TMI Blog2014 (9) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... no doubt omitted by Finance Act, 2001, with effect from 01-04-2002. But the earlier proviso was only for fixing a limit of 25% on domestic sales, for computing profits and gains derived from exports. Here on the other hand, claim of the assessee is not on domestic sale, but on export sales of goods purchased as such by it. Sections 10A(i) and 10B(i) are no different, since these are similarly worded. Learned CIT(A) in our opinion, fell in error in not following the decision of Co-ordinate Bench. Assessee had already preferred a claim before AO for deduction under section 10B, though only on manufactured goods. The claim made on trading goods exported was also under same section. It cannot be considered as a claim of different genie. It is also a fact that the AO never had an opportunity to verify this claim. In all fairness we are of the opinion that the claim can be looked afresh by the AO. We therefore, set aside the order of learned CIT(A) on this issue and remit it to the AO for consideration afresh in accordance with law. Expenditure on freight and insurance was excluded from export turnover - Held that:- Definition of ‘export turnover’ in explanation(iii) to 10B(2) specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,24,502 Total income ₹ 7,65,10,622 Less: Set off of unabsorbed depreciation ₹ 2,29,70,688 Total income ₹ 5,35,39,934 Tax thereon Rs.1,60,61,980 Surcharge ₹ 16,06,198 Education cess Rs. 3,53,363 Total payable Rs.1,80,21,541 Less: TDS Advance tax ₹ 12,35,270 Balance payable Rs.1,67,86,271 Add: Interest u/s 234B Rs. 52,94,019 Total Payable Rs.2,20,80,290 Less: Tax paid u/s 141A ₹ 19,16,249 Balance payable Rs.2,01,64,041 No doubt, the AO has curtailed the claim of deduction under section 10B substantially vis- -vis the claim of the assessee. However, set off of depreciation has been done after computing the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be eligible for deduction, once it was exporting goods manufactured by it. 10. Per contra, learned DR submitted that decision of Special Bench in Maral Overseas Ltd.,(supra), was on the limited aspect of export incentives and not traded goods. As for the decision of Mumbai Bench in the case of M/s T Two International (P) Ltd., was concerned learned AR submitted that it was for assessment year 2001-02, prior to amendment of definition of export turnover which came into effect from 01-04-2002. 11. We have perused the orders and heard the rival contentions. There is no dispute that the claim on traded goods to be considered as part of its business was first made by the assessee before the CIT(A). Assessee had never made such a claim in its return or before the AO. Be that as it may, assessee is making this claim based on the decision of Mumbai Bench in the case of M/s T Two International (P) Ltd., Claim in that case was also on deduction under section 10A on profit from export of traded goods. It was held by the Co-ordinate Bench as under, at para-10 of its order; 10. The learned CIT(A) has not granted deduction to the assessee insofar as it relates to the profit from exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial undertaking, we are of the considered opinion that the learned CIT(A) was not justified excluding the export of trading in goods worth ₹ 3.23 Crores from the qualifying exports . 12 As for the claim of learned DR that there was amendment to the definition of export turnover with effect from 01-04-2002, we are unable to find any, that has a bearing on the issue before us. Second proviso to section 10B(1) as it earlier stood was no doubt omitted by Finance Act, 2001, with effect from 01-04-2002. But the earlier proviso was only for fixing a limit of 25% on domestic sales, for computing profits and gains derived from exports. Here on the other hand, claim of the assessee is not on domestic sale, but on export sales of goods purchased as such by it. Sections 10A(i) and 10B(i) are no different, since these are similarly worded. Learned CIT(A) in our opinion, fell in error in not following the decision of Co-ordinate Bench. Assessee had already preferred a claim before AO for deduction under section 10B, though only on manufactured goods. The claim made on trading goods exported was also under same section. It cannot be considered as a claim of different genie. