Income Tax Appellate Tribunal - Mumbai
Tara Jewels Exports P. Ltd., Mumbai vs Department Of Income Tax on 25 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO, J.M.
ITA No. 2257/Mum/2007
Assessment Year : 2003-04
Tara Jewels Exports Pvt. Ltd., ... Appellant
G-44, Gems & Jewellery Complex,
Seepz, Andheri (East)
Mumbai - 400 096
(PAN - AAACT 1161 H)
Vs.
Jt. Commissioner of Income Tax, ...Respondent
(OSD), Range - 8(3),
Aayakar Bhavan, Mumbai - 400 020
ITA No. 2295/Mum/2007
Assessment Year : 2003-04
Jt. Commissioner of Income Tax, ...Appellant
(OSD), Range - 8(3),
Aayakar Bhavan, Mumbai-20
Vs.
Tara Jewels Exports Pvt. Ltd., ...Respondent
G-44, Gems & Jewellery Complex,
Seepz, Andheri (East)
Mumbai - 400 096
(PAN - AAACT 1161 H)
Assessee by : Mr. B.V. Jhaveri
Revenue by : Mr. Kusum Ingale
Date of Hearing : 25/01/2012
Date of Pronouncement : 16/03/2012
ORDER
PER V. DURGA RAO, J.M.:
These are the cross appeals directed against the order of CIT(A)- XXIX, Mumbai, passed on 22/12/2006 for the assessment year 2003-04.
2 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
ITA NO. 2257/Mum/2007 - appeal by the assessee
2. Ground No. 1 is pertaining to deduction u/s 10A of the Act.
3. The facts relating to raise this ground are that the assessee is a pvt. Ltd. company engaged in the business of manufacturing and export of studded diamond and gold jewellery. The assessee filed its return of income for the year under consideration declaring total income of Rs. 67,07,218/- and claimed deduction u/s 10A to the extent of Rs. 4,83,99,550/- and deduction u/s 80HHC of Rs. 16,82,502/-. During the course of assessment proceedings, the assessee was focussed on payment of labour charges of Rs. 1,88,71,966/- during the year as against only Rs. 3,30,221/- incurred in the immediately preceding year. On being asked by the AO to furnish the details of the parties to whom labour charges have been paid, the nature of job work done by these parties, the processes employed in the course of labour work, the place of carrying out the work i.e. whether within the SEZ location or otherwise, In response, the assessee furnished the details before the AO. From the said details, it transpired that job work charges to the extent of Rs. 83,71,311/- had been paid to such parties who had carried out the manufacturing process outside the SEZ location which amounted to the above 44.35% total charges paid at Rs. 1,88,71,966/-. The assessee had further submitted that increase in the export turnover of 40% during the year would not have been possible but for such outsourced job work activities which are permissible as per the applicable statutory regulations governing SEZ operations. After considering the submissions of the assessee, the AO had observed that deduction u/s 10A is available in respect of an undertaking which manufactures or produces article or thing in any Special Economic Zone (SEZ). He further observed that the assessee had not 3 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
at all specified the manufacturin process which had been carried out within the SEZ after receiving manufacturing goods from the job work parties which are located outside the SEZ. He further observed that the assessee had merely stated that the some processes are carried out along with packing and labelling without specifying the nature of such processes. The AO, therefore, held that the assessee is not entitled to the deduction in respect of the profits derived from the export of goods which have been manufactured by the job work parties outside the SEZ. He further held that the assessee has not given the details of export sales which have been generated from such activities and the extra time asked for by the assessee in this regard that too at the fag end of March'06 when the case is getting barred by limitation is not acceeded to since sufficient opportunities were given to the assessee in the course of assessment proceedings. The AO, therefore, has estimated the ineligible portion of the export turnover relatable to job work activities on proportionate basis at 15,15,99,085/- being 44.35% of Rs. 34,18,24,319/- of export turnover is generated from the ineligible activities outside the SEZ. Accordingly, the claim of deduction u/s 10A worked out to Rs. 68,82,598/- was denied on the ground that the same was derived from such activities which were not carried out inside the location. Aggrieved, the assessee carried the matter in appeal before the CIT(A).
