AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1552
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....ental representative appeared on behalf of Revenue. 2. At the threshold it was noted that there is delay of 25 days in both appeals of Revenue in ITA No.2161-2162/Kol/2013. The Revenue has filed affidavits for condonation in this regard stating the reasons that the delay is occurred due to preparation of appeal files. Ld. AR for assessee submitted that considering delay he should not be having any objection to the Bench if considering the delay of condonation. Thus, in our considered opinion, on the facts and circumstances of the both the case, the delay in filing appeal deserves to be considered and is condoned. Accordingly the appeals are admitted and the hearing proceeded with. First we take up assessee's appeal in ITA No. 1841/Kol/2013 for A.Y.02-03. 3. The assessee in the first issue has challenged the assessment proceedings u/s147 of the Act which was also confirmed by the ld. (CIT). For this, assessee has raised following ground:- "1. Reassessment proceedings is bad in law. 1.1 That the Ld. CIT(A) has erred on facts and in law in confirming the reopening u/s. 148, ignoring the provisions contained in first proviso to section 147 of the Act although....
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....ant through his letter dated 17.11.2009. In fact, Section 147 under first proviso allowes assessments which have been completed u/s. 143(3) to be reopened beyond the period of four years if the assessee fails to disclose fully and truly all material facts necessary for the assessment. In the Tax Audit Report, the appellant had reported its income from the activity of manufacturing whereas it was only blending tea. The jurisdictional High Court in the case of Appeejay Pvt. Ltd. (206 ITR 367) had already held that blending of different kind of tea will not constitute manufacture or production of articles or tings. Therefore, on the date of filing of the return, the appellant was aware that the jurisdictional High Court has held blending of tea to be an activity which is not equitable to manufacturing. Yet, it had claimed deduction u/s. 10B and reported its activity as manufacturing. In the original assessment order us. 143(3) passed on 10.03.2005 the applicability of section 10B was not examined although the quantum of deduction was reduced. Another issue of relevance is that subsequent of the passage of the assessment order u/s.143(3) 10.03.2005 the matter of blending of tea was exa....
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....td. (supra), relied upon by Ld. CIT(A) has been overruled by the Hon'ble Supreme Court reported in 262 ITR 605 (SC). Ld. AR further submitted that the Hon'ble ITAT in assessee's own case for the AY 2005-06 in ITA No. 1189/Kol/2008 has decided the issue in favor of assessee holding that the activity of blending tea amounts to manufacture and thus entitled for deduction under section 10B of the Act. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 7. We have heard the rival contentions of both the parties and carefully considered the materials available on record and the case laws cited before us. From the above discussion we find that the crux of the issue for our adjudication is whether the action of ld. CIT(A), holding the reopening the assessment proceedings under section 147 of the Act after the expiry of the 4 years is correct in the above stated facts & circumstances. At this juncture we would like to reproduce the provisions of section 147 of the Act which reads as under : "Sec.147: If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to....
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....g of article or thing. In view of what is stated above I have reason to believe that by allowing deduction u/s. 10B of Rs. 1,68,79,919/- income to that extent has escaped assessment for the asst year 2002-03. It may be mentioned here that notice u/s.147 was issued after prior approval from the Commissioner of Income Tax-II, Kolkata." It is not in dispute that for A.Y. 2002-03, an assessment u/s. 143(3) of the Act had already been made in the case of the assessee by an order of assessment dated 10.3.2005. Admittedly notice u/s. 148 of the Act was issued and subsequently served on the assessee on 28.8.2008 which is beyond the period of four years from the end of the relevant assessment year (2002-03). Such an allegation is admittedly absent in the reasons recorded and on facts there has in fact been no such failure on the part of the Assessee, so as to attract the proviso to Sec.147 of the Act. In our considered view the AO merely opened the reassessment proceedings under section 147 on the basis of changed of opinion which is not permissible in the eyes of law. The law is well settled on this issue. As the proceedings for the AY 2002-03 have to be judged on the basis of rea....
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....so to s. 147 prescribes limits of four years in respect of cases other than those covered under the four contingencies and no period of limitation has been provided for cases covered under the four contingencies contained in the proviso-In respect of those contingencies, one can fall back on s. 149 for the purpose of finding out the limits within which such notices can be issued by the authority- Limitation prescribed under s. 149 cannot be implied when the case does not come within four contingencies under the proviso to s. 147- Even where the assessee is in default, unless the case comes under cls. (ii) and (iii) of s. 149(1)(a) no notice can be issued after expiry of four years-Sec. 151 may have application only in respect of s. 149, and it cannot stretch its application to s. 147, proviso, in relation to cases other than assessee's default-In the instant case assessee had claimed certain reliefs which were allowed-Admittedly, there is no allegation that the amounts now sought to be taxed were not disclosed-On the other hand, these were disclosed but claimed to be non-taxable-Therefore, it cannot be said that there was any omission or failure to disclose fully and truly the mate....
