9911796707
TMI Blog2012 (4) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... & readymade garments. During the assessment year 2001-02, the assessee has claimed income exempt u/s 10B of I.T. Act for three units namely original unit which started production from A.Y. 1992-93, spinning unit no. III which started production from A.Y. 1996-97 and spinning unit no. IV which started production from A.Y. 1999-2000. This is given below in tabular form:- E.O.U. Date of Commercial Production Relevant Assessment Year Exemption u/s 10B claimed up to AY A. Original Unit 01.02.1992 1992-93 2001-02 B. Spinning Unit No. III 01.06.1995 1996-97 2005-06 C. Spinning Unit No. IV 19.08.1998 1999-00 2008-09 3. During course of assessment, the Assessing Officer observed that the first year of operation of original unit was assessment year 1992-93 and as there was loss, as per provisions of Section 10B(3), the assessee company exercised its option not to avail exemption u/s 10B of Income-tax Act, 1961, for assessment years 1992-93, 1993-94 and 1994-95. As such, the first year of its claim u/s 10B was assessment year 1995-96 and the same was admissible up to assessment year 1999-2000 only since the assessee was entitled for deduction only for five consecutive years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next five years. That claim was declined by the Assessing Officer by observing that the amendment, enhancing the number of eligible assessment years to 'ten' did not provide for retrospective operation and, accordingly, the benefit of ten years could not be granted in the assessment year in question." The CIT(A) further stated that in the light of the above facts, the Hon'ble I.T.A.T. has concluded as under :- "In view of the above discussion, we see no merit in assessee's grievance. In our considered view, the assessee having already availed Section 10B benefit of 5 consecutive assessment years, was not eligible for exemption u/s 10B, any further, so far as assessment year 1998-99 is concerned. Accordingly, we confirm the conclusions arrived by the authorities below and decline to interfere in the matter." As per the CIT(A), the verdict in the case relied on by the Assessing Officer has been restricted to assessment year 1998-99, to which the provisions of pre-amended Section 10B applied. The learned Commissioner of Income Tax (Appeals) further stated that it has also been observed by the Hon'ble Bench that the question of extending the tax holiday period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture or produce. That the facts in the case of Tata Tea Limited are different and clearly distinguishable from those in the case of this appellant. I, therefore, adjudicate ground no.1 and ground no. 1(a) in favour of the appellant and direct the AO to allow exemption u/s 10B in respect of the normal computation as well as the computation u/s 115JB, for all the eligible units of the EOU, for a period of ten years, starting from the assessment year in which the respective unit started production. In result all the units of the EOU of the appellant are eligible for exemption u/s 10B, for the year under appeal, which the AO is directed to allow." The CIT(A) further discussed that the entire Section 10B has been substituted by the Finance Act 2000 w.e.f. 01.04.2001. Section 10B(1) as substituted by the Finance Act 2000 w.e.f. 01.04.2001 and as applicable for the year under consideration reads as under:- "Subject to the provisions of this Section a deduction of such profits and gains as are derived by a 100 % Export Oriented Undertaking from export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove proviso would not have been omitted and would have been made applicable to existing units. Similarly, explanation (ii) defining the term "relevant assessment years" was also substituted w.e.f. 0.04.1999, which is reproduced here under : Erstwhile explanation applicable up to 31.3.99. (ii) "relevant assessment year means the five consecutive assessment years specified by the assessee at his option under sub Section (3) of sub Section (5) as the case may be". The substituted explanation w.e.f. 01.04.1999 (ii) "relevant assessment years" means the ten consecutive assessment years referred to in sub Section (3)" This substitution lays down the clear intention of the legislature to provide the benefit of extended period of ten years to all the units, existing or new. When this amendment was brought into effect, the appellant was still eligible for exemption u/s 10B for two assessment years and as such qualified for exemption for the unexpired period of ten years. 6. It is a settled rule of interpretation that no words can be read into a provisions that did not exist. It is for the Parliament to legislate and for the judiciary to interpret the law as enacted by the Parli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the Revenue and argued that the assessee is eligible for deduction u/s 10B of the I.T. Act upto A.Y. 1999-2000 i.e. 8 years beginning with the assessment years in which undertaking began manufacturing i.e. from A.Y. 1992-93. From 1 April, 1998 the law was amended and 8 years were substituted by 10 years, in section 10B(3) of the I.T. Act. The restraint of exemption upto 8 years were also withdrawn. The only question which is to be solved is whether amendment of Finance Act, 1998 will apply to new units established after 01.04.1998 or they will apply to existing E.O.Us also. 9. The learned CIT DR placed reliance on the decision of Tata Tea Limited, 87 ITD 351, and contended that this decision replies two issues namely amendments in statutes are prospective and not retrospective and amended provision does not