TaxTMI 
TaxTMI 
2012 (4) TMI 345
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....y export of cotton yarn, grey & finished knitted cotton fabrics & readymade garments. During the assessment year 2001-02, the assessee has claimed income exempt u/s 10B of I.T. Act for three units namely original unit which started production from A.Y. 1992-93, spinning unit no. III which started production from A.Y. 1996-97 and spinning unit no. IV which started production from A.Y. 1999-2000. This is given below in tabular form:- E.O.U. Date of Commercial Production Relevant Assessment Year Exemption u/s 10B claimed up to AY A. Original Unit 01.02.1992 1992-93 2001-02 B. Spinning Unit No. III 01.06.1995 1996-97 2005-06 C. Spinning Unit No. IV 19.08.1998 1999-00 2008-09 3. During course of assessment, the Assessing Officer observed that the first year of operation of original unit was assessment year 1992-93 and as there was loss, as per provisions of Section 10B(3), the assessee company exercised its option not to avail exemption u/s 10B of Income-tax Act, 1961, for assessment years 1992-93, 1993-94 and 1994-95. As such, the first year of its claim u/s 10B was assessment year 1995-96 and the same was admissible up to assessment y....
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....d completed only five years of exemption u/s 10B, the assessee was also eligible for further exemption for next five years. That claim was declined by the Assessing Officer by observing that the amendment, enhancing the number of eligible assessment years to 'ten' did not provide for retrospective operation and, accordingly, the benefit of ten years could not be granted in the assessment year in question." The CIT(A) further stated that in the light of the above facts, the Hon'ble I.T.A.T. has concluded as under :- "In view of the above discussion, we see no merit in assessee's grievance. In our considered view, the assessee having already availed Section 10B benefit of 5 consecutive assessment years, was not eligible for exemption u/s 10B, any further, so far as assessment year 1998-99 is concerned. Accordingly, we confirm the conclusions arrived by the authorities below and decline to interfere in the matter." As per the CIT(A), the verdict in the case relied on by the Assessing Officer has been restricted to assessment year 1998-99, to which the provisions of pre-amended Section 10B applied. The learned Commissioner of Income Tax (Appeals) further ....
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.... of ten consecutive assessment year, beginning with the assessment year relevant to the previous year in which the unit began to manufacture or produce. That the facts in the case of Tata Tea Limited are different and clearly distinguishable from those in the case of this appellant. I, therefore, adjudicate ground no.1 and ground no. 1(a) in favour of the appellant and direct the AO to allow exemption u/s 10B in respect of the normal computation as well as the computation u/s 115JB, for all the eligible units of the EOU, for a period of ten years, starting from the assessment year in which the respective unit started production. In result all the units of the EOU of the appellant are eligible for exemption u/s 10B, for the year under appeal, which the AO is directed to allow." The CIT(A) further discussed that the entire Section 10B has been substituted by the Finance Act 2000 w.e.f. 01.04.2001. Section 10B(1) as substituted by the Finance Act 2000 w.e.f. 01.04.2001 and as applicable for the year under consideration reads as under:- "Subject to the provisions of this Section a deduction of such profits and gains as are derived by a 100 % Export Oriented Undertakin....
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....cover any period after the expiry of the said period of eight years." Had it been the intention of the law makers to not to allow the benefit of extended period to the existing units, the above proviso would not have been omitted and would have been made applicable to existing units. Similarly, explanation (ii) defining the term "relevant assessment years" was also substituted w.e.f. 0.04.1999, which is reproduced here under : Erstwhile explanation applicable up to 31.3.99. (ii) "relevant assessment year means the five consecutive assessment years specified by the assessee at his option under sub Section (3) of sub Section (5) as the case may be". The substituted explanation w.e.f. 01.04.1999 (ii) "relevant assessment years" means the ten consecutive assessment years referred to in sub Section (3)" This substitution lays down the clear intention of the legislature to provide the benefit of extended period of ten years to all the units, existing or new. When this amendment was brought into effect, the appellant was still eligible for exemption u/s 10B for two assessment years and as such qualified for exemption for the unexpired ....