4. Before the CIT(A), the assessee had filed written submissions vide letter dated 12/12/2006, the contents of which were reproduced by the CIT(A) in his order at pages 3,4 &5, are extracted below:-
"2. While checking the working of deduction claimed by the assessee company u/s 10A at Rs. 4,83,99,550/- the AO referred to the following in his order.
(a) The assessee company had paid labour charges of Rs.
1,88,71,966/- during the year ended 31" March. 2003 as against only Rs. 3,30,221/- paid in the immediately preceding year.
4 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
(b) Out of the labour charges of Rs. 1,88,71,966/-, the assessee company had paid labour charges of Rs. 83,71,311/- to such parties who had carried out the manufacturing process outside the SEZ location. i.e. in Domestic Tariff Area (DTA,), which comes about 44.35% of the total labour charges paid by the assessee company.
(c) It is imperative that the manuf acturing operations are carried out within the conf ines of the Special Economic Zone (SEZ).
(d) The assessee company had stated that af ter receiving the manuf actured goods from the job work parties which are situated outside the SEZ some processes are carried out along with packing and labeling. However, the assessee company has nor specif ied manuf acturing processes which have been carried out by it in SEZ.
(e) It is, therefore, held that the assessee is not entitled to deduction in respect of the prof it derived from the export of goods which have been manuf actured by the job work parties outside the SEZ.
(f) The total job work changes paid were Rs. 1,88,71,966/- out of which Rs. 83,71,311/- were paid to the parties in DTA. Therefore 44.35% of the total labour charges were paid to the parties in DTA.
(g) Increase in the export turnover in comparison to the preceding year was Rs. 34,18,24,319/- and therefore, 44.35% of the same, i.e., Rs. 15,15,19,085/- is the export turnover which is generated from the ineligible activities (outside the SEZ).
(h) The prof it of Rs. 5,10,25,214/-is 4.54% of the total turnover. Therefore, the same percentage of prof it to the ineligible portion of the export turnover of Rs. 15,15,19,085/- is taken as not eligible for deduction u/s 10A of the Act which works out to Rs. 68,82,598/-
3. It is submitted that the af oresaid approach of the Assessing Off icer is not correct in law. Section 10A provides as under:
5 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
"10A(1) Subject to the provisions of this section, a deduction of such prof its and gains as are derived by an undertaking f rom the export of articles or things or computer sof tware f or a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manuf acture or produce such articles or things or computer sof tware, as the case may be, shall be allowed from the total income of the assessee:"
4. Analysing the contents of section 1OA of the Act, the following ingredients are emerging:
(a) The undertaking must derive income from export of articles or things or computer sof tware;
(b) There should be prof its and gains from such activity of export;
(c) The deduction of such prof it and gains of the undertaking is allowed for a period of ten consecutive assessment years beginning with the assessment ear in which the undertaking begins to manuf acture or produce such articles or things.
5. It is submitted that all the ingredients referred to hereinabove are satisf ied in the present case. Therefore, the assessee should get deduction in respect of its entire prof it which may be the result of the workers working in the assessee's own unit at SEZ or the same unit which is located in SEZ gives raw materials to outsiders for f ashioning the products according to its specif ications. What is important is not that the entire work is carried on in such a unit inside SEZ but the work may be executed by outside parties who are provided with the required raw materials by the SEZ unit which are f ashioned into articles capable of being exported outside India by the unit in the SEZ.
6. In respect of the Circular No. 694, dated 23 r d November, 1994 issued by CBDT may be referred to, which is as under:
"ii. Treatment of on-site development -- Board's Circular has recognized the role of on site development in. the computer sof tware industry so that the inert f act that some work Is done at client's site abroad need not lose the benef it of section 10A or section lOB as is evident f rom the following extract in the Board's Circular".