say that extended period of exemption of 10 years instead of 8 years is applicable to existing units as well. The ld. CIT DR further submitted that the assessee has claimed income exempt u/s 10B of I.T. Act for three units namely original unit which started production from A.Y. 1992-93, spinning unit no. III which started production from A.Y. 1996-97 and spinning un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking is considered only with reference as to whether it constitutes reconstruction or not as provided u/s 80J (4) of I.T. Act which is similar to section 10B(2) of the I.T. Act :- "State of Gujarat v. Saurathstra Cement & Chemical Industries (2003) 260 ITR 181 (SC):- So called new unit is thus not totally independent of assets of existing unit-physical identity with old unit is preserved and the new unit is an expansion of the existing undertaking-Respondent therefore not entitled to exemption." The Hon'ble Apex Court observed in Para 10 that respondent was having two kilns and third is added. This leads to inevitable conclusion that new unit is an expansion of existing undertaking. Once it is held to be a case of expansion, the claim of exemption from electricity duty set up by the respondents, completely falls to the grounds. 13. In present case also assessee initially established spinning unit in A.Y. 1992-93 and one more spinning unit was added in each of two years namely A.Y. 1996-97 & A.Y. 1999-2000. There was no change in the product line of manufacturing. The assessee company had not got permission to set up a new industrial undertaking but the permission was gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be included in the total income of the assessee in respect of any [ten] consecutive assessment years, [* * *] beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things." He further argued that any expansion or addition/alteration of same undertaking will not entitle it for a benefit u/s 10B beyond 10 years, unless the Competent Authority approves it as a new undertaking or a new EOU which is not the case with assessee. As per the learned CIT DR, answer is required to the question as to whether assessee Maral Overseas Ltd. is eligible for claim u/s 10B upto 8 years only or it is eligible upto extended period of 10 years or the claim u/s 10B can be extended even beyond 10 years. Since both issues of allowances of deduction u/s 10B beyond 8 years to the undertaking established in 1992 and the issue of allowance of section 10B to the spinning unit III & IV established in 1996 & 1999 are to be answered by application of section 10B(3) of the IT Act. As per the learned CIT DR, the Tribunal has to decide both of them together u/r 12 of the ITAT rule, 1946 as held in the case of Hukumchand Mills Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Karnataka High Court in case of M/s. DSL Software Ltd. in ITA No. 462 of 2007 dated 12.10.2011 cited by assessee, contention of the ld. CIT DR was that when assessee already enjoyed benefit of 5 years u/s 1OB of the IT. Act upto A.Y. 1997-98, how the amended provisions of section IOB, which were amended from 01.04.1999 could be retrospectively applied to assessee to give it a benefit of deduction from A.Y. 1993-94 to A.Y. 2002-03, is an issue not even considered by Hon'ble Karnataka High Court. 24. Shri Ajay Vohra appeared on behalf of the assessee and submitted that the assessee is 100% export oriented unit which was eligible for deduction u/s 10B in respect of its Sarovar Division and two separate and independent spinning units. He submitted that initially under the provisions of section 10B exemption was available for five consecutive years out of eight assessment years beginning with the assessment year in which the eligible undertaking begins to manufacture or produce article. Thereafter IT Amendment Act, 1998 extended the period of benefit from five years to ten years with effect from 1.4.1999. Proviso to section 10B(3) was also omitted which stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held that in terms of amendment carried out in the year 1999, the tax holiday benefit stood extended for a period ten consecutive assessment years. It was held that on 01.04.1999, when the amended provision came into force by virtue of said provision, the assessee would be entitled to the benefit of tax holiday for 10 consecutive years from the date of production and if the assessee already availed the benefit under the unamended provision and the 10 consecutive years would fall prior to 01.04.1999, then the assessee would not be entitled to the said benefit. It was thus, held that if the said 10 consecutive years from the date of production have not expired prior to 01.04.1999, for the remaining unexpired period, the assessee could be entitled to benefit. 26. In view of the above decision, if the period of ten years from the date of manufacture has not expired as on the date when the amended provision came into force the assessee is entitled to the benefit of tax holiday for period of ten years. Infact, in the aforesaid decision the Court went on to hold that even if the period of five years has expired as on the date of amended provisions but the period of ten years is st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1998-99, which was the 5th consecutive year of deduction. The assessee had thus, already exhausted the five years exemption period in the assessment year 1998-99 and was no longer eligible to claim deduction under the then applicable law. In these facts and circumstances the Tribunal held that exemption could not be allowed to the assessee in the A.Y. 1999-00, since the assessee had already exhausted its eligibility period. 