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....filed appeal before the Tribunal against the above order of CIT(A). As different view has been taken by the Coordinate Bench, Kolkata, in the case of Tata Tea Limited, the Bench referred above question of law for consideration by the Special Bench. 8. Shri Keshav Saxena, CIT DR, appeared on behalf of the Revenue and argued that the assessee is eligible for deduction u/s 10B of the I.T. Act upto A.Y. 1999-2000 i.e. 8 years beginning with the assessment years in which undertaking began manufacturing i.e. from A.Y. 1992-93. From 1 April, 1998 the law was amended and 8 years were substituted by 10 years, in section 10B(3) of the I.T. Act. The restraint of exemption upto 8 years were also withdrawn. The only question which is to be solved is whether amendment of Finance Act, 1998 will apply to new units established after 01.04.1998 or they will apply to existing E.O.Us also. 9. The learned CIT DR placed reliance on the decision of Tata Tea Limited, 87 ITD 351, and contended that this decision replies two issues namely amendments in statutes are prospective and not retrospective and amended provision does not say that extended period of exemption of 10 years instead of 8 years is a....
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.... other two spinning units III & IV established in 1995 & 1998 combined together was only Rs. 73.54 crores. Besides mere expansion was permitted by Ministry of Industry to the existing undertaking as per the approval letter. 12. The ld. CIT DR further argued that in the decisions mentioned below expansion of the industrial undertaking is considered only with reference as to whether it constitutes reconstruction or not as provided u/s 80J (4) of I.T. Act which is similar to section 10B(2) of the I.T. Act :- "State of Gujarat v. Saurathstra Cement & Chemical Industries (2003) 260 ITR 181 (SC):- So called new unit is thus not totally independent of assets of existing unit-physical identity with old unit is preserved and the new unit is an expansion of the existing undertaking-Respondent therefore not entitled to exemption." The Hon'ble Apex Court observed in Para 10 that respondent was having two kilns and third is added. This leads to inevitable conclusion that new unit is an expansion of existing undertaking. Once it is held to be a case of expansion, the claim of exemption from electricity duty set up by the respondents, completely falls to the grounds. ....
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.... it separate & independent industrial undertaking, especially when marketing and administration are the same for old undertaking and new spinning divisions. 16. As per ld. CIT DR, provision of section 10B(3) prohibits claim u/s 10B beyond 10 year period for an undertaking as reproduced below:- "The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any [ten] consecutive assessment years, [* * *] beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things." He further argued that any expansion or addition/alteration of same undertaking will not entitle it for a benefit u/s 10B beyond 10 years, unless the Competent Authority approves it as a new undertaking or a new EOU which is not the case with assessee. As per the learned CIT DR, answer is required to the question as to whether assessee Maral Overseas Ltd. is eligible for claim u/s 10B upto 8 years only or it is eligible upto extended period of 10 years or the claim u/s 10B can be extended even beyond 10 years. Since both issues of allowances of deduction u/s 10B bey....
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....be placed on the decision of Special Bench in case of International I Research Park Laboratories Ltd. [1995J 212 ITR (AT) 1. 22. In view of the above submissions, the learned CIT DR vehemently argued that the assessee was not eligible for claim of deduction u/s 10B with reference to the amended provision of law which are prospective in nature. 23. With regard to the decision of Hon'ble Karnataka High Court in case of M/s. DSL Software Ltd. in ITA No. 462 of 2007 dated 12.10.2011 cited by assessee, contention of the ld. CIT DR was that when assessee already enjoyed benefit of 5 years u/s 1OB of the IT. Act upto A.Y. 1997-98, how the amended provisions of section IOB, which were amended from 01.04.1999 could be retrospectively applied to assessee to give it a benefit of deduction from A.Y. 1993-94 to A.Y. 2002-03, is an issue not even considered by Hon'ble Karnataka High Court. 24. Shri Ajay Vohra appeared on behalf of the assessee and submitted that the assessee is 100% export oriented unit which was eligible for deduction u/s 10B in respect of its Sarovar Division and two separate and independent spinning units. He submitted that initially under the provisions of s....
