Income Tax Appellate Tribunal - Kolkata
Epic Exports, Kolkata vs Assessee on 12 October, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "ए ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
[(सम¢) ौी एन ǒवजयकुमारन,
मारन, Ûयायीक सदःय, एवं ौी सी.सी.डȣ.
डȣ.राव,
राव, लेखा सदःय]]
[Before Sri N.Vijayakumaran, JM & Sri C. D. Rao, AM]
आयकर अपील संÉया / I.T.A No. 410/(Kol) of 2011
िनधॉरण वषॅ/Assessment Year : 2007-08
M/s.Epic Exports वनाम-
वनाम
-वनाम A.C.I.T., Circle-32, Kolkata
Kolkata -versus-
(PAN:AAAFE 9780 D)
(अपीलाथȸ/APPELLANT ) (ू×यथȸ/RESPONDENT)
अपीलाथȸ कȧ ओर से/ For the Appellant: Shri A.K.Tulisyan
ू×यथȸ कȧ ओर से/For the Respondent: Shri S.K.Roy
सुनवाई कȧ तारȣख/Date of Hearing : 12.10.2011.
घोषणा कȧ तारȣख/Date of Pronouncement : 11.11.2011.
आदे श/ORDER
(सी.
सी.डȣ.
डȣ.राव)
राव), लेखा सदःय
Per Shri C.D.Rao, AM
The above appeal filed by the assessee is directed against the order of ld. C.I.T.(A)-XIX, Kolkata dated 16/12/2010 pertaining to assessment year 2007-08.
2. The only issue raised by assessee in this appeal is relating to the disallowance of deduction u/s 10AA of the IT Act.
3. The brief facts of the issue are that assessee while filing the return of income has claimed the exemption u/s 10A of the IT Act. However, Assessing Officer observed that assessee's claim is allowable u/s 10A of the IT Act.
3.1. Against this assessee went in appeal before the ld. CIT(A) and argued alternatively that if assesee is not entitled to exemption u/s 10A of the IT Act assessee has fulfilled the conditions laid down u/s 10A of the IT Act. In order to strengthen this argument he filed written submission. The ld. CIT(A) forwarded this written 2 submissions to AO. The AO has contended that assessee's income is not exempt even u/s 10AA of the IT Act. Against the Remand Report the ld. Counsel for assessee has submitted several arguments in rejoinder which was incorporated at para 5 of the order of the ld. CIT(A) and ultimately ld. CIT(A) has confirmed the action of AO. The relevant observations of the ld. CIT(A) in rejecting the claim of assessee u/s 10AA are as under :-
"5.4................................................................................................. ...................................................................................................... ...................................................................................................... ........
In the remand report, the .A.O. has mentioned that even u/s. 1OAA, the claim of the appellant is not allowable, whereas the Contended that it satisfies all the conditions being the export undertaking located in a SEZ, Falta. On careful consideration of the facts and in law, I am inclined to agree with the action of the AO. It is observed that neither in its original submission made during the appellate proceedings nor in the reply submitted in response to the remand report, the' appellant has filed any rebuttal of the observations made by the A.O. that the appellant itself has not exported any goods or things and it has not received the sale consideration in convertible foreign exchange. The provisions of Section 1OAA of the Act were inserted by the Special Economic Zone Act 2005 w.e.f. 102.2006. The heading of the said section "Special Provisions in respect of Newly Established Units in Special Economic Zones" As per sub-section (1) of Section 1OAA, subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of Section 2 of Special Economic Zones Act, 2005,from his unit, who begins the manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing or after the first day of April;: 2006, a deduction of -(I) 100%:of profits .and gainsderived from the export of such articles or things, or from services for a period of five Consecutive. Assessment years beginning assessment year relevant to the previous year in which the units begins to manufacture or produce such articles or things or provides services or, as the case may be and (II) 50% of such profits and gains for further five assessment years and thereafter. The sub-section (2) of Section 1OAA has provided certain conditions which are to be fulfilled to claim deduction under sub-section (1) of the said section. The sub-section (7) of section IOAA has provided that for the purpose of subsection (1), the profits derived from the export of articles or things or services (including computer software) shall be the amount which bears to the profit of the business of the undertaking, being the unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by thee asessee. As per clause (i) of Explanation-I of Section 1OAA, "Export Turnover" means the consideration in respect of export by the undertaking, being the unit of articles or things or services received in or brought into, India by the assessee but does not include freight, tele-communication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred on foreign exchange in rendering of services outside India. Clause (ii) of Explanation-I says that "export in relation to Special Economic Zone" means taking the goods or 2 3 providing services out of India from a Special Economic Zone by land, sea or air or by any other mode whether physical or otherwise.