31. Reliance was placed on the following decisions wherein it has been held that various Benches of the Tribunal (whether Special or Division), being lower in judicial hierarchy, are bound to follow the decisions of the High Court: - Kamlakshi Finance Corporation Limited: AIR 1992 SC 711 - Khalid Automobiles v. UOI [1995] 4 SCC (Supl) 653 - Jain Exports v. UOI [1988] 3 SCC 579 - Berger Pains India Limited: 266 ITR 99 (SC) - Asst. CCE v. Dunlop India Ltd.: 154 ITR 172 (SC). - Aggarwal Warehousing & Leasing Limited: 257 ITR 235 (MP) - CIT v. Akshay Kumar Jain: 281 ITR 431(MP) - SAE Head Office Monthly Paid Employees Welfare Trust: 271 ITR 159 (Del) - Bank of Baroda v. H.C. Shrivatsava: 256 ITR 385 (Bom) - Voesta- Alphine Ind. Gmbh v. ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking, and (5) above all, a separate and distinct identity of the industrial unit set up. We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of which exemption of tax under section 15C may be claimed." 34. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Indian Aluminium Limited; 108 ITR 367 wherein the assessee made extensions to its existing factories at Belur and Alupuram in the accounting year relevant to the assessment year in question. In the assessment year 1960-61, the respondent claimed relief under section 15C of the Indian Income-tax Act, 1922, in respect of the additional investments in the form of extensions to the existing factory premises, installation of new plant and machinery, etc., at Belur and Alupuram. The assessing officer refused to allow the relief and the Commissioner of Income Tax (Appeals) dismissed the respondent's appeal. On further appeal, the Tribunal noted that (i) during the previous year, production of aluminium ingots went up by double, that the additional units set up by the respondent cost over Rs. 50 lakhs at Belur and abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation also took quantum leap of Rs. 3.37 crores. 5. Around 800 workers and staff were recruited during the financial year 1995-96 . 38. As regards Unit IV, the ld. Counsel for the assessee submitted that : 1. Additional 16128 spindles were installed taking the total installed capacity to 54528 spindles. 2. The company imported and installed twelve circular knitting machines. 3. The company set up a power plant of 4.25 MV capacity. 4. Readymade garment manufacturing facilities were set up to manufacture additional 6 lacs garments per annum. 5. New unit resulted in total addition to gross block of fixed assets by Rs. 69.43 crores as against 121.01 crores at opening of year. 6. Turnover of company increased to Rs. 224.5 crores as against Rs. 158.37 crores in preceding year. 7. Around 570 workers and staff were recruited during the financial year 1998-99 39. As per the Ld.Counsel for the assessee the new units were duly approved as 100% EOUs by the competent authorities. The permission dated 31.03.1995 bearing No. 141/EOB/61/95 issued by the Ministry of Industry, Department of Industrial Development, Government of India was received for setting up new unit. However, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0B of the Act mandates that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover to the total turnover. Thus, even though sub-section (1) of section 10B of the Act refers to profits and gains as are derived by a 100% EOU, the manner of determining such eligible profits has been statutorily defined in sub-section (4) of that section. 43. He further invited our attention to the finding recorded by the Assessing Officer to the effect that the aforesaid income was treated as business income of the assessee on which deduction u/s 10B cannot be denied in view of the provisions of section 10B(1) read with section 10B(4) of the Act. 44. He further submitted that the decision of the Supreme Court in the case of Liberty India and others v. CIT: 317 ITR 218 relied upon by Revenue is not applicable to the facts of the present case. In that case, the issue before the Supreme Court was with regard to the eligibility of duty drawback for claiming deduction under section 80IB of the Act. The Supreme Court, making a reference to its own decision in the case of Sterling Food (supra), held that duty drawback co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10B(3) of five years was substituted by ten years by the Income Tax Second Amendment Act, 1998. And accordingly, the assessee became entitled for exemption u/s 10-B for a further period of two years i.e. assessment year 2000-01 and 2001-02. Thereafter, with effect from 1.4.2001, the entire section 10B has been substituted by the Finance Act, 2000, sub section (1) of which provides for deduction of profits for 100 % EOU for a period of 10 consecutive years beginning with the assessment year relevant to the previous year in which the undertaking starts its production. As the relevant provisions of exemption u/s 10-B, had undergone various changes, it is worthwhile to narrate the relevant provisions of law as applicable from the year in which this Section was brought into statute. (a) Section 10B was initially inserted by the Finance Act, 1988, w.e.f. 1.4.1989 to provide for a complete tax holiday to 100 % E.O.U. for a period of five consecutive assessment years falling within the block of eight assessment years, subject to fulfillment of certain conditions. (b) The Finance Act 1993 amended Section 10B(4)(iii) with retrospective effect from 01.04.91 to provide that an undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of substituted Section 10B are retrospective in nature. The amended provisions are applicable w.e.f. 01.04.1999 and those substituted are applicable w.e.f. 01.04.2001 and the appellant's claim under the said Section is as per these amended/substituted provisions, as applicable to the respective assessment year. There is no restriction on the existing units for claiming the exemption for a period of ten years. On the contrary the first proviso to the newly substituted Section 10B(1) categorically allows exemption to the existing units for the unexpired period of ten years. Even the Explanatory note relating to the said enactment as reported at 245 ITR St 34 states that an undertaking set up before 31.03.2000 shall be entitled to the deduction for a period of ten years. Though this amendment is effective from 01.04.2001, it specifically allows exemption to existing unit for a period of ten years." 