TaxTMI 
TaxTMI 
2011 (7) TMI 541
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....in Indian rupee. Besides claiming exemption on export profits on the actual exports, assessee also claimed exemption on the profits derived on the sale of components made to the industrial unit at MSEZ for both the years. For the year 2003-04, the Assessing Officer besides allowing exemption on profits derived on export, also allowed exemption on the profits derived on sale of components made by the assessee to the industrial unit at Madras against payment received in Indian rupees, which was reversed by the Commissioner of Income-tax in exercise of suo moto revisional powers under section 263 of the Income-tax Act because of the restriction contained in section 10A(3) of the Act, which limits exemption on export profits only on the profits derived on actual export made against receipt of convertible foreign exchange. For the assessment year 2004-05, the Assessing Officer allowed assessee's claim of exemption only on the profits derived on actual exports and disallowed the claim made for sale of components to the industrial unit at MSEZ. The first appellate authority confirmed the disallowance for the year 2004-05. The assessee challenged the order issued by the Commissioner under ....
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....Convertible foreign exchange as defined under clause (ii) of Explanation to section 10A(8) means foreign exchange which is treated by the RBI as convertible foreign exchange for the purposes of Foreign Exchange Regulation Act, 1973 or the Rules made thereunder. Admittedly assessee was given full exemption on the profits received on actual exports for which payment was received in convertible foreign exchange. Dispute is only with regard to the interstate sale of components made to the unit in the MSEZ for which the payment received is also admittedly in Indian rupee and not in convertible foreign exchange. The provisions in section 10A are comprehensive and exhaustive and there is no dispute that the mandatory conditions of section 10A(3) have to be satisfied to get exemption on export profits. In other words, exemption is available only on actual exports and only if consideration of export is received in convertible foreign exchange. In the case in hand both the conditions are not satisfied because assessee's sales of components are to another industrial unit in India and the sale proceeds are received in Indian rupee. The question, therefore, is whether provisions of another stat....
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....t, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India." Senior counsel appearing for the Revenue contended that the assessee's claim of exemption is thoroughly untenable because both the conditions required for allowing the claim contained in section 10A(3) are not satisfied in as much as sale is only an interstate sale and not an export sale and the consideration received is in Indian rupee and not in convertible foreign exchange. Reference is also made to the technical words used such as "foreign exchange" and "export turnover" used in section 10A(3) and counsel contended that nowhere in the provisions of section 10A an artificial meaning is given to "export" or "export turnover" to enable the assessee to claim exemption on so-called deemed export which is the sale of components by the assessee to another unit in the MSEZ. According to Standing Counsel for the Revenue, assessee's claim is thoroughly misconceived and if exemption was to be provided for the sales made between industrial units in the Export....
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....much as there can be no discrimination in regard to taxation on the profits on exports and profits on deemed exports. So far as the decision of this court above referred, the contention of assessee's counsel is that the provisions of the Act should be liberally construed to achieve the object i.e., to grant exemption on export profit. On the factual position, the assessee contended that the industrial unit at MSEZ after purchasing the components from the assessee, manufacture the final products and export which qualifies for exemption from tax and assessee being the component supplier is a contributor for receipt of foreign exchange which is the basis for granting exemption. 6. After hearing both sides and after going through the above referred provisions of the Income-tax Act and the provisions of the Special Economic Zones Act, 2005, we are unable to uphold the order of the Tribunal because the concept of deemed export under the Special Economic Zones Act is not incorporated in the scheme of exemption under section 10A of the Income-tax Act and it is the settled position that the Income-tax Act is a self-contained code and the validity or correctness of the assessment has to be ....