Income Tax Appellate Tribunal - Mumbai
Jewelex India P.Ltd, Mumbai vs Department Of Income Tax on 27 June, 2014
आयकर अपील य अ धकरण "जे" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा सद य के सम ।
BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM आयकर अपील सं./I.T.A. No. 1055/Mum/2013 ( नधारण वष / Assessment Year: 2009-10) Dy. CIT-3(2), Room No. 674, Jewelex India Pvt. Ltd.
6th floor, Aayakar Bhavan, बनाम/ 124C, Mittal Court,
M. K. Road, Mumbai-400 020 Vs. Nariman Point, Mumbai-400 021
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AABCJ 4523 H
(अपीलाथ /Appellant) : ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Sanjeev Jain
यथ क ओर से/Respondent by : Shri Nitish Joshi &
Shri P. P. Bhandari
सनु वाई क तार ख / : 29.04.2014
Date of Hearing
घोषणा क तार ख /
: 27.06.2014
Date of Pronouncement
आदे श / O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-4, Mumbai ('CIT(A)' for short) dated 26.11.2012, partly allowing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2009-10 vide order dated 23.12.2011.
2.1 The appeal raises three grounds, which we shall take up in seriatim. The first challenges the exclusion of the profit of the assessee's undertaking operating from a 2 ITA No. 1055/Mum/2013 (A.Y. 2009-10) Dy. CIT vs. Jewelex India Pvt. Ltd.
Special Economic Zone (SEZ) for the purpose of computing its' book profit for the relevant year u/s.115JB of the Act. The exclusion in its respect stands claimed by the assessee with reference to sub-section (6) thereof, which reads as under, inserted on the statute by the Special Economic Zone Act, 2005, w.e.f. 10.02.2006, so that it would apply for the current year:
'Special provision for payment of tax by certain companies. 115JB. (1) ............
(2) .............
(6) The provisions of this section shall not apply to the income accruing or arising on or after the 1st day of April, 2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be:
Provided that the provisions of this sub-section shall cease to have effect in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012.' The assessee's claim stood accepted by the ld. CIT(A) following the decision by the Tribunal, Mumbai Bench (E) in the case of Geneys International Corporation Ltd. vs. ACIT (in ITA Nos.6903/Mum/2011 and 609/Mum/2012 (for A.Ys. 2008-09 & 2009-10) dated 31.10.2012/copy on record). The same, in fact, stands relied upon by the assessee even before us.
2.2 The Revenue's case, on the other hand, toward denial of the said exclusion, is that the income of the said Unit is exempt u/s.10A, while the adjustment by way of reduction of the profit exempt u/s.10A stood withdrawn by the omission of the words 'section 10A or section 10B' in Explanation 1(ii) to section 115JB(2) by Finance Act, 2007, w.e.f. 01.04.2008.
3. We have heard the parties, and perused the material on record, including the decision by the tribunal in the case of Geneys International Corporation Ltd. (supra), this being the principal issue decided by the tribunal in that case. The tribunal has discussed the matter in detail; its findings being contained at paras 21 and 22 of its order, which paragraphs find reproduction in the impugned order vide para 6 thereof. The tribunal has 3 ITA No. 1055/Mum/2013 (A.Y. 2009-10) Dy. CIT vs. Jewelex India Pvt. Ltd.
clarified that notwithstanding the omission of the reference to, inter alia, section 10A in the relevant adjustment clause, so that the profit falling u/s. 10A is subject to book profit tax u/s.115JB, the said provision would not, in view of the overriding character of sub- section (6) thereof, apply to any unit operating in SEZ, also clarifying that the deduction u/s.10A is also applicable to units not operating in a SEZ. No contrary decision having been brought to our notice by the Revenue, respectfully following the same, we have no hesitation in upholding the impugned order on this ground, dismissing the Revenue's ground no. 1. We decide accordingly.
4. Ground nos. 2 & 3 raise a common issue, and which we shall therefore take up together, as was the case by the ld. CIT(A). The assessee has two Units, income from which is subject to exemption u/s.10A and section 10AA respectively. The following incomes, however, were excluded by the Assessing Officer (A.O.) in computing the deduction under the said sections for the reason that the same were not derived from the assessee's relevant units:
(Amt. in Rs.) Description Unit-I eligible for Units II & VII eligible deduction u/s.10A for deduction u/s.10AA Interest on margin deposits 18,43,921 2,326 Sale of Moulds Wax 10,273 -
Design Charges - 24,90,014
Sale of Scrap 1,61,032 10,20,877
Excess provisions of expenses 1,79,775 24,584
written back
21,95,001 (*) 35,37,801
(*) Units II (Rs.33,09,946) & Unit VII (Rs.2,27,855)
The assessee's case, on the other hand, is that its' view has found acceptance by the tribunal in the case of Jewelex International Pvt. Ltd., a group concern (in ITA No.3302/Mum(J)/2009 dated 15.09.2010/copy on record) in view of sub-section (4) of section 10A, which reads as under:4 ITA No. 1055/Mum/2013 (A.Y. 2009-10)
Dy. CIT vs. Jewelex India Pvt. Ltd.
'Special provision in respect of newly established undertakings in free trade zone, etc. 10A. (1) ...................
(2) ...................
(4) For the purposes of sub-sections (1) and (1A), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.' The profit exempt u/s.10A(1) having been defined by the section itself, the entire income of the eligible unit, without exception, would qualify for entering the computational formulae of section 10A(4). There is, accordingly, no scope for exclusion of any income as long as the same belongs to or owes its origin to the business carried on by the eligible unit. The ld. CIT(A) had also allowed relief to the assessee on that basis, so that, aggrieved, the Revenue is in appeal.