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....academic and in fructuous and we dismiss the same as having become in fructuous. 10. In the result, assessee's appeal is allowed. Coming to Revenue's appeal in ITA No.2161/Kol/2013 for A.Y.02-03 11. Since we have quashed the initiation proceedings in assessee's appeal in ITA No.1841/Kol/2013 for A.Y. 2002-03, Hence, ground raised by Revenue become in fructuous and do not require any adjudication. Therefore, we dismiss Revenue's appeal as in fructuous. 12. In the result, Revenue's appeal is dismissed. Coming to assessee's appeal in ITA No.1897/Kol/2013 for A.Y. 03-04. 13. Grounds raised by assessee per its appeal are as under:- "1. That the Ld. CIT(A) has erred in directing the AO for disallowing benefit u/s. 10B for manufacture and export of handicrafts. 2. That the Ld. CIT(A) has grossly erred in confirming the action of AO in treating the interest income of Rs. 22,69,100/- as 'income from other sources' instead of 'Business Income' thereby denying the benefit of exemption u/s. 10B on the same." 14. At the time of hearing Ld. for the assessee has stated that he has instructed by assessee not to press the ground No.1. Hence, same is dismissed as not....
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....ny indirect or incidental profit cannot be regarded as profit earned out of main business activity. Even for the purpose of claim of deduction u/s. 10A it has been held that interest is not profit 'derived from' industrial undertaking as there is no direct nexus between income and the undertaking. Therefore, such interest is not eligible for exemption u/s. 10A. I refer to the following cases upholding the above decision: 1. CIT vs. Menon Impex (P) Ltd. (Mad) 259 ITR 403 2. India Comnet International vs. ITO (Mad) 304 ITR 322 6.1.2 In view of the above discussions I dismiss ground no. 5 of the appeal and confirm the assessment made by the AO." Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 17. Before us Ld. AR submitted that interest income was earned on the margin money deposit in bank for the purpose of availing the credit facilities from the bank. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 18. We have heard both the parties and perused the records especially the impugned order and the case laws cited therein and also by the learned Counsel of the assessee. From the pe....
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.... way of fixed deposits, another portion of amount was invested by way of loan to sister concern which was deriving interest or consideration received from sale of import entitlement, which was permissible in law. There was a direct nexus between this income and income of business of undertaking. Though it does not par take character of a profit and gains from sale of an article, it was income which was derived from consideration realized by export of articles. In view of definition of 'Income from Profits and Gains' incorporated in Subsection (4), assessee was entitled to benefit of exemption of said amount as contemplated u/s 10B of Act. Therefore, Tribunal was justified in extending benefit to aforesaid amounts also. We do not find any merit in these appeals. Therefore, first substantial question of law raised in ITA No.428/2007 was answered in favour of revenue and against assessee and first substantial question of law in ITA No.447/2007 was answered in favour of assessee and against revenue. While computing eligible deduction u/s 10B/10A of Act entire profits including interest earned from business of undertaking was to be considered." 18.1 We also find that the aforesaid ju....
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....h profits and gains as derived by 100% EOU from the export of articles or things or computer software. The substituted Sub-section (4) provides the manner for the computation of deduction which says that profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking and not the profits and gains from export of articles. Therefore, profits and gains derived from export of articles are different from the income derived from the profits of the business of the undertaking. The profits of the business of the undertaking includes the profits and gains from export of the articles as well as all other incidental incomes derived from the business of the undertaking. It is important to note that similar provisions are not there while dealing with computation of income under Section 80HH of the Act. However the specific provision of Section 80HH expressly excludes this type of incomes. Therefore, in view of the aforesaid provisions, it is inferred while computing the deduction under section 10B of the Act, it also provides for deduction for other business income of the undertaking. 18.2 We also rely i....
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....k in order to avail the packing credit facility. There is a direct nexus between interest income and the income of the business of the undertaking. Indeed the interest income does not par take the character of a profit and gains from the export of an article, but it is the income which is derived in the course of the business. In view of the definitions of 'Income from Profits and Gains' incorporated in Sub-section (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated u/s. 10B of the Act. Hence the ground raised by the assessee is allowed. 19. In the result, assessee's appeal is partly allowed. Coming to Revenue's appeal in ITA No.2162/Kol/2013 for A.Y.03-04. 20. Sole issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for Rs. 2,53,06,790/- by disallowing the exemption u/s. 10B of the Act on the ground of holding tea blending activity as non-manufacturing. 21. In the course of assessment proceedings, AO observed that the activity of the assessee is blending / mixing and adding additives in the manufacturing of tea and accordingly the deduction u/s. 10B was claimed. However....