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of <h1>Appeal Dismissed: Exemption under Section 10B requires actual exports in convertible foreign exchange.</h1> <h3>M/s. Indus Medicare Private Limited Versus Dy. Commissioner of Income-tax, Circle 2 (1), Hyderabad</h3> M/s. Indus Medicare Private Limited Versus Dy. Commissioner of Income-tax, Circle 2 (1), Hyderabad - [2014] 34 ITR (Trib) 347 (ITAT [Hyd]) Issues Involved:1. Computation of relief under section 10B of the Income-tax Act.2. Eligibility for exemption under section 10B in respect of 'merchant exports.'3. Computation of exemption with reference to profits of business as per the Income-tax Act instead of book profit.Issue-wise Detailed Analysis:1. Computation of Relief under Section 10B:The primary grievance of the assessee pertains to the computation of relief under section 10B of the Income-tax Act. The assessee claimed a deduction of Rs. 2,52,37,535 under section 10B, which was restricted to Rs. 56,32,290 by the Assessing Officer. The Commissioner of Income-tax (Appeals) upheld this restriction, leading to the present appeal. The assessee contended that the net foreign exchange earnings (NFE) were in favor of the appellant, supporting its claim under section 10B. Additionally, the assessee argued that deemed exports should be considered as exports for the purpose of computation of deduction under section 10B.2. Eligibility for Exemption under Section 10B for 'Merchant Exports':The facts reveal that the assessee, a 100% export-oriented company, included certain sales made within India in its export turnover, claiming them as 'merchant exports.' The Assessing Officer and the Commissioner of Income-tax (Appeals) did not accept this inclusion, leading to the restriction of the claim. The Tribunal referred to the decision of the jurisdictional High Court in the case of Swayam Consultancy P. Ltd. v. ITO [2011] 336 ITR 189 (AP), which held that for the purposes of the Income-tax Act, the law neither contemplates nor recognizes 'deemed exports.' The High Court emphasized that the term 'export' means taking goods out of India, and the benefit under section 10B is available only if the sale proceeds of articles or things exported out of India are received in convertible foreign exchange. The Tribunal, following this binding decision, upheld the disallowance made by the Assessing Officer and sustained by the Commissioner of Income-tax (Appeals).3. Computation of Exemption with Reference to Profits of Business as per the Income-tax Act:The assessee's grievance regarding the computation of exemption with reference to profits of business as per the Income-tax Act instead of book profit was also addressed. The Commissioner of Income-tax (Appeals) rejected the grounds on this aspect, noting that no arguments were advanced by the assessee and there was no merit in the claim. The Tribunal found no infirmity in this part of the order and rejected the ground of the assessee.Conclusion:The Tribunal dismissed the appeal of the assessee, upholding the decisions of the Assessing Officer and the Commissioner of Income-tax (Appeals). The Tribunal confirmed that for the purpose of section 10B, the law does not recognize deemed exports and that the computation of exemption should be based on actual export out of India with proceeds received in convertible foreign exchange. The order was pronounced in the court on July 18, 2014.
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