5. After considering the submissions of the assessee, the learned CIT(A) held as under:-
6 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
"I have considered the f acts of the case and submission made by appellant. The f acts as available on record show that an amount of Rs. 83,71,311/- have been paid as job work charges to parties engaged in manuf acuring process outside the SEZ location. This payment was 44.35% of the total labour charges paid at Rs. 1,88,71,966/-. Since this manuf acturing process took place outside FTZ (Free Trade Zone), AO had disallowed proportionate claim of deduction u/s 1OA holding that the amount is not covered under the provisions of section, 1OA. The appellant has izlqfrq4 deduction on this on the ground that the only condition laid down in section 1OA is that undertaking must derive income from export and there is no condition that the manuf acturing process should take place inside SEZ. Appellant has stated the following:
"It is not important as to where the work, which results in ultimate export, is executed, i.e. whether executed in India or outside India. The important point to be noted is irrespective of the f act that the work may be executed inside the SEZ or outside the SEZ, the export price which is realized should ref lect the element of cost which has gone into paying labour charges for the goods which are ultimately exported"
Appellant has also relied on Boards Crcu1ar No.91, dated 01/04/2003 stating that on the basis of circular, it is immaterial whether the operation in respect of the exported goods are directly conducted within the conf ines of the SEZ unit or not. So far as foreign exchange is received, everything is allowable. Appellant has also referred to Explanation 3 of section 10A in support of its claim.
In my considered opinion, there is no merit in the contention of appellant. The kind of interpretation the appellant is trying to put to the provision of section 1OA and CBDT Circular No.91 is neither proper nor permissible in law. The courts have hell, and for this no authority need to be cited, that a deduction/exemption can be granted only according to the plain meaning of the statute. The meaning and wording of the statute cannot be twisted to enlarge' the scope of exemption/deduction. However, once deduction/exemption is allowable as per the plain meaning, full benef it should be given. Appellant has completely ignored the f act that heading of section 10A which states as follows:
"Special provision in respect of newly established undertaking in free trade zone, etc."
If appellant's arguments are accepted then, according to appellant, the heading of the section is redundant and useless 7 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
and has been put by the legislature without any. purpose because in view of the appellant, once foreign exchange are received in respect of the sale proceeds, it as Immaterial as to whether the manuf acturing process has taken place In SEZ or not Such interpretation has to be rejected at outset. It is not open to anybody to suggest that legislature did not know ItS mind when it put the above heading over section 1OA. Section WA is in respect of only those undertakings which are set up and manuf acturing or processing articles or things or computer sof tware within the free trade zone etc. Appellant's claim that undertaking may be involved in manuf acturing activity elsewhere but so f ar as it has set up on paper in Free Trade. Zone, the provision of section 1OA will apply. Such meaning will render the provision of section 1OA redundant. It cannot also be anybody's case that if part of manuf acturing process is undertaken in FTZ and partly taken outside FTZ then also the whole exercise of manuf acturing considered as manuf acturing activity undertaken inside FTZ. The very purpose of setting etc. shows that the basic idea is that the manuf acturing activity should take lace' inside It is not merely a paper formality as the appe ant seems to suggest. In this regard, appellant's reliance on Board's instruction referred above, and Explanation 3 of section totally misplaced. On the contrary, instruction and explanation 3 go against the claim made by appellant. The Instructions referred to by the appellant and explanation 3 have made exception to the provision of section IOA that manuf acturing process should be undertaken by the in free trade zone etc. in this exception manuf acturing activity undertaken outside viz. but within the country has not been included. The only exception has been made in respect of onsite development of computer programme and job work done abroad. No exception has been made regarding manuf acturing done outside FTZ but in the domestic tariff area. Explanation 3 and circular No. 91 are very specif ic and precise. Their scope cannot be enlarged by putting unreasonable interpretation to this explanation or board's circular. The very fact that no exception has been made in respect of domestic tariff area, makes it very clear that no such exception permissible. Further, it is also undisputed that but for Explanation 3, onsite development of computer sof tware would not be entitled for WA deduction; The implication of this, is that according to plain meaning of provisions of section 1 OA , the manuf acturing process should take place with Free Trade Zone for eligibility u/s 1OA. Appellant has stated in its submission that provision of section 1OA nowhere provides that the unit in FTZ must manuf acture each and every item exported by it in its f actory in FTZ. Appellant has further stated that what is required that the unit in FTZ should manuf acture articles or thin or computer 8 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
