Income Tax Appellate Tribunal - Bangalore
Granite Mart Limited , Bangalore vs Assessee on 31 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH "C"
BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND
SHRI JASON P. BOAZ, ACCOUNTANT MEMBER
I.T.A. No.354/Bang/2012
(Assessment Year : 2007-08)
M/s. Granite Mart Limited, Vs. Income Tax Officer,
41-D, KIADB Indl. Area, Ward 11(2), Bangalore.
Hoskote, Bangalore.
PAN AABCG 8488L
Appellant Respondent.
Appellant By : Shri Padamchand Khincha.
Respondent By : Shri A. Sundar Rajan.
Date of Hearing : 31.10.2012.
Date of Pronouncement : 9.11.2012.
O R D E R
Per Shri Jason P. Boaz :
This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-I, Bangalore dt.10.01.2012 for Assessment Year 2008-09.
2. The facts of the case, in brief, are as under :
2.1 The assessee company (hereinafter referred to as 'the assessee'), engaged in the business of manufacture and export of granite slabs and monuments, filed its return of income for Assessment Year 2008-09 on 30.09.2008 declaring total income of Rs.3,35,997 after claiming deduction ofRs.7,39,37,292 under section 10 B of the Income Tax Act, 1961 2 ITA No.354/Bang/12 (herein after referred to as 'the Act'). The return was processed under section 143(1) and the case was subsequently taken up for scrutiny by issue of notice under section 143(2) of the Act. The assessment was completed by an order under section 143(3) of the Act dt.28.10.2010 wherein the income of the assessee was determined at Rs.96,48,263.
In the order of assessment, the Assessing Officer determined the eligible deduction under section 10 B of the Act at Rs.1,08,31,895 as against Rs.7,39,39,292 claimed by the assessee.
2.2 Aggrieved by the orders of learned CIT(Appeals) dt.10.1.2012, the assessee is now in appeal before us. In this appeal, the assessee has raised the following grounds :
" 1. The learned Assessing Officer had erred in passing the order in the manner passed by him and the learned CIT (Appeals) has also erred impartially confirming the same. The orders passed being bad in law and are liable to be quashed.
2. In any case and without prejudice, the Assessing Officer had erred in reducing the deduction under section 10B of the IT Act, 1961 from Rs. 2,01,44,161 to Rs. 1,08,31,895 by denying deduction under section 10B of the IT Act, on third party sales and inter-unit transfers / sales.
3. The authorities below Assessing Officer has not properly appreciated the law relating to the deduction / exemption under section 10B of the IT Act, and also have not properly applied and appreciated the intent behind the provisions of the law.
4. The authorities below have erred in not appreciating that :
i) the deduction is given to encourage exports and that the provisions are to be liberally construed;
ii) the deduction is available to a eligible undertaking for 'exports' which need not necessarily mean export out of India.
iii) that the scheme in pursuance of which section 10A / 10B were introduced in the Act, consider sale of goods from one eligible unit to another eligible unit as export;3 ITA No.354/Bang/12
iv) the EXIM policy administered by Ministry of Commerce considers such trade as export trade and such clarification of one wing of Government is binding on the other wing of the Government.
5. The appellant is entitled for deduction / exemption u/ 10B of IT Act, on the inter unit transfers and third party exports and the same is to be allowed to the appellant as claimed and the denial of the deduction / exemption as done by authorities below being erroneous being not in accordance with law is to be quashed.
6. The appellant also denies liability to pay interest. The interest having been levied erroneously is to be deleted.
7. In view of the above and on other grounds adduced at the time of hearing, it is requested that the appellant be allowed the deduction under section 10B of IT Act, 1961 on its entire turnover including the third party exports and inter unit transfers and interest levied be deleted." 4.0 The grounds raised at S.Nos.1, 6 and 7, being general in nature, no adjudication is called for thereon.
5.1 In the grounds raised in S.Nos. 2 to 5, the assessee challenges the Assessing Officer's action in reducing the deduction under section 10 B of the Act to Rs.1,08,31,395 by denying deduction under section 10 B on third party sales and inter-unit transfers/sales. The learned counsel for the assessee argued that the authorities below have erred in not appreciating that the deduction under section 10 B is given to encourage exports and that the provisions are to be liberally construed; that the deduction is available to undertaking for 'exports' which need not necessarily mean out of India; that the scheme of deduction under section 10B envisages that sale of goods from one eligible unit to another eligible unit as exports as per the EXIM Policy as administered by the Ministry of Commerce, Govt. of India considers such trade as export and therefore this is 4 ITA No.354/Bang/12 binding on the other wings of the Govt. of India. The learned counsel for the assessee, however, fairly conceded that this issue raised in grounds of appeal at S.Nos.2 to 5 are squarely covered against the assessee by the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Years 2005-06 and 2006-07 in ITA Nos. 22 & 763/Bang/2010 dt.17.9.2010.