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....993-94 and claimed benefit und section 10B till assessment year 1997-98. In view of the amended provision the assesese became entitled to benefit from assessment years 1993-94 to 2002-03. The assessee accordingly claimed benefit for three more years from assessment years 1999-00 to 2001-02. The benefit for assessment year 2001-02 was denied by the assessing officer. 25. The High Court held that in terms of amendment carried out in the year 1999, the tax holiday benefit stood extended for a period ten consecutive assessment years. It was held that on 01.04.1999, when the amended provision came into force by virtue of said provision, the assessee would be entitled to the benefit of tax holiday for 10 consecutive years from the date of production and if the assessee already availed the benefit under the unamended provision and the 10 consecutive years would fall prior to 01.04.1999, then the assessee would not be entitled to the said benefit. It was thus, held that if the said 10 consecutive years from the date of production have not expired prior to 01.04.1999, for the remaining unexpired period, the assessee could be entitled to benefit. 26. In view of the above decision, if t....
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....led to deduction for a period of 10 consecutive assessment years from the date of commencement of manufacture/production of article or thing by the said eligible undertaking. 30. The Ld. Counsel for the assessee further submitted that the decision of Kolkata Bench of the Tribunal in the case of Tata Tea Ltd: 87 ITD 351 relied upon by the assessing officer is clearly distinguishable as in that case the exemption was claimed for assessment year 1998-99, which was the 5th consecutive year of deduction. The assessee had thus, already exhausted the five years exemption period in the assessment year 1998-99 and was no longer eligible to claim deduction under the then applicable law. In these facts and circumstances the Tribunal held that exemption could not be allowed to the assessee in the A.Y. 1999-00, since the assessee had already exhausted its eligibility period. 31. Reliance was placed on the following decisions wherein it has been held that various Benches of the Tribunal (whether Special or Division), being lower in judicial hierarchy, are bound to follow the decisions of the High Court: - Kamlakshi Finance Corporation Limited: AIR 1992 SC 711 - Khalid Automobiles v. ....
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.... that section is otherwise applicable. However, in order to be entitled to the benefit under section 15C, the following facts have to be established by the assessee, subject always to time-schedule in the section: (1) investment of substantial fresh capital in the industrial undertaking set up, (2) employment of requisite labour therein, (3) manufacture or production of articles in the said undertaking, (4) earning of profits clearly attributable to the said new undertaking, and (5) above all, a separate and distinct identity of the industrial unit set up. We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of which exemption of tax under section 15C may be claimed." 34. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Indian Aluminium Limited; 108 ITR 367 wherein the assessee made extensions to its existing factories at Belur and Alupuram in the accounting year relevant to the assessment year in question. In the assessment year 1960-61, the respondent claimed relief under section 15C of the Indian Income-tax Act,....
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....s set up in a newly constructed building by installing additional 16224 spindles, which took the total installed capacity to 38400 spindles from existing 22176 spindles. 2. Four new knitting machines were installed against the existing 13 knitting machines. 3. Facilities to manufacture additional 6 lakh p.a pieces of garments were put in place as against earlier installed capacity of 13.6 lakh garments p.a. 4. Turnover of company almost doubled to Rs. 121.72 crores during that year from Rs. 67.26 crores in the immediately preceding year and profits before depreciation also took quantum leap of Rs. 3.37 crores. 5. Around 800 workers and staff were recruited during the financial year 1995-96 . 38. As regards Unit IV, the ld. Counsel for the assessee submitted that : 1. Additional 16128 spindles were installed taking the total installed capacity to 54528 spindles. 2. The company imported and installed twelve circular knitting machines. 3. The company set up a power plant of 4.25 MV capacity. 4. Readymade garment manufacturing facilities were set up to manufacture additional 6 lacs garments per annum. 5....
