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2022 (6) TMI 264 - ITAT RAJKOTRevision u/s 263 - CIT noted from the records that the assessee had claimed deduction of its profits derived from exports with respect to its unit set up in Special Economic Zone (SEZ) u/s. 10AA which deduction he noted had not been examined and verified by the A.O.- No queries with respect to the said claim except for asking for a calculation of the quantum of deduction and accepting the revised calculation furnished by the assessee to it - contention of assessee before us was that it had been explained to the Ld. PCIT that the export incentive was not of the assessee but related to a vendor of the assessee who had passed on the benefit to the assessee - HELD THAT:- We agree with the assessee that these incentives merely tantamounted to reduction in purchase cost of the assessee and were in no way earned on account of the manufacturing activity carried on by the assessee. The decision in the case of Liberty India Ltd. [2009 (8) TMI 63 - SUPREME COURT] holds export incentives of assessee’s earned on account of the policy of the Government in the course of carrying out its business activities as not being eligible to deduction as not being derived by the undertaking of the assessee but being earned on account of policy of the government. In the present case, since these export incentives have admittedly not been earned by the assessee, the decision of the Hon’ble Apex Court in the case of Liberty India Ltd. does not apply to the facts of the present case. In fact we agree with the assessee that this excise duty refund earned by the vendor of the assessee company and passed on to the assessee merely resulted in reduction in purchase cost of the assessee and higher profits on account of the same were therefore eligible to deduction u/s. 10AA of the Act. The order of the Ld. CIT denying the assessee deduction u/s. 10AA on the export incentive is therefore set aside. Claim of deduction u/s. 10AA on domestic sales undertaken within SEZ - contention of the assessee before us was that these export had been undertaken through a third party i.e. M/s. Glonet Marketing Pvt. Ltd., Mumbai and this export was permissible under the SEZ policy - HELD THAT:- The assessee had claimed deduction of profits earned from sales made to one M/s Glonet Marketing Pvt. Ltd. , which sales was in accordance with the SEZ laws, who in turn had exported these goods. In short the assessee had claimed deduction on indirect exports - As in view of the decision of the Hon’ble Apex Court in the case of Metal Closures (P.) Ltd. . [2019 (1) TMI 228 - SC ORDER] no iota of doubt that the finding of the ld. CIT on this aspect is not in accordance with law. The Hon’ble Apex Court having clearly and categorically held that deemed export made through third parties also qualified as export for the purposes of deduction u/s. 10B of the Act, the assessee in the present case being placed in identical set of facts was entitled to and had rightly claimed deduction on the indirect exports made by it amounting to Rs. 396.22 lakhs. The order of the Ld. CIT denying the assessee deduction on the same u/s. 10AA of the Act is therefore held to be not in accordance with law and set aside. Thus assessee’s claim of deduction u/s. 10AA on both the export incentives and profits earned from indirect exports was in accordance with law. The order of the ld. CIT passed u/s. 263 holding that the assessment order allowing deduction on these two counts to be erroneous and thereafter denying the assessee deduction on the same is directed to be set aside. Appeal of assessee allowed.
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