49. Applying the relevant provisions as discussed above, prior to amendment by Income Tax (Amendment) Act, 1998, the assessee was eligible for deduction u/s 10B of the I.T. Act for five consecutive years out of 8 years beginning with the assessment years in which undertaking beg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and applying the amended law, the assessee was clearly eligible for deduction under section lOB of the Act for the extended period. 52. We now discuss the facts in the case of Tata Tea Limited as relied on by the Assessing Officer. 53. The facts in the case of Tata Tea Limited (supra) were that the assessee had started eligible unit in assessment year 1989-90. Deduction under section 10B of the Act was availed by the assessee for five consecutive years i.e. assessment years 1992-93 to 1996-97. The assessee had exhausted its five year tax holiday period available for claiming exemption under section 10B of the Act in the assessment year 1996-97. In the appeal for the assessment year 1997-98, the assessee, however, sought to claim deduction under section 10B of the Act by relying upon the provisions of the said section as amended subsequently by Income-tax (Second Amendment) Act, 1998, w.e.f. 1.4.1999. It was the contention of the assessee that the law, as amended by the I.T. (Second Amendment) Act, 1998 extending the period of tax holiday from five years to ten years, was merely c1arificatory in nature and also applied to the assessee, even though the assessee admittedly and undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1999. The order relied by the learned Authorised Representative in Consindia (P) Ltd. is not applicable inasmuch as in that case the period of eight years expired in asst. yr. 2000-01, whereas the amendment was carried out w.e.f. 1st April, 1999. We therefore hold that the learned CIT(A) was justified in denying the benefit of deduction under s. 1OA." On perusal of the aforesaid, it may be noticed that in the aforesaid case- (i) the assessee had claimed and been allowed deduction for five consecutive assessment years, viz, assessment years 1992-93 to 1996-97. (ii) even the eight years block period for claiming tax holiday for a continuous period of five years had already exhausted in the assessment year 1996-97. (iii) the amendment in section 10B was applicable from the assessment year 1999-2000 and not retrospectively. 55. It is in these circumstances, that the Tribunal held that the assessee was not eligible for claiming tax holiday for the extended period of ten years. It is, however, important to note that in the aforesaid decision the Tribunal also observed that had it been a case where the five years period had not expired at the time of applicability of the amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they extended the benefit of tax holiday from 5 years to 10 years. If it is a case of extension from 5 years to 10 years, the unit, which had the benefit of 5 years automatically, should get the benefit of 10 years if other conditions are fulfilled. The other condition to be fulfilled is ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture. Therefore, the object with which this amendment was introduced is to extend the benefit of tax holiday for a period of 10 consecutive years from the date of commencement of manufacture or production. Before an assessee can claim the benefit of tax holiday, the said law governing the tax holiday should be in force on the first day of the relevant year. Then only he would be entitled to the said benefit. On 01.04.1999 when the amended provision came into force by virtue of said provision the assessee would be entitled to the benefit of tax holiday for 10 consecutive years from the date of production. If the assessee already availed the benefit under the unamended provision and the 10 consecutive years would fall prior to 01.04.1999, then the assessee would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court on the issue, the same is binding on the Special Bench in view of the settled principle of judicial proprietary, as laid down in following cases :- Supreme Court in the case of Dunlop India Ltd.: 154 ITR 172 @ 181: "We desire to add and as was said in Cassell and Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never he necessary for us to say so again that " in the hierarchical system of courts " which exists in our country, " it is necessary for each lower tier ", including the High Court, "to accept loyally the decisions of the higher tiers". "It is inevitable in a hierarchical system of courts that there are decisions of the supreme appellate tribunal which do not attract the unanimous approval of all members of the judiciary ...... But the judicial system only works if some one is allowed to have the last word and that last word, once spoken, is loyally accepted " (See observations of Lord Hailsham and Lord Diplock in Broome v. Cassell). The better wisdom of the court below must yield to the higher wisdom of the court above. That is the strength of the hierarchical judicial system. In Cassell v. Broome [1972] AC 1027, commenting on the Court of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1998 with effect from 1-4-1999. Since the assessee was entitled to exemption in the year in which amendment became effective and operative, the assessee will be entitled to the extended period of exemption because the period of five years had not exhausted up to assessment year 1999-2000. Since the right of the assessee was continuing in the year of amendment and was not lost on the date when the amendment came into existence, the view taken by the learned CIT(A) cannot be upheld." 