TMI Blog2011 (4) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 3, 2010 of the Commissioner of Income-tax (Appeals)-IV, Hyderabad, was dismissed holding that the appellant is not entitled to claim deduction under section 10B of the Act. 2. The appellant is engaged in the manufacturing and assembling of wire and cable drawing/manufacturing machines. It is an assessee within the jurisdiction of the respondent. The assessee filed income-tax return for the year 2007-08 declaring loss of Rs. 45,469. Though the surplus, as per the profit and loss account, is Rs. 1,29,79,828, the assessee claimed deduction of Rs. 1,28,97,161 under section 10B of the Act. They contended that they are a 100 per cent. export-oriented unit (EOU) as approved under the scheme of the Government of India, and they are entitled for deduction under section 10B of the Act. The Assessing Officer noticed that the goods were cleared from the factory on November 4, 2006 and, as per the invoicecum-challan, the place of delivery is at Attola Village in Silvasa (Daman and Nagar Haveli Union Territory). During the scrutiny of the return, the assessee pleaded that the machinery was delivered to M/s. Chandra Proteco Ltd. (the agent for short) under section 143(3) of the Act on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant, placing reliance on Central Coal Fields Ltd. v. State of Orissa, AIR 1992 SC 1371, CIT v. Silver and Arts Palace [2003] 259 ITR 684 (SC), Ram Babu and Sons v. Union of India [1996] 222 ITR 606 (All) and CIT v. Silver and Arts Palace [2001] 248 ITR 69 (Raj), would contend that section 10B of the Act is intended to extend the benefit of exemption to industries and, therefore, it should be construed liberally. He would submit that the machinery intended for export is delivered to the agent of Proteco and, even though it is delivered in India at Silvasa, it should be deemed to be delivery to a foreign buyer, and a delivery on export. He points out that the payment was made in convertible foreign exchange as evidenced by the Foreign Inward Remittance Certificate (FIRC) issued by the State Bank of Hyderabad and, therefore, the learned Tribunal erred in rejecting the contention of the appellant. According to the counsel, the FIRC is conclusive proof of export and, therefore, the assessee is entitled for claiming deduction under section 10B of the Act. 5. Exports and imports are regulated by the Customs Act, 1962 which, among others, repealed the Sea Customs Act, 1878. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act though the term "export turnover" is explained/defined by four provisions, namely, the Explanations to sections 10A, 10AA, 10B and 80HHC of the Act. Be it noted, section 10A of the Act enables an undertaking in a free trade zone to claim deduction of profits and gains from the export of articles or things or computer software for a period of 10 consecutive years. Similarly, under section 10AA of the Act, a newly established unit in a special economic zone can claim deduction of 100 per cent. profits and gains derived from the export for a period of 10 years and, under section 10B of the Act, an assessee can claim deduction of profits and gains as are derived by 100 per cent. EOUs from the export of articles or things for a period of 10 years. Section 80HHC of the Act is to the effect that an assessee, being an Indian company engaged in the business of "export out of India", may be allowed deduction of the profits to the extent specified in section 80HHC(1B) of the Act. The Explanation to all these provisions has a definite bearing in understanding section 10B(3) of the Act on which the petitioner's counsel placed considerable emphasis. For ready reference, we quote the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices 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 ; export turnover means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India ; export out of India shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situated in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962) ; Explanation (b) export turnover means the sale proceeds received in, or brought into, India by the assessee in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and had taken the view in Ram Babu and Sons v. Union of India [1996] 222 ITR 606 (All), that this Explanation means that, for the purpose of this section, there will be no export out of India if two conditions are cumulatively fulfilled, viz., (a) it is a transaction by way of sale or otherwise in a shop, emporium or establishment situate in India, and (b) that it does not involve clearance in any customs station as defined in the Customs Act. This view of the Allahabad High Court had been consistently followed by several other High Courts, includ- ing the Rajasthan High Court itself in ITO v. Vaibhav Textiles [2002] 258 ITR 346 (Raj)." 11. It is the admitted position herein that initially Proteco agreed to take delivery of wire/cable drawing machines at Hyderabad ex-factory, subse- quently Proteco sent a communication advising the appellant to deliver the machinery to their agent at Silvasa which is also a 100 per cent. EOU, the payment was received in convertible foreign exchange as evidenced by the FIRC, and the goods were delivered to the agent under a proforma invoice in the name of the foreign buyer. This transaction of manufacturing machines in India by a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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