Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Fabstract Clothing India Pvt. ... on 12 September, 2017
1
I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCHES: "B" NEW DELHI ]
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND SHRI L. P. SAHU, ACCOUNTANT MEMBER
I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
Deputy Commissioner M/s. Fabstract Clothing India Pvt. Ltd.,
of Income Tax, Vs. M - 169, Second Floor,
Circle : 11 (1), Greater Kailash, Part - II,
New Delhi. N e w D e l h i - 110 048.
PAN : AAACF 3387 J
(Appellant) (Respondent)
Assessee by : Shri Ved Jain, C. A.;
Department by : Shri Anshu Prakash, Sr. D. R.;
Date of Hearing : 31.08.2017
Date of Pronouncement : 12.09.2017
O R D E R.
PER I. C. SUDHIR, J. M. :
This is an appeal filed by the Revenue against the order passed
by the learned CIT (Appeals) dated 11th March, 2014. In this appeal
the Revenue has challenged the action of the learned CIT (Appeals)
in allowing deduction under Section 10B of the Act, to the
assessee.
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
2. The brief facts relating to the present appeal are that the
assessee is a company engaged in the business of manufacturing and
exports of readymade garments and it is registered 100% EOU. It filed
its return of the income claiming deduction under Section 10B of the
Income Tax Act. The Assessing Officer during the course of the
assessment proceedings raised the issue that it has received a letter
from Assistant Development Commissioner, Special Economic Zone,
informing that assessee is not engaged in manufacturing. The assessee
submitted a detailed reply along with evidences that it is engaged in
manufacturing activities. In support thereof the assessee also filed
evidences in the form of various returns submitted to various
authorities and the inspection carried out by the authorities. The
assessee also wrote a letter to the Assistant Development Commissioner
raising the issue. The learned Assessing Officer not being satisfied
with the reply of the assessee, disallowed the claim of the
assessee.
2.1 Aggrieved by the order of the Assessing Officer, the assessee
filed appeal before the learned CIT (Appeals). The assessee reiterated
its submission and submitted all the evidences which were submitted
to the Assessing Officer. The learned CIT (Appeals) after going through
all the facts and evidences accepted the claim of the assessee
and directed the Assessing Officer to allow deduction under Section
10B of the Act.
2.2 Aggrieved by the order of the learned CIT (Appeals), the Revenue
is in appeal before us. It was contended by the learned Senior DR that
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
CIT (Appeals) was not justified in allowing the benefit of deduction
under Section 10B of the Act when the assessee has failed to fulfill
the conditions prescribed therein.
2.3 In reply the leaned AR submitted that the Assessing Officer
was not justified in holding that assessee is not engaged in
manufacturing. He invited our attention to the profit and loss account
to point out that the various expenses debited therein clearly shows
that assessee is engaged in manufacturing. He invited our attention
to schedule of fixed assets at paper book Page 37 to point out that
the assessee was having machinery of 1,10,83,645/-. It was further
explained that assessee has been already in manufacturing and export
of readymade garment in domestic tariff area (DTA). It has applied for
conversion into 100% EOU on 19th June, 2006. It received a letter
of approval on 7th September, 2007. As per section 10B of the Income
Tax Act, existing unit which subsequently get converted into a 100%
EOU are eligible for deduction under Section 10B of the Act. It was
further submitted that the learned Assessing Officer without making
any verification and ignoring the evidences brought on record by the
assessee had denied the deduction. The learned CIT (Appeals) has
thoroughly examined the issue and has recorded categorical finding
on each and every aspect as is evident from its order.
2.4 We have considered the submission made by the parties
and perused the order passed by the authorities below. On going
through the order of the Assessing Officer we note that he has disallowed
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
the deduction merely on the basis of the letter received from
Assistant Development Commissioner without making any verification
despite the assessee bringing substantial material to support its
contention that it is engaged in manufacturing of readymade garments.
