TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 1521
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..../s 143(3) of the Act vide order dated 12/12/2011, the assessee's total income has been determined at Rs. 2,78,50,117/- due to the disallowances/additions of the following amounts for purposes of calculating the deduction u/s 10B of the Act:- 3. Aggrieved by the order of the AO, the assessee filed appeal before the CIT(Appeals). 4. With respect to setting off of carried forward and unabsorbed depreciation against profits of the undertaking u/s. 10B amounting to Rs. 26,09,261, the facts are that the assessee declared income of Rs. 1,38,68,696 for the year before setting off of unabsorbed depreciation and declaring income of Rs. 1,00,16,037 after adjusting unabsorbed depreciation of Rs. 26,09,261 and deduction under Chapter VIA of Rs. 12,43,398. The contention of the assessee before the CIT(A) was that brought forward unabsorbed depreciation of Rs. 26,09,261 for the AY 2006- 07 has to be allowed without factoring the same for calculation of deductible export profit u/s. 10B of the Act, following the decision of Hon'ble jurisdictional High Court in the case of CIT v. Yokogawa India Ltd., 341 ITR 385 (Karn). 5. The AO has given his finding in para 3 of the assessment order as under:....
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....se of computation of deduction u/s. lOB. The company was asked to explain why the same should not be excluded from export turnover in the light of decision of IT AT, Bangalore in the case of Granite ~art Ltd, for A Y 2005-06.The assessee company replied vide letter dated 25.10.2011 stating that the assessee's claim for third party export has been allowed by the Hon'ble IT AT of Bangalore for A Y 2006-07 in assessee's own case and the same is further confirmed by CIT(A)-I, Bangalore for A Y 07-08. 6. The reply of the assessee company is not tenable as department has not accepted the above said decisions and further appeals are pending before higher appellate authorities. From the details furnished, it was found that the assessee has claimed exemption under Section lOB on account of deemed exports to the extent of Rs. 7,97,60,58!5/-. On this issue of deemed-exports, detailed reasons are given by the assessing officer in the assessment order for the A.Y. 2006-07, 2007- 08 and 2008-09 while making addition by disallowing deduction u/s. lOB of the IT Act to the corresponding extent of deemed exports while determining the total income. 7. From the relevant details filed w....
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....se already relied on us in Tata Elxsi Ltd. Vs. ACIT. Therefore, the answer to this ground is readily available in the that judgment itself. By following tile ratio of the ratio of the above judgment, we come to the conclusion that the as. ;cannot claim the deduction u/s.10B in respect of the so called exports made through third parties/export houses." In the above judgment, Hon'ble ITAT has relied on the decision in case of Tata Elxsi Vs. ACIT. The relevant portion of the order are reproduced as under: "We have heard rival submissions and perused tlte records. Chapter 8 of the Exim Policy issued by the Ministry of Commerce & Industry defines 'deemed export' as under: "8.1 'Deemed Exports' refers to those transactions in which goods supplied do not leave country and payment for such supplies is received either in Indian rupees or in free foreign exchange." Under cl. 8.3 benefit for deemed exports are as under : "8.3 Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP v1. a) Supply of goods against advance authorisation/advance ....
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....of computation of deduction u/s. 10B of the IT Act." 10(a) We find that the ITAT, B Bench in ITA No.814/Bang/2009 A.Y. 2006- 07 held as follows :- "3. The next issue is with regards to exclusion of deemed exports amounting to Rs.;13,05,22,177 for the purpose of calculating deduction u/s. 10B. In appeal, the CIT(A) granted relief. We find that the as. Filed declaration from M/s. S.K. International, New Delhi as well as M/s. ELE Stones (India) Pvt. Ltd., certifying the payments of Rs. 9,76,52,462 & Rs. 3,28,69,715 totaling Rs.;13,05,22,177 had been realised in convertible foreign exchange against materials purchased from the assessee under the third party export basis. The Chapter VI of the Foreign Trade Policy as well as the policy statement of the Government of India clarifies that even the third party exports were eligible for benefit available u/s. 10B of the Act. The third party exports are also considered as exports and since the consideration in respect of such third party exports made by 100% EOU which manufactures the article or things are received in or brought into India in convertible foreign exchange, either by tghe 100% EOU itself or through the third party exporter....