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.... held that merely because the new permission contained reference to the original licence could not be considered as conclusive that the new unit was not a separate or independent unit. 42. With regard to the assesee's eligibility for claiming deduction u/s 10B in respect of export entitlement and special import licence, the contention of the Ld. Counsel for the assessee was that deduction u/s 10B of the Act is clearly allowable in view of specific provisions contained u/s 10B(4) of the Act which provided a specific formula for computing profits derived by the undertaking from the export. He further emphasized that that sub-section (4) of section 10B of the Act mandates that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover to the total turnover. Thus, even though sub-section (1) of section 10B of the Act refers to profits and gains as are derived by a 100% EOU, the manner of determining such eligible profits has been statutorily defined in sub-section (4) of that section. 43. He further invited our attention to the finding recorded by the Assessing Officer to the effect that the af....
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....t years beginning with the assessment year in which the undertaking begins to manufacture or produce articles, at the option of the assessee, as per the provisions of erstwhile Section 10B(3) as applicable up to assessment year 1998-99. Since there was loss, the assessee did not claim any deduction in the first three assessment years i.e. 1992-93, 1993-94 and 1994-95. The exemption u/s 10-B was claimed and allowed to the assessee for the first time in assessment year 1995-96. Accordingly, the assessee was eligible for exemption u/s 10-B in respect of profits of its EOU up to the assessment year 1999-2000. With effect from 1.4.1999 the period of exemption prescribed u/s 10B(3) of five years was substituted by ten years by the Income Tax Second Amendment Act, 1998. And accordingly, the assessee became entitled for exemption u/s 10-B for a further period of two years i.e. assessment year 2000-01 and 2001-02. Thereafter, with effect from 1.4.2001, the entire section 10B has been substituted by the Finance Act, 2000, sub section (1) of which provides for deduction of profits for 100 % EOU for a period of 10 consecutive years beginning with the assessment year relevant to the previous ye....
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....The substituted explanation w.e.f. 01.04.1999 (iii) "relevant assessment years" means the ten consecutive assessment years referred to in sub Section (3)" This substitution lays down the clear intention of the legislature to provide the benefit of extended period of ten years to all the units, existing or new. When this amendment was brought into effect, the appellant was still eligible for exemption u/s 10B for two assessment years and as such qualified for exemption for the unexpired period of ten years. 5. The law as applicable to any particular assessment year can only be applied for that assessment year, nothing is to be read in, and nothing is to be implied. The appellant company has not claimed that the provisions of substituted Section 10B are retrospective in nature. The amended provisions are applicable w.e.f. 01.04.1999 and those substituted are applicable w.e.f. 01.04.2001 and the appellant's claim under the said Section is as per these amended/substituted provisions, as applicable to the respective assessment year. There is no restriction on the existing units for claiming the exemption for a period of ten years. On the contrary the first....
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....tion lOB of the Act was claimed for the first time in the assessment year 1995-96 and accordingly under the pre-amended law the assessee was entitled to deduction upto assessment year 1999*2000. In the assessment year 1999-2000, before expiry of the original time limit of five consecutive assessment years for which deduction was available as per then applicable law, the amended law became applicable and the assessee was accordingly eligible for deduction for the extended period of 10 years, as against 5 years allowed under the pre-amended law. 51. In the assessee's case, the amended law became applicable during the period in which the assessee was otherwise eligible for claiming deduction under section lOB of the Act under the pre amended law. Thus, as a necessary corollary and applying the amended law, the assessee was clearly eligible for deduction under section lOB of the Act for the extended period. 52. We now discuss the facts in the case of Tata Tea Limited as relied on by the Assessing Officer. 53. The facts in the case of Tata Tea Limited (supra) were that the assessee had started eligible unit in assessment year 1989-90. Deduction under section 10B of the Act ....