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. AO also noted that assessee had received the consideration for sale from such merchant exporters only in Indian rupee and there was no concept of deemed exports in section 10B of the Act. Learned CIT(A), accepted the claim of the assessee, noting that Co-ordinate Bench decision in Tata Elxsi Ltd., case (supra), though a detailed and well reasoned one was given prior to the decision in assessee s case for AY: 2006-07. He preferred to follow the latter. Observation of the Co-ordinate Bench in revenue s appeal for AY: 2006-07 (ITA No.814(B)/2009 dated 19-03-2010) on this issue reads as under; The CIT(A) observed from the summary of year wise direct exports and exports made through third parties furnished by the assessee that it has been consistently indulging in export through third party mainly M/s S.K.International and M/s ELE Stones (Ind.) Ltd., On receipt of confirmed export orders from respective overseas custo0mers for export cut and polished granite slabs, titles, slates etc., the above parties placed purchase orders on the assessee along with disclaimer certificates declaring that they will not be claiming export benefit on the third party export sales made by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we come to the conclusion that the assessee cannot claim the deduction u/s 10B in respect of the so-called exports made through third parties/export houses . 17. Thus in the case of Granit Mart Ltd.,(supra), Co-ordinate Bench decision in Tata Elxsi Ltd., (supra)has been considered. However, in the former decision dated 19-03-2010, though it was in assessee s own case, and though a reference has been made at para two to Tata Elxsi Ltd., decision, this was in relation to the claim of the assessee for excluding transport insurance charges both from export turnover and total turnover. 18. In any case, we find that Hon ble Kerala High Court in the case of Electronic Controls Discharge Systems (P)Ltd., (supra), in a judgment rendered on 27th July, 2011 has considered the very same issue. Their Lordship held as under at para-3 to 6 of the judgment. 3. The very short question that arises for consideration is whether assessee is entitled to exemption on the profits derived on the sale of components to an industrial unit in another SEZ within India under s. 10A(3) of the IT Act, which provides for exemption on the profit derived on export sale proceeds of articles or things or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose of this sub-section, the expression competent authority means the Reserve Bank of India or such other authority as authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation 2.-The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. (8) Explanation 2.-For the purpose of this section,- (ii) convertible foreign exchange means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder or any other corresponding law for the time being in force; (iv) export turnover means the consideration in respect of export by the undertaking of articles or things or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or providing services, out of India, from a SEZ, by land, sea or air or by any other mode, whether physical or otherwise; or (ii) supplying goods, or providing services, from the Domestic Tariff Area to a Unit or developer; or (iii) supplying goods, or providing services, from one Unit to another Unit or Developer, in the same or different SEZ, Reference is also made to Foreign Trade Policy 2004-2009 issued by the Director General of Foreign Trade wherein deemed export is explained in cl. 8.1 as follows : Deemed Exports refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. Specific reference is made to Notification issued by the Ministry of Finance, Central Board of Excise and Customs, New Delhi, on 30th July, 2003 wherein there is a statement that SEZ will be considered as foreign territory for purposes of duties and taxes. Counsel for the assessee has also relied on decision of the Supreme Court in Satyawati Sharma vs. Union of India (2008) 5 SCC 287. Even though this decision is on Rent Control Act, assessee s counsel submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are of the view that if the provisions of the SEZ Act, 2005, are brought in to extend the exemption on profits derived on inter-unit sale made by industries within the export processing zone, the Court will be rewriting the legislation which is exactly what the Tribunal has done. In fact, the unit which purchased components from the assessee must be manufacturing final products and being a unit in the SEZ will be exporting the final product, on which that unit will get exemption on the entire profits which include the value of the components supplied by the assessee. Probably the legislature did not want duplicity in exemption on export profit. That is why inter-unit sales in the export processing zone are not treated as export within the meaning of s. 10A of the IT Act, no matter such transfers are treated as exports for the purpose of customs and excise duty exemption. When the exemption is only on actual profits derived on exports made against receipt in convertible foreign exchange, the Tribunal, in our view, has no justification to extend it to profits received on local sales within India against payment received in Indian rupees. For the above reasons, we are unable to su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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