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....r of the learned CIT(A) submitted that co-ordinate bench had in the case of M/s. Granite Mart Ltd. Vs. ITO (ITA No.22 & 763/Bang/2010 dated 17.09.2010) held that neither deemed exports, nor third parties export would be eligible for a claim of deduction under section lOB of the Act, that too, after considering the decision of M/s. Tata Elxsi Ltd., (supra). Reliance was also placed on the decision of Hyderabad Bench of this Tribunal in the case of ACIT Vs. Badhra Consulting Ltd.,(2010) 134 TTJ 214 and the judgment of Hon'ble Kerala High Court in the case of CIT Vs Electronic Controls & Discharge Systems (P) Ltd., (2011) 245 CTR 465. 15. Per contra, learned AR placing reliance on a Coordinate Bench decision dated 19-10-2010 in revenue's appeal ITA No.814/Bang/2009 where assessee was the respondent, submitted that for assessment year 2006-07, the issue was decided in favour of the assessee by the learned CIT(A) and this was confirmed by the Tribunal. Reliance was also placed on the decision of Chennai Bench of this Tribunal in the case of CIT Vs Janani Holding(ITA No.1094/MDS/20 10 dated 28-02-2011). 16. We have heard the rival contentions and perused the orders. Assesse....
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....he ground raised by the assessee m respect of. the claim of exemption made u/ s lOB on the sales made to another export oriented units. This issue was also considered by the ITAT A Bench in the case mentioned above ie. TATA ELXSI Ltd, Vs A CIT, 115 TTJ 423. After examining the scheme of section u/ s lOA which is in pari passu to sec. 1OB, the Tribunal held that such deemed export is entitled only for the benefits of duty draw back and exemption from basic excise duty. Such deemed exports do not get entitled for the deduction. u/ s lOA. As the above judgment squarely applies to the present case, we hold that the assessee company is not entitled for deduction u/ slOB in respect of sales made to other export units. This ground of the assessee is rejected. 9. The third issue to be considered is whether the assessee is entitled for deduction u/s. lOB in respect of -ttie sales made through third parties. It is the case oj the assessee that these third parties are export houses and they have exported all such goods sold by the assessee to them for the purpose of such export and as such they are entitled for deduction u/s. lOB. It is very interesting to note as stated above that even a ....
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....t Ltd., (A. Y. 2005-0 6) dt. 17-09-2010. 7.2. In view of such latest decision brought to my knowledge by the assessment order I have no other go but to dismiss this ground of appeal, although allowed in appeal of AY-2007-08. Ground of appeal is dismissed." 12. Following the decision of the ITAT in ITA No.888/Bang/2010 for the A.Y. 2007-08 at para 10(b), we direct that deemed exports shall not be considered as part of the export turnover while computing deduction u/s. 10B of the IT Act, 1961. 13. The 3rd ground of appeal reads as follows:- "3) TRADED GOODS a) The Appellant has taken additional ground before the A.O. at the time of scrutiny assessment, about considering the Traded Goods of Rs. 8,64,86,069/- as part of Export Turnover for the purpose of calculation of deduction under section 10B as all these traded goods are exported out of India and the proceeds are received in foreign exchange with in the stipulated time. b) The A.O. has erred in not considering and appreciating the provisions of law as detailed in section 10B and not following the decision of Hon'ble Tribunal of Mumbai in the matter of T. Two International (P) Ltd. 26 SOT 582 (MUM) 2008. c) The CIT (A) ....
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....revised From 56G for traded goods before him. 16. The CIT(Appeals) held as follows:- "5.1 Similar issue has been raised in appeal for assessment year 2007-08 and my predecessor decided the issue by holding thus:- "5.2. The ground as well as the citation was considered. Firstly, it must be pointed out that the decision is not from jurisdictional ITAT and therefore not binding. Secondly, I find the ITAT itself, before giving decision in para 9.2. of the order stated that not much precedents are available being the first year of implementation of changed law from 1-4-2001 and the issue being virgin, there is scope for much deliberation on each issue raised in that appeal. Thirdly, I consider the word "derived" is most important in the frame work providing for deduction either u/s.10A or u/s.10B of I.T.Act. The word "derive" shows and means a direct connection/nexus as distinguished from the concept of "attributable to". The word "derived by the assessee" implies there must be direct nexus amongst - (i) the manufacture and (ii) export and also (iii) the receipts of sale proceeds in CFE and if one is lacking, the same would not be entitled to be covered in the definition of....
