TaxTMI 
TaxTMI 
2016 (7) TMI 206
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....01. 2006. The company is recognized as Export House by the Govt. of India, and was engaged in export of tea and other products e.g. iron ores, rice bran oil, HDPE etc. The primary activities of the assessee was to export tea to the countries located in Asia, through it's units located in Coimbatore, Tamil Nadu, through it's various units including unit located in SEZ in Coimbatore . During the year under consideration, the assessee disclosed profit of Rs. 146,88,982/- from SEZ unit i.e. 10% Export Oriented unit located in MEPZ Special Economic Zone unit in Coimbatore, vide Green card No. 1257/MEPZ dated 23/08/2004 and claimed exemption u/s. 10A to the extent of 50% of such profit. The total claim of exemption u/s. 10A was thus Rs. 73,44,491/-. It is pertinent here to mention that this is the seventh and the last year of availability of exemption u/s. 10A. The ld. AO disallowed the said claim of exemption u/s 10A of the Act on the ground that no activity in the nature of processing and manufacture was carried out in the said SEZ unit and that the profit of the said SEZ unit was grossly inflated to claim benefit of exemption u/s 10 A of the Act. This action of the ld. AO was ....
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.... section 10A(7) of the Act. We hold that in these circumstances, in order to justify his suspicion, the ld. AO ought to have reworked out the profits of the respective units and then accordingly determine the eligibility of exemption u/s 10 A of the Act. He cannot summarily reject the entire claim of exemption u/s 10 A of the Act. 2.2.1. Another reason for rejection of claim of exemption u/s 10 A of the Act was that no manufacturing activity or processing activity was actually carried out by the assessee in SEZ unit according to ld. AO. We find that the ld. AO had categorically recorded in the assessment order that the assessee has made sales to the extent of Rs. 3,45,09,846/- in the SEZ unit comprising of 531593 Kgs . We find from the assessment order wherein the assessee had procured raw tea leaves from India and Vietnam and after blending and processing, it exported such manufactured / processed tea to Afghanistan and Pakistan from its SEZ unit. We also find from the details filed in the paper book (pages 54 to 200 of PB) that the assessee, during the year under consideration, had income from manufacturing activities i.e blending, processing and packing of tea and its export ....
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.... for the ld. AO rejecting the claim of exemption u/s 10 A of the Act is that the assessee had debited only a sum of Rs. 29,21,000/- towards manufacturing expenses as below:- Item Amount (Rs.) i) Carriage inward -- ii) Clearing & Forwarding expenses Rs. 844518/- iii) Detention charges Rs.152,485/- iv) Electricity Rs.17,998/- v) Freight including freight on import Rs.1101`,708/- vi) Inspection charges & security charges Rs.14300/- vii) Insurance charges Rs. 32549/- viii) Packating and handling charges Rs. 434,212/- ix) Service charges Rs. 36,813/- x) THC and BHF Rs. 286,417/- xi) Weighment expenses ---- Total Rs.29,21,000/- According to the ld. AO, none of the above expenses fall under the category of manufacturing expenses and accordingly the claim of assessee that it was engaged in manufacturing of tea has to be rejected. We find from the details of expenses listed above, the same are for the purpose of manufacturing operations only and hence the assessee was engaged in manufacturing operations during the year under appeal. We find that the....
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....e by holding that the assessees who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s. 10B of the Act. Further, assessees who are in the business of blending and processing of tea in respect of undertakings in free trade zones are manufacturer/producer of tea for the purpose of claiming exemption u/s. 10A of the Act. We have examined and discussed the facts in the case of Madhu Jayanti International Ltd. and found that there is blending of tea and consequently the assessee is eligible for exemption u/s. 10B of the Act as prayed for. Their appeal for the AY 2004-05 is allowed. As regards other appeals and that of the interveners, the matters are restored back to the Division Bench, with directions to decide those appeals in the light of principle laid down herein, so far as the claim for relief u/s. 10A or 10B of the Act in accordance with law." 2.2.4. We also find that the total profit as per profit and loss account of the assessee for the year ended 31.3.2011 was Rs. 4,04,55,228.57 (vide page 207 of the Paper Book) and profit of SEZ unit was Rs. 1,46,88,982.31 (v....