(5.5) From the above, it is apparent that: to claim deduction u/s. 1OAA, there must be profits and gains derived from the export of any articles or things or from the services. In the case of appellant, the A.O. has observed that it has not made export of any articles or things directly on its own account, but the export was made by other parties and the appe1llant's name was mentioned in the export invoices as supporting manufacturer. The said observation of the A.O .has not been refuted by the appellant. Further, in the provisions of Section 1OAA, the meaning of profits derived from export, meaning of export turnover and meaning pf export in relation to SEZ has also been provided. Since the appellant has not made the export of articles or things on its own account and it has not received the sale proceeds in convertible foreign exchange from the foreign parties, I am of the opinion that the appellant is not entitled for deduction u/s. 10AA of the Act. The appellant has merely acted as supporting manufacturer to the actual exporters and therefore, it has received the money in Indian rupees from the Indian customers. Under the circumstances, I upheld the action of the A.O; and the appellant is neither entitled for deduction u/s. 10AA u/s. nor I0A of the Act.
The ground no. 2 is dismissed."
3.2. Aggrieved by this assessee is in appeal before us.
4. At the time of hearing the ld. Counsel appearing on behalf of assessee has contended that the only reason for rejecting the claim of assessee by the Revenue is that no sale proceeds of assessee company were received by him in convertible foreign exchange and the revenue has further observed that the receipts treated by the ld. CIT(A) for such unit were mainly on account of stitching charges or finishing/ packing charges. As per clause (i) of the explanation-I of section 10AA of the IT Act "Export Turnover" means the consideration in respect of export by the undertaking being the unit of articles or things or services received in or brought into India by assessee but does not include fright, tele-communication charges or insurance attributable to the delivery of the articles or things outside India. However, by referring to the Special Economic Zone Act, 2005 the ld. Counsel appearing for assessee has contended that in the said Act nowhere it is mentioned that in order to exempt u/s 10AA of the IT Act the sale proceeds of assessee should be in the form of convertible foreign exchange. Therefore he requested to allow the claim of assessee u/s 10AA of the IT Act by setting aside the orders of the revenue authorities.
3 45. On the other hand, the ld. DR appearing on behalf of the Revenue relied on the orders of the revenue authorities.
6.After hearing the rival submissions and on careful perusal of materials available on record, it is observed that in the case of ITO -vs Anita Synthetics Pvt. Ltd. reported in 100 TTJ 277 has held as under :-
"Export of goods vis-à-vis sale of goods to another EOU- the requirement under s. 10B as it existed at the relevant time to receive sale proceeds ____________convertible foreign exchange - In the absence of any specific definition in the Act, the word ______has to be interpreted in accordance with the meaning ascribed to it under relevant exim___________whic deems the sale by one EOU to another as export - Further, assessee is claiming exemption only in respect of profits accruing to it from the undertaking after the date of grant of approval as EOU and the profits from trading activities are not considered for exemption - Therefore, the fact that the assessee is also engaged in trading cannot disentitle it in respect of its otherwise valid claim-Contention of AO that the undertaking was not a new one and was formed by splitting or reconstruction of business already in existence is not correct-Ownership, management and control of the assets of the business continued to vest in the hands of same assessee both prior to and subsequent to its being accorded approval - Hence, assessee's claim for exemption under s.10B could not be disallowed on any of the aforesaid grounds."
6.1. Again the ITAT, Cochin Bench in the case of M/s.Electronic Contrals and Discharge Systems Pvt. Ltd. vs ITO.Ward-1(1)Ernakulam vide ITA Nos.415&416/Coch/09 order dated 6th November, 2009 has held as under :-
"12. We have heard the rival submissions carefully and perused the cited Tribunal order. The Tribunal while interpreting the beneficial dedcuction approached the issue on liberal connotation as the sale to another SEZ by the assessee SEZ which recognized deemed export. The decisions of the Ahemedabad and Mumbai Bench of the ITAT support the assessee's contentions. Respectfully following these decisions of the Tribunal, we have no hesitation to decide that the assessee has fulfilled the requirements and hence, the assessee is entitled to 10A deduction as claimed. Under the above facts and circumstances, the order of the authorities are set aside and allow the appeals of the assessee."
6.2. Keeping in view of the above two tribunal decisions and the facts of the present case we are of the view that the assessee is entitled for deduction u/s 10AA of the IT Act. Therefore, we set aside the orders of the revenue authorities and direct the AO to allow the claim of assessee u/s 10AA of the IT Act.
4 57. In the result the appeal of assessee is allowed.
Order pronounced in the court on 11.11.2011.
Sd/- Sd/-
एन ǒवजयकुमारन,
मारन, Ûयाियक सदःय सी.
सी.डȣ.
डȣ.राव,
राव, लेखा सदःय,
सदःय
N.Vijayakumaran, Judicial Member C.D.Rao, Accountant Member.
(तारȣख)
तारȣख)Date: 11.11.2011.
R.G.(.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s. Epic Exports, 25, Park Lane, Kolkata-700016.
2 The A.C.I.T., Circle-32, Kolkata.
3. The CIT, 4. The CIT(A)-XIX, Kolkata.
5. DR, Kolkata Benches, Kolkata
स×याǒपत ूित/True Copy,
आदे शानुसार/ By order,
Deputy /Asst. Registrar, ITAT, Kolkata Benches
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