10.9 So far as the objections of the learned CIT(A) regarding conduct of the assessee-firm in not claiming the exemption in earlier year is concerned, the approach of the learned CIT(A) raising this objection, cannot be legally justified because if the assessee is entitled to any benefit under any statutory provision then the past conduct cannot be relevant particularly when reference to such conduct is not made in the Act. The eligibility of the assessee has to be seen in the year in which the claim is preferred and if in earlier years the assessee waived his right then he cannot be stopped in claiming the benefit in the subsequent years. 10.10 The learned CIT(A) has also observed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B of the Act so long as the new unit set up was approved as an EOU by the designated authority. 61. Applying the relevant provisions of law as applicable during the years, under consideration, and also the judicial pronouncements, as discussed above, we can safely hold that in the assessment year 1999-00 when the period of exemption was extended from five years to ten years, all the three units of the assessee were eligible for deduction u/s 10B of the Act. Each of the units were eligible for exemption under section 10B of the Act, both under the pre-amended law when the exemption was available for five years out of eight years as well as under the amended law when the exemption was extended to ten consecutive assessment years. As the amendment came into force in the assessment year 1999-00, the amended laws became applicable to the assessee according to which all the three eligible units of the assessee became entitled for deduction for a period of ten consecutive assessment years from the date of commencement of manufacture/production by the said eligible undertaking. Furthermore, there is no question of claiming the provision of section 10B to be prospective or retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort oriented undertaking. The expression "undertaking" has not been defined u/s 10B of the Act. The said expression has been explained by the Courts in the context of similar other provisions of IT Act viz. section 15C of 1922 Act, section 80J, 80HH, 80I, 80IA and 80IB of 1961 Act. Hon'ble Supreme Court in the case of Textile Machinery Corporation Limited v. CIT 107 ITR 195 held that the true test is whether the unit claiming deduction is a new and identifiable undertaking separate and distinct from the existing business. It was further held that manufacture or production of articles yielding additional profit attributable to the new outlay of capital is a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability. Following observations of the Court are very much pertinent :- "The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be formed by reconstruction of the old business. Now, in the instant case, there is no formation of any industrial undertaking out of the existing business since that can take place only when the assets of the old business are transferred substantially to the new undertaking. There is no such transfer of assets in the two cases with which we are concerned." 63. At page 206 the Hon'ble Supreme Court has summarised the requirements to be satisfied by a new industrial undertaking to enjoy the tax holiday as under :- "However, in order to be entitled to the benefit under section 15C, the following facts have to be established by the assessee, subject always to time-schedule in the section: (1) investment of substantial fresh capital in the industrial undertaking set up, (2) employment of requisite labour therein, (3) manufacture or production of articles in the said undertaking, (4) earning of profits clearly attributable to the said new undertaking, and (5) above all, a separate and distinct identity of the industrial unit set up. It is clear from the above that the Hon'ble Supreme Court has pointed out that new industrial undertaking should emerge as physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.6 lacs garments per annum. The turnover of the company reached to Rs. 121.72 crores from Rs. 67.26 crores in the immediately preceding year and the profits before depreciation took quantum leap of 3.37 crores. In Unit No. 4, additional 16128 spindles were installed which enhanced the installed capacity to 54528 spindles. 