5. Before us, the ld. Departmental Representative (DR) relied on the decision in the case of Tricom India Ltd. vs. Asst. CIT [2010] 36 SOT 302 (Mum), where, following the decision in the case of CIT vs. Menon Impex (P.) Ltd. [2003] 259 ITR 403 (Mad) (128 Taxman 11), the tribunal confirmed the disallowance of interest income in computing the deduction u/s.10B, a para materia provision, also having a provision corresponding to section 10A(4) in section 10B(4). The ld. AR, on the other hand, would rely on the decision in the case of Motorola India Electronics (P) Ltd. (in IT Appeals No.428 & 447 of 2007 dated 11.12.2013/copy on record) by the Karnataka High court. The hon'ble court in the said decision, again in the context of section 10B, found no scope for exclusion of any income in computing the deduction there-under in view of s. 10B(4), which is identically worded to s. 10A(4) (supra), despite the Revenue's reliance on, among others, Liberty India vs. CIT [2009] 317 ITR 218 (SC) and CIT vs. Sterling Foods [1999] 237 ITR 579 (SC). At this stage, the ld. AR was informed by the Bench that this tribunal had, in the case of Tessitura Monti (P.) Ltd. vs. ITO [2013] 141 ITD 531(Mum.) 5 ITA No. 1055/Mum/2013 (A.Y. 2009-10) Dy. CIT vs. Jewelex India Pvt. Ltd.
[22 ITR (Trib) 329], upon a review of precedents, including by the co-ordinate Bench in the case of Jewelex International Pvt. Ltd., (supra), and deriving support from the decision in the case of ITO vs. V. J. Homes Pvt. Ltd. [2010] 38 SOT 4 (Jodh), opined that the computation formulae of section 10B(4) would apply only to the profits derived by the assessee's industrial undertaking. Due regard was made by it to the words 'business of the undertaking' occurring in section 10B(4). At this stage, it was submitted by the ld. AR, that the incomes under reference in the instant case would stand to be included, i.e., allowed relief toward, even on the basis of the position of law as explained by the tribunal in Tessitura Monti (P.) Ltd. (supra). The hearing was closed at this stage.
6. We have heard the parties, and perused the material on record, including the decisions cited and/or relied upon by the parties. Our first observation in the matter is that sections 10A and 10B are para materia, so that the decisions rendered in the context of one would equally apply to that in the case of the other. Secondly, in our view, section 10AA would, in view of sub-section 10AA(7) thereof, also stand to be considered as a pari materia provision, so that like considerations and a like decision for the deduction u/ss. 10A & 10AA, as by the A.O. and the ld. CIT(A), could be taken by us. The tribunal in the case of Tricom India Ltd. (supra) and Tessitura Monti (P.) Ltd. (supra), rendered independent of each other, examined the issue at length, meeting the several arguments raised by the assessee, to come to a definite finding that the provision of section 10A(4)/10B(4) would not operate to include all the incomes of the assessee, i.e., irrespective of their nexus or proximate connection with the eligible activity and, therefore, the income qualifying for deduction would require being 'derived from' the eligible undertaking manufacturing or producing articles or things, the profit on the export of which is to be excluded in computing the assessee's total income, to qualify for relief under the relevant section. The process, as explained in Tessitura Monti (P.) Ltd. (supra), involves three steps (refer para 4.3 of the order for the relevant discussion). Further, having regard to the words 'business of the undertaking', as well as 'business carried on by the assessee's undertaking' appearing in section 10A(4) (or section 10B(4)) 6 ITA No. 1055/Mum/2013 (A.Y. 2009-10) Dy. CIT vs. Jewelex India Pvt. Ltd.
- and which we have found to be also in section 10AA(7), it was explained that a receipt integral to the assessee's business would stand to be considered as a part of the business of the eligible undertaking. Though the source of the interest income, which is the predominant amount in the instant case, is the deposit with the bank, the contract with the bank for the deposit of the money is entered only to facilitate the import of goods etc., i.e., the business of the undertaking. Where, therefore, the same (money held in deposit account/s) forms part of the regular arrangement adopted or followed by the assessee's bank for extending non-fund credit facility/s to its constituents, it could be regarded as integral to the assessee's business, forming part of the profit of the business of its eligible undertaking. The interest on surplus funds, on the other hand, could not be said to be so derived and, thus, would stand to be excluded. We do not wish to dwell in the matter further; the ld. counsel accepting the proposition for the matter being restored to the file of the A.O. for being examined in light of the said decisions.
7. The matter is accordingly, i.e., in view of the foregoing, restored back to the file of the A.O. to allow the assessee deduction u/ss.10A and 10AA, as the case may be, on the impugned incomes in light of and considering the parameters as laid down in Tessitura Monti (P.) Ltd. (supra). The assessee shall cooperate with the A.O. in the set aside proceedings, enabling due verification of its claims and, thus, issue of definite findings of the fact by the assessing authority. Needless to add, the assessee shall be provided due opportunity by the assessee to present its case before him. We decide accordingly.
8. In the result, the Revenue's appeal is partly allowed for statistical purposes.
प रणामतः राज व क अपील सां यक य उ े य के लए आं शक वीकृत क
जाती है ।
Order pronounced in the open court on June 27, 2014
Sd/- Sd/-
(D. Manmohan) (Sanjay Arora)
उपा य / Vice President लेखा सद य / Accountant Member
मुंबई Mumbai; दनांक Dated : 27.06.2014
7
ITA No. 1055/Mum/2013 (A.Y. 2009-10)
Dy. CIT vs. Jewelex India Pvt. Ltd.
व. न.स./Roshani, Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त(अपील) / The CIT(A)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंब
ु ई / ITAT, Mumbai