TMI Blog2011 (7) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is why inter-unit sales in the Export Processing Zone are not treated as export within the meaning of section 10A of the Income-tax 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. - 217 AND 232 OF 2010 - - - Dated:- 27-7-2011 - C.N. RAMACHANDRAN NAIR AND BHABANI PRASAD RAY, JJ. P.K.R. Menon and Jose Joseph for the Appellant. A.K. Ganguly for the Respondent. JUDGMENT Ramachandran Nair, J. The respondent-assessee is an industrial unit engaged in manufacture and export of high intensity discharge lamp, igniters, luminaries, control gears etc. located in the Cochin Special Economic Zone. Being an export unit within the Special Economic Zone, assessee is entitled to Income-tax exemption under section 10A of the Income-tax Act on the profit earned on the export of goods received in convertible foreign exchange for a period of ten years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing for the Revenue and Senior counsel Sri A.K. Ganguly appearing for the respondent-assessee. 2. Before proceeding to consider the case on merits, what we notice from the Tribunal's order is that the assessee filed one appeal before the Tribunal with a delay of 627 days and the other with a delay of 509 days. Inspite of objection raised by the department, the Tribunal has condoned the delay accepting the explanation of the assessee that the assessee took one to one and a half years to take "better opinion from tax experts" on the issues involved in the appeal. We are surprised in the light way the Tribunal has condoned the delay. In our view, the appeal before the Tribunal is certainly an afterthought on a matter apparently accepted by the assessee. However, since the Tribunal has exercised the discretion and allowed the delay condonation petition however unsatisfactory it may be, we proceed to ignore the same and consider the appeals on merits. 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 Special Economic Zone within India under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89 Taxman 303. Assessee's counsel relied on the definition of "export" contained in section 2(m)(iii) of the Special Economic Zones Act, 2005 which is as follows : "(m) "export" means (i) taking goods, or providing services, out of India, from a Special Economic Zone, 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 Special Economic Zone." Reference is also made to Foreign Trade Policy 2004-2009 issued by the Director General of Foreign Trade wherein "deemed export" is explained in clause 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 Customs, New Delhi, on 30-7-2003 wherein there is a statement that Special Economic Zone will be considered as foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of Domestic Tariff Area sales or inter-unit sales within the Zone or units in other Zones. In fact all Special Economic Zones are allowed to make 25 per cent sales to Domestic Tariff Area and the profit derived from such sales are not entitled to exemption. Exemption under section 10A(3) is specifically geared to profits on actual exports, that too, made against receipt of convertible foreign exchange. We are of the view that if the provisions of the Special Economic Zones Act, 2005, are brought into extend the exemption on profits derived on inter-unit sale made by industries within the Export Processing Zone, the court will be re-writing 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 Special Economic Zone 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 me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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