TMI Blog2014 (10) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... s should be satisfied before the benefit under s. 10B(1) of the Act is claimed. - Decided against the assessee. Deduction in respect of amount on sale of packing material to Nambia disallowed – Held that:- The only reason on which they have held that the amount would not be eligible for exemption u/s 10B is packing materials were not manufactured by assessee - the products manufactured by assessee could not have been exported without packing materials, hence, the observation by the lower authorities that it cannot be considered as part of the export turnover is not correct - When a particular article or thing cannot be exported without its container/packing, same has also to be considered as part of the product and consequently has to be treated as part of the export turnover of assessee - the turnover being part of the export turnover of the assessee would be eligible for deduction u/s 10B – Decided in favour of assessee. - ITA No. 205/Hyd/2013 - - - Dated:- 16-9-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Shri C.P. Ramaswamy For the Respondent : Shri Solgy Jose T. Kottaram ORDER Per Saktijit Dey, J. M. This appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as on going through the provisions contained u/s 10B as a whole, AO opined that the intention of the legislature from section 10B is to give benefit of deduction attributable to export of goods or articles but not entire sales of undertaking. AO was of the view that though as per the exim policy sale by one 100% EOU to another EOU may be treated as export but as per section 10B it cannot be treated as export sale under the IT Act. Further, referring to Circulars No. 657 684 of CBDT as well as the provision of section 10B which was amended w.e.f. 01/04/03, AO held that under the amended provisions of section 10B deduction is allowable only on exports out of India with the conditions that export profits are brought into the country within a period of 6 months from the end of the previous year. Accordingly, AO conclude that as the assessee has not directly exported the sales amounting to ₹ 3,37,14,685, which was sold to another EOU within the country, assessee would not be eligible for claim of exemption on the said turnover. AO also noted that out of the total export turnover claimed of Rs. ₹ 11,04,52,037, only the amount of ₹ 4,49,00,628 is received in conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Economic Zone for fulfilling the terms and conditions mentioned in LOP. - Sales made from one 100% EOU to another 100% EOU. Since all the three conditions were fulfilled by the appellant, it is requested that the unit can be considered for these sales as Export Sales. It is further explained that as per Foreign Trade Policy, Para Nos. 6.10, 6.11 (a), 6.12(a) and 6.19 it is clearly mentioned that sales made by an 100% EOU Unit to another 100% EOU Unit can be eligible for 10B exemption even though there is no foreign currency I routed therein. This contention of the appellant was already rejected by the AO on the ground that as far as SEZ, Development Commissioner, Foreign Trade Policy Etc are concerned; it may be entitled for exemption, but in my considered opinion, when there is a clash with Income Tax provisions, it would not survive, i.e., it is not entitled for exemption under section 10B. In this context, it is important to note here that the AP High Court in the case of Swayam Consultancy (P) Ltd vs. ITO, reported in (2011) 63 DTR 205 (AP) has held that in the circumstances stated by the appellant, it is not eligible for exemption under section 10B of the IT Act, 1961. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders of the revenue authorities. There is no dispute to the factual aspect that the turnover of ₹ 3,37,46,108 represents sales made by assessee to two 100% EOUs inside the country against Indian currency, who in turn had actually exported the goods outside India. It is the contention of the learned AR that as per the exim policy sales made to a 100% EOU should also be considered as export sales and accordingly allowable as deduction u/s 10B of the Act. However, on a plain reading of provisions of section 10B as a whole and specifically sub-section (3) of section 10B, it becomes clear that assessee will be eligible for deduction if sale proceeds of articles or things exported out of India are received in convertible foreign exchange within a period of six months or further time as may be allowed. It is a fact on record that in the present case, the conditions of sub-section (3) of section 10B has not been fulfilled in respect of the turnover of ₹ 3,37,46,108 sold to two other 100% EOU in India. The Hon ble AP High Court while examining identical nature of dispute of disallowance of exemption u/s 10B on sales made to another 100% EOU analysed the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eligibility conditionalities. The intention of the Parliament, in granting benefit to the units in free trade zones, special economic zones and EOUs, is to allow the benefit of deduction only when the articles or things or computer software are actually and factually exported out of India for foreign currency. This is made very clear by the Explanations to other such similar sections conferring the benefit of deduction of profits. For ready reference, they are shown in the following table. - (Emphasis, italicized in print, supplied) 9. Secs. 10A, 10AA, 10B and 80HHC of the Act allow an assessee to claim deduction of profits from export of articles. These provisions, in effect, deal with different categories of eligible undertakings and establishments engaged in the export of articles and things in various locations. The Explanation to these provisions defines/explains the export turnover . The freight and telecommunication charges incurred in connection with the delivery of articles or things outside India during the course of export cannot be reckoned as export turnover . This clearly indicates that when the profits from exports are allowed as deduction, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agent of a foreign buyer, does not amount to export out of India either under the Customs Act or under the IT Act. The AO, the appellate authority and the learned Tribunal appreciated the principle of law and applied it correctly. The appeal is misconceived. The ratio laid down by the Hon ble AP High Court, as aforesaid, squarely applies to assessee s case, hence, assessee will not be entitled for exemption u/s 10B in respect of turnover of ₹ 3,37,46,108 sold to 100% EOU in India. The contention of the ld. AR that decision of the Hon ble AP High Court being factually distinguishable will not apply to assessee s case, in our view, is devoid of merit. At least in the case of Swayam Consultancy (P) Ltd. (supra) assessee had taken a plea that the 100% EOU to whom goods were sold is the agent of foreign buyer, hence, the sale should be considered as a sale directly made to foreign buyer. Still then Hon le High Court held that it cannot be said as export sale. Whereas, in case of assessee it is a sale simpliciter to another 100% EOU within the country. So far as the decision of the ITAT, Ahmedabad Bank (supra) we have to observe that the said decision was rendered in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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