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....e are dealing with the asst. yr. 1997-98 which is the ninth year beginning with the assessment year relevant to the previous year in which the industrial undertaking began to manufacture. How an amendment carried out after two years of the cessation of benefit can be said to have application on earlier years is any body's guess. It is more so for the reason that the period of eight years expired in asst. yr. 1996-97 and thereafter the assessee's unit became taxable under the regular provisions of the Act. It is still further noted that even the period of ten consecutive assessment years from the beginning of the year in which the industrial undertaking begins to manufacture or produce articles was also over in the asst. yr. 1998-99 whereas the amendment was carried out w.e.f. 1st April, 1999. The order relied by the learned Authorised Representative in Consindia (P) Ltd. is not applicable inasmuch as in that case the period of eight years expired in asst. yr. 2000-01, whereas the amendment was carried out w.e.f. 1st April, 1999. We therefore hold that the learned CIT(A) was justified in denying the benefit of deduction under s. 1OA." On perusal of the aforesaid, it may b....
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....would be entitled to the benefit of tax holiday for ten consecutive years from the date of production and if the assessee had already availed the benefit under the un-amended provision and the ten consecutive yeas would fall prior to 1.4.1999 then the assessee would not be entitled to the said benefit. It was further held that if the said ten consecutive years from the date of production have not expired prior to 1.4.1999, for the remaining un-expired period, the assessee could be entitled to the benefit. The relevant observation of the Court was as under :- "8. From the aforesaid object behind the amendment, it is clear that the period of 5 years is extended to 10 years in order to give added thrust to exports. It is because the Parliament felt that the tax holiday of 5 years is not having the desired result and therefore, they extended the benefit of tax holiday from 5 years to 10 years. If it is a case of extension from 5 years to 10 years, the unit, which had the benefit of 5 years automatically, should get the benefit of 10 years if other conditions are fulfilled. The other condition to be fulfilled is ten consecutive assessment years beginning with the assessment yea....
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....tion in this appeal." 57. Applying the proposition of law laid down by the above decision to the facts of the instant case, as the period of ten years from the year of start of manufacture has not expired as on the date when the amended provision came into force, the assessee is entitled to the benefit of tax holiday for the remaining period of ten years. It is pertinent to mention here that in the aforesaid decision, the Hon'ble Karnataka High Court went on to hold that even if the period of five years has expired as on the date of amended provisions but the period of ten years is still running, the assessee cannot be denied the benefit. Thus, the issue raised before this Special Bench is squarely covered by the aforesaid decision of the Hon'ble High Court of Karnataka. Since this is the only decision of the Hon'ble High Court on the issue, the same is binding on the Special Bench in view of the settled principle of judicial proprietary, as laid down in following cases :- Supreme Court in the case of Dunlop India Ltd.: 154 ITR 172 @ 181: "We desire to add and as was said in Cassell and Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never h....
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....e assessee was eligible for deduction u/s 10A of the Act for the extended period of ten years. In this case also eight years expired in the assessment year 2000-01. 59. Reference in this regard may also made to the decision of the Delhi Bench of the Tribunal in the case of Tech Books Electronics Services (P) Ltd. v. ACIT: 100 ITO 125. In that case, again, neither the five year period nor the block period of eight year had expired before the amended provisions became applicable and accordingly the Tribunal was pleased to hold that the assessee was eligible for deduction for the extended period as per the amended law. The pertinent observations of the Tribunal are reproduced hereunder: "10.8 In the case of the assessee, neither the period of five years nor the block period of eight years expired when the amendment replacing the word 'ten' for 'five' was introduced by Income-tax (Second Amendment) Act, 1998 with effect from 1-4-1999. Since the assessee was entitled to exemption in the year in which amendment became effective and operative, the assessee will be entitled to the extended period of exemption because the period of five years had not exhausted up....