The learned CIT (Appeals) on the other hand has examined each and
every aspect of the issue as is evident from the order passed by him. It
may be relevant to quote the finding of the learned CIT (Appeals), which
reads as under :-
" I have considered the facts of the case, submissions of the AR
and documents filed on record by the AR of the appellant
company. The assessing officer while passing the impugned
order has disallowed the deduction claimed by the appellant
under Section 10B of the Act stating that the appellant has not
commenced the production during the year under Consideration.
I find that the assessee company was incorporated in the year
1999 and has been engaged in the business of manufacturing
and export of garments since then, at its premises C-57, Hosiery
Complex, Phase-II, Extention. Noida. The appellant is a regular
income tax assessee and its case have been assessed under
section 143(3) for the assessment years 2005-06, 2006-07 &
2007-08. The AR of the Assessee has placed various documents
on record which reveal that the assessee was engaged in the
activity of manufacturing of garments since its inception till
the year under consideration. A perusal of documents reveal
that the company was allotted Import Export Code on 19.07.1999
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
by Foreign Trade Development Officer, New Delhi, it was registered
with Apparel Export Promotion Council on 20.08.1999, it was
registered with Directorate of Industries Govt. of Uttar Pradesh on
30.03.2002 with registration number 20/78/1616/PMT/SSI/12,
in the said certificate the date of commencement of production
is specifically mentioned as 01.02.2002, it was registered unit
UP VAT on 09.05.2000 and was allotted TIN No. 09566000577, IT
was registered with Employees State Insurance Corporation
on 15.03.2002, the assessee has submitted various such
registrations which are required by an industrial entity for set-up
and operation. The AR has also brought forward various
documents like orders passed by state sales tax department,
excise department, bank accounts, books of accounts, audited
balance sheets and profit and loss account for the year under
consideration. A perusal of the Fixed Asset Schedule attached
with the balance sheet reveals that the assessee has substantial
investment in machinery and other business assets. The most
important document is the audited balance sheet and profit
and loss account for the year under consideration which
specifically highlights the figures of purchase / sale, debtors /
creditors, stock, fixed assets, depreciation, employee cost,
administrative cost, banking transactions etc. which establishes
it conclusively that the appellant was engaged in manufacturing
activity during the year under consideration. The said figures
have not been doubted by the Assessing Officer during the course
of proceedings before him. Further the case of the assessee has
been scrutinized for the assessment years 2005-06, 2006-07 &
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
2007-08 wherein the purchase and sales made by the appellant
have been duly dealt with and accepted. Thus the finding of
the Assessing Officer that the appellant has not done production
during the year under consideration in bad on the facts of the
case and consequently disallowance of deduction under Section
10B is bad in law and against the facts of the case.
The assessing officer has disallowed the deduction under
Section 10B of the Act in this case. On going through the
assessment order and after perusing the details filed by the AR
of the appellant, I find that the appellant has not violated any
condition which debars it from claiming deduction under section
10B of the Act. The assessee has specifically fulfilled all conditions
required to claim deduction under section 10B of the Act. It is
important to state here that the appellant is a 100% export
oriented unit and has claimed the exemption under section 10B
of the Act accordingly and the Assessing Officer has not brought
any facts on record to negate the said claim by bringing forward
any evidence to establish that the appellant is not an 100%
export oriented undertaking.
The assessee applied for the conversion of its DTA Unit into an
100% EOU on 10.06.2006 and the same was approved by the
letter of the Development Commissioner, Noida on 07.09.2007.
The assessee was eligible to claim deduction under section
10B w.e.f. 07.09.2007 and it has claimed the same accordingly.
In this respect the assessee has produced before me circular
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
No.1/2005 dated 06.01.2005 and Circular No. 1/2009 dated
27.03.2009 wherein it has been held by the CBDT that any
assessee which converts into an 100% EOU from a DTA unit shall
be entitled to claim the exemption under section 10B till the
assessment year 2010-11. In this case, the Assessing Officer
received a letter from the Asst. Development commissioner, Noida
Special Economy Zone stating that the assessee was issued a
letter of Permission to operate on 07.09.2007 and has now
applied for debonding and has not commenced production till
the date. The Assessing Officer merely relying on the said letter
held in the assessment order that the appellant has not
commenced production and disallowed the exemption claimed
by the appellant under section 10B of the Act. The Assessing
Officer has grossly ignored the plethora of evidences brought
on record by the appellant during the course of hearing before
him which clearly evidence that the manufacturing activity was
carried on by the assessee during the year. The assessee has
enclosed in the paper book a detailed reply filed by it to the Asstt.