sof tware which are exported outside India. If this condition is fulf illed then such unit in FTZ will be entitled to deduction u/s 1OA. The 'contention of the appellant is self contradictory. If the only criteria f or granting deduction u/s 1OA is that the unit should manuf acture articles or things which are exported then there is no reason for such elaborate provision under the heading "Special pro vision in respect of newly established undertakings in free trade zone, etc. The provision should have been very simple and should have been as follows:
"If any undertaking brings in foreign exchange in respect of exports made, it will be entitled for deduction u/s 10A"
It is correct that the legislature wants to encourage exports but this encouragement in the form of tax deduction and exemption are based on certain conditions and compliance of various provisions. The government's aim is not simply to grant all and every benef it merely on the basis of fact that foreign exchange has come to the country. Had it been so, there would have been no reason for various government agencies monitoring havala transactions. Therefore, the submission pf the appellant that the AO should only see that the foreign exchange has come to the country and the unit has done some manuf acturing and nothing beyond that, cannot be accepted. Appellant has also stated that manuf acturing has been done under its supervision and therefore in view of various interpretations, this should be considered 'as appellant's own manuf acturing. This line of argument is also rejected f irstly because no evidence baa been brought on record before AO or before the undersigned that manuf acturing has been done Under its supervision. In this regard, observation of AO is very relevant wherein he has observed as under:
"Moreover, the assessee has not at all specif ied the manuf acturing processes which have been carried out within the SEZ af ter receiving the manufactured goods from the job work parties which are located outside the SEZ The assessee has merely slated that some processes are carried out along with packing and labeling without speci'1ng the nature of such processes."
Secondly, the issue involved is not whether the manuf acturing process belonged to appellant or not. The issue is whether the manuf acturing process has been done within the free trade zone area or not. It is undisputed that manufacturing process has not been done within the free trade zone area. Therefore, even if manuf acturing process has been done under the supervision of appellant and technically considered as appellant's own manuf acturing even then It cannot be considered as 9 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
manuf acturing process done by the undertaking within the FTZ which is an essential condition f or deduction u/s 10A. It must be noted that 10A is qua undertaking established in Free Trade Zone. Therefore, presuming that manufacturing has been under the supervision, this will not alter the fundamental f act that it has not been done in FTZ. In view of above, this ground is dismissed and addition made by AO s upheld".
Still aggrieved, the assessee is in appeal before us.
6. Before us, the learned counsel for the assessee submitted that as per section 10A of the Act, three conditions have to be satisfied to claim deduction under this section, namely, i) undertaking must derive income from export of articles or things or computer software,
ii) there should be profit and gains from such activity of export, and
iii) deduction of such profit and gain of such undertaking is allowed for a period of 10 consecutive years beginning with assessment year in which undertaking begins to manufacture or produce article or thing. It is submitted that as per section 10A it is not required that every piece of jewellery must be manufactured in SEZ, as the assessee the raw material received by the assessee may be given to outsiders for the process. He therefore contended that the view taken by the AO that, the assessee is not manufactured the entire process inside the SEZ, is not correct. The learned counsel for the assessee relied upon the Circular No. 694 dated 23 r d November'94 issued by the CBDT and submitted that the above Circular supports the case of the assessee. He further relied upon the Explanation 3 to section 10A, as per which, the assessee need not manufacture everything inside the SEZ and manufacturing can be done outside SEZ also. In this connection, he referred pages 76 to 79 of the paper book where all the details are filed pertaining to work given outside on sub-contract and, therefore, the learned counsel submitted that the claim of deduction of the assessee should not be denied. The learned counsel for the assessee contended that the AO while deciding the claim of the assessee has 10 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
not considered the case laws relied upon by the assessee. He referred to one of the case law decided by the Hon'ble Kerala High Court in the case of CIT Vs. Indian Resins & Polymers, 235 ITR 5 wherein the Hon'ble Court was held that it was immaterial as to whether the raw cashew was processed for export in the factory of the assessee or in the factories belonging to third parties and what was required was only processing of goods for export.