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....ndustrial undertaking and a new line of production set up and named as separate unit cannot be treated as new industrial undertaking. The objection of the Assessing Officer was that even though the assessee had carried out capacity expansion, but such expansion could not be regarded as separate industrial undertaking in order to be independently eligible for deduction u/s 10B of the Act. By the impugned order, the learned CIT(A) after giving detailed finding, allowed the assessee's claim by holding that all the conditions u/s 10B were satisfied as there was substantial investment of fresh capital in the new unit set up and employment of the requisite labour. The learned CIT(A) also recorded a finding to the effect that separate and distinct industrial unit was set up by the assessee. It was also held that there was no requirement of obtaining separate and distinct industrial licence as a condition precedent to claim of deduction u/s 10B of the Act so long as the new unit set up was approved as an EOU by the designated authority. 61. Applying the relevant provisions of law as applicable during the years, under consideration, and also the judicial pronouncements, as discussed ....
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....are entitled for exemption under section 80B upto Assessment years 2005-06 and 2008-09 respectively. For the year under consideration, the assessee is eligible for exemption under section 80B in respect of all its units of this undertaking situated at Khalbujurg District Khargone." We also find that the CIT has revised the above order of the Assessing Officer by exercising his power under section 263 of the Act on the issue of allowability of deduction under section 10B on the aforesaid units. This order of the CIT was quashed by the Tribunal and subsequently appeal filed by the revenue was also dismissed by the High Court. 62. We have considered in detail the submissions of the learned CIT DR and the ld. counsel for the assessee. We have also deliberated on the case laws cited by both the parties in the context of factual matrix of the case. As per our considered view, deduction u/s 10B of the Act is allowable in respect of profits of 100% export oriented undertaking. The expression "undertaking" has not been defined u/s 10B of the Act. The said expression has been explained by the Courts in the context of similar other provisions of IT Act viz. section 15C of 1922 Act, sect....
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....hers is a circumstance in favour of the assessee that the new industrial units can function on their own. Use of the articles by the assessee is not decisive to deny the benefit of section 15C." "One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced and at least a minimum of ten persons with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognizable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. For the purpose of section 15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of section 15C the new undertaking must be formed by reconstruction of the old business. Now, in the instant case, there is no formation of any industrial undertaking out of the existing business since that can take place only when the assets of the old....
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....nce distinct from the other units/business; having independent infr-structure, separate plant and machinery being set up with substantial capital investment and having an identifiable output and the profits attributable thereto can be determined. 67. Applying the above proposition to the facts of the instant case, we find that all the aforesaid conditions are satisfied in the two new spinning units viz. Unit Nos. 3 and 4, which were set up by the assessee as a separate and independent production units, by making substantial investment in new building, plant and machinery, etc. wherein distinct and marketable produce are manufactured. In respect of unit no. 3 we find that it was set up in a newly constructed building by installing additional 16224 spindles which enhanced the total capacity to 38400 spindles from the existing 22,176 spindles. We also find that four new knitting machines were installed. The facilities to manufacture additional 6 lacs per annum pieces of garments were put as against earlier installed capacity of 13.6 lacs garments per annum. The turnover of the company reached to Rs. 121.72 crores from Rs. 67.26 crores in the immediately preceding year and the profi....
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....late for issue of separate approval for each unit from the competent authority. The only requirement under the said section is that the undertaking should be approved. The definition of "100% export undertaking" as provided in clause (iv) of Explanation 2 to section 10B provides as under :- "(iv) "hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;" 69. From record we find that the new spinning unit set up by the assessee was duly approved as 100% EOU by the concerned Government department. The relevant permission dated 13.3.1995 bearing no. 144/EOB/61/95 issued by the Ministry of Industries, Department of Industrial Development, Government of India, was received for setting up new unit. Necessary corrections in the permission dated 13.3.1995 were also carried out by the Ministry vide letter dated 31.5.1995. The assessee had also filed letter dated 14.4.1998 before t....
