CTION OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT T HIS CONDITION SHALL NOT APPLY IN RESPECT OF ANY UNDERTA KING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN S.33B IN THE CIRCUMSTANCES AND WITH IN THE PERIOD SPECIFIED IN THAT SECTION; )IV) IT IS NO T FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE LEARNED CIT (A) HAS ALSO HELD THAT THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF EXEMPTION IN VIEW OF T HE AMENDED PROVISIONS OF S.10B. THIS FINDING OF LEARNE D CIT (A) IS NOT BASED ON CONSTRUCTION OF RELEVANT STATUTORY PROVISIONS. THE CBDT VIDE CIRCULAR NO.1 O F 2005 (2005) 193 CTR (ST) 85) HAS CLARIFIED THE POSI TION AND THEREFORE IN VIEW OF THE PROVISION OF S.10B A S AMENDED W.E.F. 1 ST APRIL 1999 THE ASSESSEE SHALL BE ENTITLED TO CLAIM EXEMPTION IN RESPECT OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEINGS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS. THEREFORE THE EOU WHIC H EXISTED BEFORE FINANCIAL YEAR 1998-99 AND WHICH WAS OTHERWISE ELIGIBLE FOR TAX HOLIDAY OF FIVE ASSESSME NT YEARS OUT OF BLOCK OF EIGHT ASSESSMENT YEARS WOULD BE ELIGIBLE FOR TAX HOLIDAY FOR A BLOCK PERIOD OF TEN ASSESSMENT YEARS. HOWEVER THE PERIOD OF TEN YEARS SHALL COMMENCE FRO THE FINANCIAL YEAR RELEVANT TO T HE ASSESSMENT YEAR IN WHICH THE UNDERTAKINGS BEINGS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS. IN THE INSTANT CASE SINCE THE FIRM STATED MANUFACTURING O R PRODUCING ARTICLES OR THINGS IN ASSESSMENT YEAR 199 4- 95 FROM THE ASSESSMENT YEAR THE FIRM SHALL BE ELIG IBLE FOR EXEMPTION FOR TEN CONSECUTIVE ASSESSMENT YEARS AND THE DEDUCTION SHALL BE AVAILABLE FOR THE UNEXPI RED PERIOD OF TEN YEARS. 10.8 IN THE CASE OF THE ASSESSEE NEITHER THE PERIO D OF FIVE YEARS NOR THE BLOCK PERIOD OF EIGHT YEARS EXPI RED WHEN THE AMENDMENT REPLACING THE WORD TEN FOR FIVE WAS INTRODUCED BY IT (SECOND AMENDMENT) ACT 1998 W.E.F. 1 ST APRIL 1999. SINCE THE ASSESSEE WAS ENTITLED TO EXEMPTION IN THE YEAR IN WHICH AMENDMEN T BECAME EFFECTIVE AND OPERATIVE THE ASSESSEE WILL B E ENTITLED TO THE EXTENDED PERIOD OF EXEMPTION BECAUS E THE PERIOD OF FIVE YEARS HAD NOT EXHAUSTED UPTO ASSESSMENT YEAR 1999-2000. SINCE THE RIGHT OF THE ASSESSEE WAS CONTINUING IN THE YEAR OF AMENDMENT AND WAS NOT LOST ON THE DATE WHEN THE AMENDMENT 11 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI CAME INTO EXISTENCE THE VIEW TAKEN BY THE LEARNED CIT (A) CANNOT BE UPHELD. 10.9 SO FAR AS THE OBJECTIONS OF THE LEARNED CIT (A ) REGARDING CONDUCT OF THE ASSESSEE-FIRM IN NOT CLAIM ING THE EXEMPTION IN EARLIER YEAR ARE CONCERNED THE APPROACH OF THE LEARNED CIT (A) RAISING THIS OBJECT ION CANNOT BE LEGALLY JUSTIFIED BECAUSE IF THE ASSESSEE IS ENTITLED TO ANY BENEFIT UNDER ANY STATUTORY PROVISI ON THEN THE PAST CONDUCT CANNOT BE RELEVANT PARTICULAR LY WHEN REFERENCE TO SUCH CONDUCT IS NOT MADE IN THE ACT. THE ELIGIBILITY OF THE ASSESSEE HAS TO BE SEEN IN THE YEAR IN WHICH THE CLAIM IS PREFERRED AND IF IN EARLIER YEARS THE ASSESSEE WAIVED HIS RIGHT THEN HE CANNOT BE STOPPED IN CLAIMING HE BENEFIT IN THE SUBSEQUENT YEARS. 23. IN BOTH THE AFORESAID DECISIONS THE TRIBUNAL W AS CONSIDERING THE CLAIM FOR DEDUCTION IN ASSESSMENT Y EAR 2001-02 AND ASSESSMENT YEAR 2000-01 RESPECTIVELY. I N OUR OPINION THESE TWO CASES COVER THE CASE IN HAND . 7. THE TRIBUNAL THUS HAS DECIDED A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-03 FOLLOWING ITS EARLIER TWO DECISIONS IN THE CASES OF M/S CONSINDIA PVT LTD (ITA 8270/MUM/2004 DATED 29.1.2008 (SUPRA) AND IN THE CASE OF M/S TECH BOOKS ELECTRONICS SERVICES (P) LTD. (100 ITD 125) (DEL.) WHEREIN IT WAS HELD THAT AS PER THE AMENDMENT MADE IN SECTION 10B(3) BY THE IT (SECOND AMENDMENT) 1998 W.E.F. 1.4 .1999 THE ASSESSEE WAS ENTITLED FOR DEDUCTION U/S 10B FOR A T OTAL PERIOD OF 10 YEARS INCLUDING THE PERIOD OF 5 EXTENDED YEARS. RE SPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL WE UPH OLD THE IMPUGNED ORDER OF THE LEARNED CIT (A) ALLOWING THE CLAIM OF HE ASSESSEE FOR DEDUCTION U/S 10B FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2001-02. GROUND NO.1 OF THE REVENUES APPEAL I S ACCORDINGLY DISMISSED. 