7. On the other hand, the learned DR submitted that when the AO asked the details of work done by the outsiders, the assessee has not submitted the details as what was the work done by insiders and what was the work done by the outsiders or whether any work has been done by the assessee or not is not clear from the facts of the case. He, therefore, submitted that the issue needs examination and unless the assessee manufactures the goods, not eligible for deduction u/s 10A of the Act. Therefore, he submitted that the issue may be restored to the file of the AO for examination in the light of the above submissions.
8. We have heard both the parties, perused the record and gone through the orders of the authorities below. The case of the assessee is that the assessee is a manufacturing company and exporting studded diamond and gold jewellery The company of the assessee is situated in SEZ and the assessee is eligible for deduction u/s 10A of the Act. According to the AO, the assessee has not submitted the details like what was the work done in SEZ and what was the work done inside SEZ and outside the SEZ. The AO was in doubt that whether the assessee manufactured in its company or not. The AO, therefore, has estimated the ineligible portion of the export turnover relatable to job work activities on proportionate basis at 15,15,99,085/- being 44.35% of Rs. 34,18,24,319/- of export turnover 11 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
is generated from the ineligible activities outside the SEZ. Accordingly, the claim of deduction u/s 10A worked out to Rs. 68,82,598/- was denied on the ground that the same was derived from such activities which were not carried out inside the location. The learned counsel for the assessee has relied upon various case laws and the proposition in the said cases are that it is immaterial that whether the work was done by the assessee inside or the outside the SEZ, once the assessee located in SEZ, the assssee is eligible for deduction u/s 10A irrespective of the fact that the work was done inside or outside the SEZ. Whereas, the learned DR submitted that bare details, which are necessary to examine the issue, namely, what was the work done by the assessee inside the SEZ and outside the SEZ were not filed before the AO. The AO, therefore, held that the assessee has to do some manufacturing work within the SEZ for claiming deduction u/s 10A of the Act. We find force and justification in the argument of the learned DR. Therefore, after considering the facts of the case under consideration, restore the issue to the file of the AO with a direction to decide the afresh in accordance with law after considering the case laws relied upon by the assessee before him and the CBDT Circular, after providing reasonable opportunity of hearing to the assessee. We direct the Assessee to file the details as required by the revenue (supra) in support of its case. Thus, this ground of appeal of the assessee is treated as allowed for statistical purposes.
9. Ground No.2 is pertaining to interest income charged under the head 'income from other sources'.
10. During the course of assessment proceedings, the AO had observed that the assessee had claimed interest and other income of Rs. 25,44,225/- as part of the profit derived from the undertaking for 12 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
the purpose of deduction u/s 10A of the Act, which included interest at Rs. 25,03,608/-, dividend on shares of Rs. 3,141/- and sales tax refund of Rs. 37,476/-. Following the details reasons discussed in AY 2002-03 in assessee's case, the AO treated the above income as 'income from other sources' not allowing the deduction u/s 10A in the year under consideration. The CIT(A) upheld the action of the AO in AY 2002-03. The assessee carried the matter in appeal before the CIT(A). Before the CIT(A), the assessee filed a detailed written submissions, which were reproduced by the CIT(A) in his order at pages 10 to 15. After considering the submissions of the assessee, the CIT(A) confirmed the action of the AO following the decision in the case of the assessee in AY 2002-03. Aggrieved, the assessee is in appeal before us.