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....e and totally independent wherein substantial investment in new building, plant and machinery was done, therefore, the case law relied upon by the learned CIT DR is of no help to the revenue for declining the claim of deduction u/s 10B in respect of its new unit nos. 3 and 4. 72. Now coming to the objection of the learned CIT DR to the effect that the assessee was only granted certificate for enhanced capacity by way of amendment of the original certificate and not a fresh sanction letter in the form of certificate, therefore, the assessee's claim of deduction u/s 10B of the Act cannot be granted. This objection of the learned CIT DR is not tenable insofar as manner of granting approval/licence for new unit is not relevant and even the endorsement on the existing licence/approval would be sufficient for considering the unit as distinct and separate undertaking, since the assessee fulfilled all the conditions, namely, (a) Business has separate and independent existence, separate and distinct from other units/business (b) employment of independent infrastructure and separate plant and machinery etc. (c) substantial capital investment (d) new....
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....as not a case for purchase of addition capital goods for the existing project. The assessee is irrespective of the number of units, is one of artificial juridical person. Therefore, a combined permission, which involves setting up for different units, is quite in order. The fact of amendment of earlier permission or of grant of separate permissions, is not really relevant. What is really to be examined is whether the units are independent of unit and whether the units are covered by the permission or not. In our humble understanding it meets both the tests. We have also noted that it is not an statutory requirement that there has to be separate permission for each unit and therefore just because the permission is granted by the Government by way of amending the original permission letter does not affect the eligibility for deduction u/s 10B in any manner." 74. In view of the above discussion, the co-ordinate Bench held that the manner in which the approval has been granted is not relevant to examine the assessee's eligibility for claim of deduction u/s 10A of the Act in respect of three units. What is really to be examined is as to whether the three units are independent uni....
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....se, held that the assessee was eligible for exemption in respect of export entitlement and special import licence as the income of EOU eligible for exemption u/s 10B of the Act. From record we find that the export entitlement was allotted by the competent authority in respect of export undertaken by the assessee during the year. The assessee off-loaded the entitlement which was unusable and bought quota/entitlements which was required for procuring the required material necessary for its production purpose. Similarly, special import licence was allotted to the assessee by the designated authority as per Export Import Policy And Procedure 1997 - 2002. Income arising out of sale of export entitlement and special import licence was assessed as income from business. However, on such business income, the assessee is entitled to claim of deduction u/s 10B in respect of such income. The relevant provisions of section 10B read as under :- "[Special provisions in respect of newly established hundred per cent export-oriented undertakings 10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-orie....
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....apply for the purposes of clause (ii) of that sub-section. (3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. Explanation 1.-For the purposes of this sub-section, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation 2.-The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. [(4) For the purposes of sub-section (1), 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 ....
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...."manufacture or produce" shall include the cutting and polishing of precious and semi-precious stones.]" It is clear from the plain reading of section 10B(1) of the Act that the said section allows deduction in respect of profits and gains as are derived by a 100% EOU. Further, section 10B(4) of the Act stipulates specific formula for computing the profit derived by the undertaking from export. Thus, the provisions of sub-section (4) of section 10B of the Act mandate that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover by the total turnover. Thus, even though sub-section (1) of section 10B refers to profits and gains as are derived by a 100% EOU, the manner of determining such eligible profits has been statutorily defined in sub-section (4) of that section. Both sub-sections (1) and (4) are to be read together while computing the eligible deduction u/s 10B of the Act. We cannot ignore sub-section (4) of section 10B which provides specific formula for computing the profits derived by the undertaking from export. As per the formula so laid down, the entire profits of the business are to b....