TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 233
X X X X Extracts X X X X
X X X X Extracts X X X X
....evious year. For this, assessee has raised various grounds which we need not to reproduce. 3. Brief facts are that the assessee is a company registered and located in NEPZ Special Economic Zone, involved in manufacture and export of printed circuit boards. The assessee is claiming exemption u/s.10A of the Act, in respect of 100% of profits and gains derived from export of articles or things or computer software for a period of 10 consecutive assessment years beginning with assessment year relevant to the previous year in which the unit begins to manufacture or produce such articles or things of computer software. According to AO, the proceeds in respect of export turnover to the tune of Rs. 41,63,08,042/- was not realized within six months from the end of the previous year and hence, the same was adjusted from the export turnover for arriving at the amount of exemption claimed u/s.10A of the Act. The assessee explained that the AO has taken the amount of export proceeds not realized incorrectly as Rs. 41,63,08,042/-, whereas as per Form No.56F (Note No.4), the amounts outstanding at the end of the year is Rs. 22,51,13,218/- pending realization at the end of six months from the yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te to India the full export value of goods or software within a period of twelve months from the date of export. Reserve Bank has also been empowered to extend the said period beyond twelve months. The Bank has also been empowered to direct, if necessary, that a unit shall cease to be governed by provisions of sub-regulation (2) and in such a case the unit shall be governed by sub-regulation (1). The ld.counsel also took us through RBI Circular No.91 dated 01.04.2003 and took us through para 'A' wherein the treatment of pending realization of consideration of export proceeds and how to give treatment to the same and the same reads as under:- "Realisation of export proceeds In terms of para 11(c) of AP(DIR Series) Circular No.28 dated March 30, 2001, units situated in Special Economic Zones have been permitted to realize and repatriate to India the full value of goods or software within a period of twelve months from the date of export. It has now been decided to remove the stipulation of twelve months or extended period thereof for realization of export proceeds. Accordingly, there shall be no prescription of any time limit for realization of exports made by units in SEZs. How....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2008, order dated 20.04.2011. 7. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the undisputed fact is that as per auditor's certificate Form No.56F, the aggregate amount of Rs. 22,51,13,218/- was pending realization at the end of six months from the year end. With respect to the consideration of export proceeds pending realization, whether the assessee is entitled for deduction u/s.10A of the Act in relation of export proceeds not received in convertible foreign currency in India, we have gone through the provisions of section 10A(3) of the Act and the relevant reads as under:- 10A(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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....., supra wherein the Tribunal has considered this very issue and allowed the claim of assessee by following the circular of RBI applicable to the provisions of section 10A of the Act, by observing in para 8 as under:- "8. Now coming to the facts of the case, it is fairly admitted by the learned A.R. that the amount in question was brought into India beyond a period of six months from the end of the previous year. He relied on the order passed by the Mumbai Bench of the Tribunal in M/s.Shangold India Ltd. Vs. ITO - ITA No.6041/Mum/2002 dated 6th May, 2009 in which the Tribunal noted that for the assessment year 2004-2005 the Reserve Bank of India, being the competent authority as per sub-section (3), has extended the period. Though this order was passed in the context of section 10A, the learned A.R. contended that the same would be applicable for calculating relief u/s.10B also. On a specific query, the learned A.R. could not place on record the full text of Circular of Reserve Bank of India on which he has placed reliance. The ld. AR candidly accepted that the matter be restored to the file of Assessing Officer with the direction to decide this aspect in the light of the RBI Cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the total income should be computed as envisaged under the Act and there can be no concessions or benefits which allow the assessee to violate other provisions of the Act and claim them as deduction. 2.3 The learned CIT(A) failed to appreciate that the disallowances are on account of the infringement provisions contained in the Act and cannot be taken for the benefit of the assessee. 2.4 The learned CIT(A) failed to consider the judgment of the Ahmedabad Tribunal in the case of Rameshbhai C Prjapati (2013) 140 ITD 488 (Ahd) relied on by the Assessing Officer. 9. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO noted from the computation of total income that the assessee has added back the disallowances in the total income of the assessee as under:- Particulars Amount (in Rs.) Disallowance u/s37 - Donations 1,05,501 Disallowance u/s 43B 10,35,690 Disallowance u/s 36(i)(va) 26,93,729 Disallowance u/s 40(a)(ia) 1,50,000 Disallowance u/s.40A(7) 4,79,493 Disallowance u/s 40A(3) 91,496 TOTAL 45,55,909 Accordingly, the AO disallowed the deduction and added the same to the returned income of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Allahabad High Court that the disallowances made u/s.32, 40(a)(ia), 40A(3), 43B etc., of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under chapter VI-A is admissible on the profits so enhanced by the disallowances. The ld.counsel stated that the CBDT Circular No.37 of 2016 categorically states that no appeal should be filed by the Department before the Tribunal on this issue or in case, the same has been filed, the same should be withdrawn or not pressed upon. When this was confronted to ld.CIT-DR, he could not controvert the stated fact position. 