11. The learned counsel for the assessee has agreed that the issue is covered against the assessee by the decision of the Tribunal in assessee's own case for AY 2002-03 in ITA No 7053/Mum/05 vide order dated 03/06/2011. However, he has submitted that any expenses incurred to earn the income may be allowed in the light of section 57 clause (iii) of the Act. We have heard both the sides, perused the records, gone through the orders of the authorities below. The Tribunal in the assessee's own case for A.Y. 2002-03 (supra) wherein the Tribunal held as under:-
"9. We have considered both the parties and have perused the record of the case. All the decisions relied upon the learned counsel for the assessee were rendered prior to the decision of the Hon'ble Supreme Court in the case of Liberty India, wherein it has been observed that the words 'derived from' is narrower in connotation as compared to the words 'attributable to'. By using the expression 'derived from', Parliament intended to cover sources not beyond the f irst degree. Therefore, the interest income was to be treated as income from other sources. Since no expenditure was incurred for earning this interest income, it could not be netted off. Therefore, gross interest is to be excluded 13 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
in computing deduction u/s 10A. In the result, this ground is dismissed."
11. Since the issue under consideration is identical to the case of the assessee in AY 2002-03, respectfully following that decision, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee. However, we direct the AO if assessee incurred any expenses to earn the income, the same may be verified and allowed in view of the section 57(iii) of the Act.
12. Ground No. 3 is in respect of inter-unit transfer.
13. During the course of assessment proceedings, the AO noticed that the assessee had not considered inter-unit transfer as a part of total turnover. Following his decision in AY 2002-03 in assessee's case, the AO held that such inter-unit transfers are to be considered as a part of total turnover in determining the extent of profits eligible for deduction u/s 10A. The CIT(A) also upheld the action of the AO following his decision in AY 2002-03. Aggrieved, the assesee is in appeal before us.
14. After hearing both the parties and perusing the material on record as well as the orders of the authorities below, We find that the AO has not brought any material on record to show that whether the assessee filed appeal before the Tribunal or not in AY 2002-03. We, therefore, restore the issue to the file of the AO to consider the issue based on the outcome of the order of the Tribunal in AY 2002-03 and in case the assssee has not filed any appeal before the Tribunal against the order of the CIT(A) in AY 2002-03, the order of the CIT(A) becomes final. Thus, this ground of appeal is allowed for statistical purposes.
14 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
15. Ground No. 4 is relating to deduction u/s 14A of the Act.
16. The AO noticed that the assessee had total funds available including loan funds were Rs. 55.59 crores as on 31/03/2003, which included loan funds of Rs. 24.34 crores. He further noticed that on the other hand investments and loans and advances were Rs. 10.96 crores and the total interest paid was Rs. 1,90,72,728/-. Applying the proportion of total funds to the amount of investments and loans and advances, the AO worked out the disallowance of interest u/s 14A of the Act, to Rs. 37,26,026/- on the ground that the interest attributable to the loand and advances given without interest out of borrowed funds. On appeal, before the CIT(A) the assessee filed its written submission vide letter dated 12/12/06, which was extracted by the CIT(A) in his order at page 20. After considering the submissions of the assessee, the CIT(A) following the details reasons discussed in AY 2002-03 in assessee's case, confirmed the action of the AO. Aggrieved by the order of the CIT(A), the assessee is in appeal before us.
17. Before us, the learned counsel for the assessee submitted that the issue is covered by the decision of the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT & Anrs., 328 ITR 81 and submitted that the AO may kindly be directed to recompute the disallowance after taking into account of the facts of the case. The learned DR on the other hand, has not controverted the aforesaid submission of the assessee nor brought any contrary decision against the aforesaid decision.