5.2 The learned Departmental Representative was heard.
5.3 Both sides have been heard and we have carefully perused and considered the material on record and the judicial decision cited. We find that this issue is squarely covered against the assessee by the decision of the co-ordinate bench of this Tribunal which had considered this very issue that is raised in this appeal in the assessee's own case for Assessment Years 2005-06 & 2006-07 while adjudicating on the eligible deduction under section 10 B of the Act. In its order in ITA Nos.22 & 763/Bang/2010 dt.17.9.2010, the co-ordinate bench of the Tribunal has discussed this issue at paras 8 to 12 thereof which are extracted and reproduced hereunder :
" 8. Next, we will consider the ground raised by the assessee in respect of the claim of exemption made u/s 10B on the sales made to other export oriented units. This issue was also considered by the ITAT - A Bench in the case mentioned above i.e TATA Elxsi Ltd., Vs. ACIT, 115 TTJ 423. After examining the scheme of section u/s 10A which is in pari passu to sec. 10B, the Tribunal held that such deemed export is entitled only for the benefits of duty draw back and exemption from basic excise duty. Such deemed exports do not get entitled for the deduction u/s 10A. As the above judgment squarely applies to the present case, we hold that the assessee company is not entitled for deduction u/s 10B in respect of sales made to other export units. This ground of the assessee is rejected.
9. The third issue to be considered is whether the assessee is entitled for deduction u/s 10B in respect of the sales made through third parties. It is the case of the assessee that these third parties are export houses and they have exported all such goods sold by the assessee to them for the purpose of such export and as 5 ITA No.354/Bang/12 such they are entitled for deduction u/s 10B. It is very interesting to note as stated above that even a deemed sale made to another export unit is held to be not entitled for deduction u/s 10A in the case already relied on us in TATA Elxsi Ltd Vs. ACIT. Therefore, the answer to this ground is readily available in that judgment itself. By following the ratio of the above judgment, we come to the conclusion that the assessee cannot claim the deduction u/s 10B in respect of the so called exports made through third parties/export houses.
10. Without prejudice to the above legal conclusion, we also find that the assessee has not explained the factual background in a consistent manner, which would at least prompt the Assessing Officer to examine whether the assessee is entitled for such benefit at all. We have gone through the detailed assessment order passed in this case. The Assessing Officer has listed the names of 398 parties who are according to the assessee export houses and to whom the assessee had made sales for the purpose of exporting the goods out of India. The total of such sales comes to Rs.18,92,92,177/-. The Assessing Officer has given the date of the transaction, name of the party and invoice value in Indian rupee. The assessee has made a general submission that in all these cases, the export houses have not claimed the benefit of sec. 10B and for all practical purpose they have disclaimed that benefit. When we specifically asked for, whether all these export houses have filed disclaimer certificates with the assessee company, the learned Chartered Accountant appearing for the assessee fairly conceded that such disclaimer certificates would be available in certain cases and not in respect of all 398 cases. There is no doubt on the proposition that two parties at a time cannot claim the deduction u/s 10B on the same amount of turnover. In the present case, it is stated that all these 398 persons have exported goods on the basis of the goods supplied by the assessee. In order to consider the eligibility of the assessee company for the benefit of deduction u/s 10B, it is very much necessary for the Assessing Officer to satisfy himself that the 398 exporters have not made any such claim in their hands and if the benefit is allowed to the assessee there would not be any case of duplication. The assessee has failed in this very basic test. Apart from the above, there are no compiled and comparable details with reference to the transactions of these 398 parties, so as to make a finding that all these 398 parties have religiously followed the rules and procedures of exports and the transactions have established a clear and speaking nexus with the sales made by the assessee to those parties.
11. Therefore, it is very difficult for us to digest that all the 398 parties are export houses that they have exported those goods earmarked and sold by the assessee company and they have not claimed the benefit of sec. 10B and for that matter, they have not claimed any other benefits entitled for exporters. When all these essential factual matters are unexplained, it is impossible to consider the contention of the assessee for exemption u/s 10B, even for the sake of an academic discussion.
12. Therefore, this contention of the assessee regarding exemption u/s 10B vis-à- vis export through export house is dismissed."
Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee's own case in ITA Nos.22 & 773/Bang/2010 (supra), we hold that the assessee is 6 ITA No.354/Bang/12 not entitled for deduction under section 10 B of the Act in respect of sales made to other export units and so called exports made through third parties / export houses. It is ordered accordingly.
6. In the result, the assessee's appeal is dismissed.
Order pronounced in the open court on 9th Nov., 2012.
Sd/- Sd/-
(N.V. VASUDEVAN) (JASON P BOAZ)
Judicial Member Accountant Member
*Reddy gp
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, - C Bench.
6. Guard File.
(True copy) By Order
Sr. Private Secretary, ITAT, Bangalore