11. After hearing both the sides, we have gone through the CBDT Circular No.37/2016, dated 02.11.2016 which reads as under:- Circular No.37/2016, dated 02-11-2016 Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia) , 40A(3), 43B etc., of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned. (K. Vamsi Krishna) ACIT (OSD) (ITJ) CBDT, New Delhi In view of the above Circular, we affirm the order of CIT(A) and this issue of Revenue's appeal is dismissed. 12. The second issue in this appeal of Revenue is as regards to the order of CIT(A) directing the AO to exclude the telecommunication expenses from the export turnover as well as from the total turnover while computing the claim of deduction u/s.10A of the Act. For this, the Revenue has raised Ground Nos.3.1 & 3.2 which need not to be reproduced. 13. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the AO while framing assessment has not reduced the telecommunication expenses of Rs. 3,55,33,215/- from the total turnover of the assessee while reducing the same from the export turnover for the purpose of computation of deduction u/s.10A of the Act. The CIT(A) excluded tele....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er period of 5 years upto 31.12.2012 19.02.2008 In view of the above, the CIT(A) noted that the commercial production started in the year 1999-2000 and thereby he allowed 100% deduction by observing in par 6.4 as under:- 6.4 I have carefully considered the facts in issue, the view taken by the AO, the arguments advanced by the appellant and material on record. The provisions of s.10A availed by the appellant are in respect of provisions existing when it commenced commercial production in the year 1999-2000. On the other hand the provisions of s.10A(1A) restricting the deduction to 50% of the profit applies to such undertakings where commercial production was commenced on or after 1.4.2003 in any SEZ in terms of s.10A/1A) of the Act. In the case of the appellant the assertions made with regard to commencement of production /manufacture is verifiable from the records as listed in para 6.2. Accordingly the assumption made by the AO is erroneous and not supported by facts. Therefore the plea of the appellant that it is eligible for such deduction for a period of 10 years from the commencement of commercial production in the year 1999-2000 relevant to A.Y.2000-2001 is upheld. The AO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated in India is Rs. 5,36,973/-. He stated that the total sales to SEZ units located in India against Form H is Rs. 24,36,984/- thereby total claim made u/s.10AA of the Act is Rs. 29,73,956/-. The ld.counsel before us, drew our attention to Explanation 1(i) to Section 10AA of the Act, wherein the definition of export turnover is given and the same reads as under:- 'export turnover' means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India; He also drew our attention to the definition as given in the Special Economic Zones Act, 2005 which reads as under:- Further, it is also defined that, 'export in relation to the Special Economic Zones' means taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise; He further stated As per S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear by the provisions of Section 53 of the SEZ Act, which states that a Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations'. 30. In fact, the CBEC issued a clarification vide Circular No. 1001/8/2015- CX.8 dated 28.4.2015 with regard to rebate of duty on goods cleared from DTA to SEZ, which clearly explains the concept of a deemed export and also states that the provisions of the SEZ Act shall have overriding effect of the provisions of the Income Tax Act in case of any inconsistency. 31. In the instant case, there was no inconsistency. Rather, the provisions of the Income Tax Act resorts to the provisions of the SEZ Act while considering as to whether the assessee would be entitled for the benefit under Section 10A or 10B of the Act. 32. It is argued by the learned Senior Standing Counsel appearing for the respondent Revenue that the provision, being a beneficial provision, requires to be strictly interpreted in favour of the Revenue. 33. However, the law has been settled by the Constitution Bench of the Hon'ble Supreme Court in the case of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o SEZ units located in India is the tune of Rs. 24,36,984/- and these are penultimate in the course of exports and the export documents, the assessee is the deemed exporter. Further, it is an undisputed fact that the sale consideration is released in convertible foreign exchange and assessee also claimed exemption u/s.10AA of the Act as the ultimate objective of this provision is promotion of exports from India and accordingly, such sales are considered as export sales for the purpose of claiming exemption under this section. As this issue is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of Preludesys India Ltd., supra, were are of the view that the assessee is entitled for claim of deduction. Accordingly, we allow the claim of assessee. 24. The second issue in this appeal of assessee is as regards to the order of CIT(A) in disallowing the claim of assessee in regard to provision for marked to market losses. 25. The AO during the course of assessment proceedings noticed that the assessee has made provision for marked to market losses on the basis of earlier years but the AO disallowed the claim on account of reversal of the provision on the gro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1,000.00 2,000.00 b Expenditure (Before Provision For MTM Loss) 750.00 1,500.00 c Profit ( Before Provision } [ a-b] 250.00 500.00 d Less: Provision for MTM Loss 213.81 - e Add: Provision for MTM Loss for PY Written 213.81 f Profit ( After Provision ) as per Books of A/c 36.19 713.81 Taxable income as per income Tax Act 1961 Taxable income as per Income Tax Act 1961 g Profit ( After Provision ) as per Books of A/c 36.19 713.81 h Disallow MTM Provision passed During the Year 213.81 - i Allow MTM Provision Reversed During the Year - 213.81 j Taxable Profit as per Income Tax Act [ g+h-i] 250.00 500.00 Note: 1. It is seen that During the FY 2008-09 (i.e AY 2009-10) Provision for MTM losses on account of Forward Contract has been made in the books of accounts as per the Accounting Standards. However while Computing Taxable profit as per income Tax Act the Prov....