18. After hearing the learned representatives of the parties and perusing the record, we find that similar issue arose before the Tribunal in assessee's case for AY 2002-03, wherein the Tribunal 15 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
following the decision of the Hon'ble jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., Vs. DCIT, 328 ITR 81, restored the issue to the file of the AO to recompute the disallowance u/s 14A. Respectfully following the said decision, we restore the issue to the file of the AO with identical directions. Thus, this ground is allowed for statistical purposes.
19. In the result, appeal of the assessee is partly allowed for statistical purposes.
ITA NO. 2295/Mum/07- by the revenue
20. Ground No. 1 is directed against the action of the CIT(A) in directing the AO to allow deduction u/s 10A of the Act on account of sales tax refund after verifying that the item of income represents sales tax refund of 10A Unit.
21. The AO held that the assessee failed to establish that the sales tax refund belongs to SEZ Units and, therefore the AO did not allow deduction of the sales tax refund u/s 10 A applying the analogy in AY 2002-03 in assessee's case. On appeal, the CIT(A) directed the AO to verify the fact and if it is found that the above item of income emerging from 10A unit, then deduction u/s 10A is allowed. Aggrieved, the revenue is in appeal before us.
22. Before us, the assessee submitted that the issue is covered by the decision of the Tribunal in assessee's own case for AY 2002-03. The learned DR, on the other hand, agreed with the submissions of the learned counsel for the assessee.
23. After hearing the parties and perusing the record, we find that the Tribunal in assessee's own case for AY 2002-03 (supra) following 16 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
the decision in earlier year in assessee's own case vide ITA No. 6325/Mum/05 restored the issue to the file of the AO with a direction to examine and decide the issue in the light of observations in the said appeal. Since the issue is identical in the year under consideration, respectfully following the decision of the Tribunal in earlier years in assessee's own case, we restore the issue to the file of the AO to decide the issue with identical direction as made by the Tribunal in earlier years (supra). Thus, this ground is treated as allowed for statistical purposes.
24. Ground No. 2 is directed against the action of the CIT(A) in directing the AO to allow deduction u/s 10A of the Act, after verifying alternate claim of the assessee that disallowance of deduction u/s 14A has been made out of interest claim of 10A without appreciating the facts of the case.
25. Before the CIT(A), the contention of the Assessee is that the disallowance of Rs. 37,26,026/- made by the AO u/s 14A of the Act, had not been taken into consideration while computing income eligible for deduction u/s 10A. He, therefore, submitted that the income eligible for deduction u/s 10A as computed by the AO of Rs. 3,29,17,549/- ought to have been enhanced by the aforesaid disallowance of Rs. 37,26,026/- and thereafter the deduction u/s 10A needs to be computed. While confirming the said disallowance made by the AO u/s 14A, the CIT(A) after taking into consideration the said alternate submission of the assessee, the CIT(A) directed the AO to verify the claim of assessee and if it is found that disallowance u/s 14A has been made out of interest claim of 10A unit then deduction u/s 10A may be allowed and consequently after verification as per law.
17 ITA NOS. 2257 & 2295/Mum/07 M/s Tara Jewels Exports Pvt. Ltd.
26. After hearing the parties and perusing the record as well as the orders of the authorities below, we find no infirmity in the order of the CIT(A) and, therefore the same is hereby upheld. Accordingly, we dismiss this ground of appeal of the revenue.
27. In the result, appeal of the revenue is partly allowed for statistical purposes.
28. To sum up, both the appeals of the assessee as well as revenue are partly allowed for statistical purposes.
Pronounced in the open court on this day of 16 t h March, 2012.
Sd/- Sd/-
(P.M. JAGTAP) (V. DURGA RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated:16 t h March, 2012
kv
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "E" Bench, I.T.A.T., Mumbai.
By Order //true copy// Asst. Registrar, I.T.A.T., Mumbai.