12 circular knitting machines were imported and installed. A power plant of 4.25 MV capacity was set up. The facilities to manufacture readymade garments were set up to manufacture 6 lacs additional garments per annum and the new unit resulted into total addition of gross block of fixed assets by Rs. 69.43 crores as against 121.01 crores at the beginning of the year. The turnover of the company also increased to Rs. 224.5 crores as against 158.37 crores in the preceding year. Thus, on the facts of the case, both the new spinning units of the assessee have their independent and separate existence which is evident from the copy of invoices along with packing list placed in the paper book which shows that identifiable and marketable products were manufactured by these units. The raw material issue slips also show that the raw material is issued and recorded unitwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 13.3.1995 were also carried out by the Ministry vide letter dated 31.5.1995. The assessee had also filed letter dated 14.4.1998 before the competent authority for enhancement of the licence capacity which was also granted on 2.6.1998. In view of these documentary evidences, we hold that fresh permission was granted for a new unit where the competent authority extended the benefit available to 100% export oriented unit for substantial extension of the existing undertaking. 70. The decision relied upon by the learned CIT DR in the case of State of Gujarat v. Saurashtra Cement & Chemical Industries; 260 ITR 181 is distinguishable on facts insofar as it was held by the Hon'ble Supreme Court that admittedly the alleged new unit was using the existing crushers, grains, raw mills, packing machines and old cement mils to complete the process of manufacture of cement. It was thus held that new unit was not totally independent viable unit, therefore, not eligible for claim of exemption from electricity duty u/s 3(2)(vii)(b) of the Bombay Electricity Duty Act, 1958. However, in the instant case before us, the aforesaid two units viz. unit no. 3 and 4 were separate and independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent infrastructure and separate plant and machinery etc. (c) substantial capital investment (d) new employees and (e) Identifiable output (even though same product) and profits thereto can be determined. 73. Similar issue has been dealt with by the I.T.A.T., Pune Bench, in the case of Patni Computer Systems Ltd. v. DCIT: ITA No. 426 and 1131/PN/06, wherein assessee's claim for deduction under section 10A of the Act in respect of three units was disallowed by the Assessing Officer on the ground that three units were not new units but mere expansion of existing unit on the basis of approval letters received from STPI. The Tribunal held that the manner of granting approval was not relevant for adjudicating the claim of deduction under section 10A. The relevant observations and findings of the Tribunal were as under :- "41. The only plea of the Revenue is that in the approvals granted by the STPI, the three units have been referred to as an expansion of the corresponding old units. The moot question is as to whether such a plea of the Revenue is potent to effect the assessee's entitlement for deduction under section 10A of the Act. Similar plea of the Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. What is really to be examined is as to whether the three units are independent units and that they fulfill the conditions prescribed u/s 10A(2) of the Act. It was, therefore, held that the mere fact that the requisite permissions from STPI refer them as expansions of the existing units would not disentitle the assessee from the claim of deduction under section 10A of the Act. 75. In view of the above decision of the coordinate Bench, the plea of the learned CIT DR will not disentitle the assessee from claiming deduction u/s 10B in respect of two new units since these units were set up in a newly constructed building by installing additional spindles, new plant and machinery, new power plant and new manufacturing facilities which resulted into increased turnover by almost double, recruitment of new manpower/employees, manufacturing of new identifiable and marketed products, maintenance of separate books of account for each unit, obtaining separate approvals for new spinning units and permission for enhanced capacity. It is pertinent to mention here that new, separate and independent units were set up which were distinct from other existing unit eligible for deduction u/s 10B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years : [Provided further that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software:] Provided also that no deduction under this section shall be allowed to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.] ** ** ** Explanation 2.-For the purposes of this section,- (i) "computer software" means- (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) any customized electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means; (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; (iii) "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 char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. In case of Liberty India, the Hon'ble Supreme Court has dealt with the provisions of section 80IA of the Act wherein no formula was laid down for computing the profits derived by the undertaking which has specifically been provided under sub-section (4) of section 10B while computing the profits derived by the undertaking from the export. Thus, the decision of the Hon'ble Supreme Court is of no help to the revenue in determining the claim of deduction u/s 10B in respect of export incentives. 78. Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100% EOU. Section 10B(4) lays down special formula for computing the profits derived by the undertaking from export. The formula is as under :- Profit of the business of the Undertaking X Export turnover Total turnover of business carried out by the undertaking 79. Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, not-with-standing the fact that sub-section (1) of section 10B refers the profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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