Development Commissioner, Noida Special Economy Zone,
wherein it has specifically reveal that there would have been
some issue with respect to the assessee being a bonded
warehouse, which in the present case is not a matter to
be discussed and considered for allowing exemption under
section 10B of the Act.
Exemption under section 10B is allowed as a deduction of such
profits and gains which are derived by a hundred per cent export-
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
oriented undertaking from the export of articles or things or
computer software for a period of ten consecutive assessment
years beginning with the assessment year relevant to previous
year in which the undertaking begins to manufacture or produce
articles or things or computer software, as the case may be, shall
be allowed from the total income of the assessee. The assessee
in the present case has fulfilled all the conditions for claiming the
exemption under section 10B of the act and Assessing Officer
has not brought any evidence on record to negate the same.
Thus, the action of the Assessing Officer in disallowing the
exemption claimed under section 10B of the Act is against
the statutory provisions in this respect and against the facts
of the case. The Assessing Officer is directed to allow the
deduction claimed under section 10B of the act and compute the
income for the year under consideration accordingly. "
2.5 Having gone through the above findings of the learned CIT
(Appeals), we find that the learned Senior DR could not point out any
error in the above findings recorded by the learned CIT (Appeals). From
the facts on record it is evident that the assessee company has been
engaged in the business of exporting and manufacturing of garment at C-
57, Hosiery Complex, Phase-II Extension, Noida. The balance sheet and
the profit and loss account of the year under consideration clearly
demonstrate that the assessee has been engaged in manufacturing of
garments. The Assessing Officer has accepted these results as he has
only denied the deduction. He has not tinkered with the results and the
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
books of accounts. It is also a fact that in terms of the circular issued by
the Central Board of Direct Taxes dated 6th January, 2005 and 27th
March, 2009, it has been clarified that any assessee which converts into
an 100% EOU from a DTA unit shall be entitled to claim the deduction
under Section 10B till assessment year 2010-11. We further note that
the assessee has written a letter to the Assistant Development
Commissioner pointing out the error in the said letter. A copy of this
letter along with necessary evidences was filed with the Assessing Officer
as well. The Assessing Officer ignoring all these evidences in an arbitrary
manner and without bringing any further adverse material and without
rebutting any of the evidences submitted by the assessee in support of
its contention has denied the exemption. It is also important to note that
in the preceding assessment year the Assessing Officer has allowed
deduction under Section 10B in the assessment order passed under
Section 143(3). Thus, the fact that the assessee was engaged in
manufacturing of garments can't be disputed. From a query from the
Bench the learned Senior DR could not give us any reason to reject
the version of the assessee and the evidences in support thereof.
Accordingly, we are of the view that learned CIT (Appeals) was
justified in allowing the deduction under Section 10B of the Act and
we uphold his order.
3. In the result, the appeal of the Revenue, is dismissed.
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I. T. Appeal No. 3442/Del/2014
Assessment Year : 2010-11.
4. The order is pronounced in the Open Court on : 12th September,
2017.
Sd/- Sd/-
( L. P. SAHU ) ( I. C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : the 12th September, 2017.
*MEHTA*
Copy of the Order forwarded to:-
1. Appellant;
2. Respondent;
3. CIT;
4. CIT (Appeals);
5. DR, ITAT, ND.
BY ORDER
ASSISTANT REGISTRAR Date Draft dictated on 12.09.2017 Draft placed before author 12.09.2017 Draft proposed & placed before the second member Draft discussed/approved by Second Member. Approved Draft comes to the Sr.PS/PS Kept for pronouncement on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order. 11 I. T. Appeal No. 3442/Del/2014 Assessment Year : 2010-11.