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....s not granted deduction to the assessee insofar as it relates to the profit from export of trading goods. From the above table, it can be seen that the assessee made export by trading in goods at Rs. 3.23 crores on which deduction was claimed. The learned CIT(A) opined that since such exports do not relate to the goods manufactured by the assessee, hence the benefit of deduction cannot be allowed. We are not convinced with the view canvassed by the learned CIT(A) because sub-section (1) of section 10A allows deduction in respect of profits and gains derived by an eligible undertaking "from the export of articles or things or computer software". The later part of this sub-section provides that this deduction is available for a period of ten consecutive assessment years starting with the "assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software". The reference to manufacture or production of eligible articles is only for the purposes of settling the first year of the ten consecutive assessment years in which the assessee will be entitled to deduction under this section. The qualifying amount f....
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....his claim. In all fairness we are of the opinion that the claim can be looked afresh by the AO. We therefore, set aside the order of learned CIT(A) on this issue and remit it to the AO for consideration afresh in accordance with law. Grounds 2 & 3 of the assessee is allowed for statistical purposes." 19. Following the decision of the coordinate Bench of this Tribunal in assessee's own case ITA No.888(Bang)2010 dated 05.09.2014, we allow grounds 3(a) & 3(b) raised by the assessee. 20. With respect to ground No.3(c) regarding the alternate ground in respect of export of traded goods raised before the CIT(A) and stated to be not considered by him, since we have decided the issue of deduction u/s. 10B in respect of export of traded goods, this ground becomes redundant. 21. In the result, the appeal is partly allowed. ITA Nos.608/B/14 & 1332/B/14 By Revenue 22. These are appeals by the Revenue for the assessment years 2009- 10 & 2010-11. 23. The only issue that arises for consideration in these appeals is as to whether the CIT(Appeals) was justified in directing the AO to exclude freight charges, shipping freight and insurance charges from the export turnover, without reducing th....
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.... calculation of deduction under section 10B as all these traded goods are exported out of India and the proceeds are received in foreign exchange with in the stipulated time. b) The A.O. has erred in not considering and appreciating the provisions of law as detailed in section 10B and not following the decision of Hon'ble Tribunal of Mumbai in the matter of T. Two International (P) Ltd. 26 SOT 582 (MUM) 2008. c) The Appellant relies on (its own) decision for the AY 2007-08 and AY 2008-09, where the jurisdictional Tribunal has held in favor of the Appellant, allowing the deduction for Traded goods." 31. Similar issue has been adjudicated in A.Y. 2009-10 and the issue has been decided in favour of the assessee, following the decision of the coordinate Bench of this Tribunal in assessee's own case ITA No.888(Bang)2010 dated 05.09.2014. For the reasons stated therein, ground No.2 is allowed. 32. In the result, the appeal by the assessee for A.Y. 2010-11 is allowed. ITA No.1475/Bang/2014 by Assessee (AY 2011-12) 33. The first ground of appeal is that the AO was not correct in not considering deemed export of Rs. 4,07.30,611 as part of export turnover for the purpose of calculat....
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....EOUs has been filed in the paperbook before us. We set aside this issue to the file of Assessing Officer to examine the details furnished by the assessee and decide the issue afresh, keeping in mind that similar issue from A.Y. 2006-07 has been approved by the revenue authorities and there has been no further appeal on this issue in the earlier years. Ground No.3 is allowed for statistical purposes. 39. Ground No.4 reads as follows:- "4. The A.O. was not correct in treating the interest of Fixed Deposits under income from other sources as this is part of business income and kept for bank guarantee purpose and not an income earned on investments of surplus funds." 40. The assessee declared interest on deposits of Rs. 14,63,737 in the return of income. During the assessment proceedings, additional interest of Rs. 4,60,221 as per 26AS statement was declared by the assessee. The AO considered the interest on deposits to the extent of Rs. 19,56,968 as income from other sources. 41. On appeal before the CIT(Appeals), the assessee submitted that these deposits are kept for margin money against the borrowed funds for export realization purposes and the rates of interest earned on thes....
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.... a hundred per cent. export oriented undertaking from the export of articles or things". The position under consideration is not akin to some of the sections employing this expression without any further amplification of the same. Sub-section (4) of section 10B gives meaning to the expression "profits derived from export of articles or things" to mean 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, etc., bears to the total turnover of the business carried on by the undertaking. A bare perusal of sub-section (4) in juxta position to sub-section (1) of section 10B transpires that the expression "derived by" used in sub-section (1) cannot be construed in its literal sense to mean encompassing only such items of income which have direct or immediate nexus with the eligible undertaking. The meaning given to this expression in sub-section (4) as referring to "the profits of the business" makes the expression more liberal to cover any income which is connected with "the business" and should not be necessarily "derived from the industrial undertaking" alone. Turning to the nature of....