12 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI 8. AS A RESULT OF OUR DECISION RENDERED ON THE ISSU E RAISED IN GROUND NO.1 ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B THE ISSUE RAISED IN GROUND NO.2 RELATING TO AS SESSEES ALTERNATIVE CLAIM FOR DEDUCTION U/S 80HHC HAS BECOM E INFRUCTUOUS. WE THEREFORE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. 9. AS REGARDS THE APPLICATION FILED BY THE ASSESSEE UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES 1963 SUPPORTING THE IMPUGNED ORDER OF THE LEARNED CIT (A) BY RAISING PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF THE REASSESSMENT DECIDED AGAINST IT BY THE LEARNED CIT (A) IT IS OBSERVED THAT THE SAME HAS BECOME ONLY A CADEMIC AS A RESULT OF OUR DECISION UPHOLDING THE ORDER OF THE L EARNED CIT (A) GIVING RELIEF TO THE ASSESSEE ON THE MAIN ISSUE REL ATING TO THE ASSESSEES CLAIM FOR DEDUCTION U/S 10B. 10. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 BEING ITA NO.7023/M/2007 WH ICH IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT (A)-2 9 MUMBAI DATED 17.9.2007. 11. IN THE SOLITARY GROUND RAISED IN THIS APPEAL T HE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT (A) IN DIR ECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80HHC IN R ESPECT OF STITCHING CHARGES OF `.1 49 97 825/- RECEIVED BY TH E ASSESSEE. 13 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT TH IS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE AS SESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS DRESSER RAND INDIA P. LTD (323 ITR 429) WHEREIN IT WAS HELD THAT SERVICE CHARGES RECEIVED BY THE ASSESSEE WHICH CONS TITUTES INDEPENDENT INCOME HAS NO ELEMENT OF EXPORT TURNOVE R AND THE SAME IS CONSEQUENTLY LIABLE TO BE EXCLUDED TO THE E XTENT THAT IS STIPULATED IN EXPLANATION (BAA) TO SECTION 80HHC. R ESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTION AL HIGH COURT WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT (A) DIRECTING THE ASSESSING OFFICER TO INCLUDE THE STITCHING CHARGES RECEIVED BY THE ASSESSEE IN THE PROFITS OF THE BUSINESS FOR THE PUR POSE OF COMPUTING DEDUCTIONS U/S 80HHC AND RESTORE THE ORDER OF THE A SSESSING OFFICER EXCLUDING THE SAME FOR THE PURPOSE OF COMPUTING DED UCTION U/S 80HHC. AS REGARDS THE ALTERNATIVE CLAIM OF THE LEAR NED COUNSEL FOR THE ASSESSEE THAT ONLY THE AMOUNT OF PROFIT EARNED BY THE ASSESSEE FROM THE ACTIVITY OF STITCHING CHARGES SHOULD BE EX CLUDED AND NOT THE ENTIRE RECEIPTS THEREOF WE DIRECT THE ASSESSING OF FICER TO CONSIDER AND EXAMINE THIS CLAIM MADE BY THE ASSESSEE BEFORE US FOR THE FIRST TIME ON MERIT AND ALLOW APPROPRIATE RELIEF TO THE A SSESSEE IN ACCORDANCE WITH THE LAW. 14 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI 13. IN THE RESULT THE APPEAL OF THE REVENUE FOR AS SESSMENT YEAR 2001-02 IS DISMISSED WHEREAS THE REVENUES APPEAL FOR ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOVEMBER 2011 . SD/- SD/- (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATE 4 TH NOVEMBER 2011 VNODAN/SPS COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A) CONCERNED 4. THE CIT CONCERNED 5. DR F BENCH 6. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES 15 ITA NOS.6303 & 7023 OF 2007 TROPICATE TEXTILES (P) LTD MUMBAI DATE INITIAL DRAFT DICTATED ON 20. 10.2011 SR. P.S. DRAFT PLACED BEFORE THE AUTHOR 21-10-2011 SR. P.S . DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS 21-10-2011 SR. P.S. KEPT FOR PRONOUNCEMENT ON 4-11-2011 SR. P.S. FILE SENT TO THE BENCH CLERK 4-11-2011 SR. P.S. DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE ON WHICH FILE GOES TO THE ASSTT. REGISTRAR FOR SIGNATURE ON THE ORDER. DATE OF DISPATCH