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TMI Blog2013 (1) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is eligible for the benefit of Section 10B in respect of contract receipts of stitching charges? (ii) Whether in the facts and circumstances of the case, the Tribunal was right in holding that contract receipts for stitching charges should be treated as domestic sales for the purpose of Section 10B? " 2. The assessee is engaged in the business of purchase of textile material, stitching and exporting garments. Apart from the export receipts, the assessee is stated to have received a sum of Rs.72,67,460/- by way of stitching charges, for which the assessee called it as sub contract receipts. The assessee submitted that whenever the stitching machines of the assessee were relatively free, the same were utilized for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. In the case of export company, so long as the profits and gains relating to such domestic sales or things did not exceed 25% of the total sales, the profits and gains would qualify as profits and gains derived from the export of articles or things. He pointed out that when the proviso speaks about the sales alone and not the turnover, in contra distinction to sub section 4, which speaks about a formula adopting the properties of the export turnover to the total turnover of the business to find out the profits derived from export of articles or thing, the Tribunal committed a serious error in construing the sub contract receipts which admittedly is not a sale for the purpose of qualifying for exemption under second proviso to Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of the total sales shall be deemed to be the profits and gains derived from the export of articles or things or computer software. Provided also that no .................................... " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted full tax holiday. However, when it was found that the 100% EOU had less than 75% of their turnover as export sales and nevertheless enjoyed 100% exemption, Section 10B was amended that 100% EOU would be entitled to the tax holiday as by way of deduction provided 75% of the turnover related to export of articles or things. Thus, units which had export less than 75% of their turnover, were not however entitled to 100% exemption. Thus, Section 10B was substituted by Finance Act 2000 with substantial changes with effect from 1.4.2001. From total exemption Section 10B stood amended as a deduction provision. When the profit from domestic sale is less than 25% of the local sales, domestic sales are deemed as part of export turnover. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits and gains derived from export of articles under the second provision to Section 10B(1), in providing the formula, given the fact that the distinction was in the consideration of the relief under Section 10B is maintained as per second proviso and sub section (4), we agree with the submission made by learned standing counsel for the assessee that the Tribunal committed serious error in treating the sub contract receipts and stitching charges as amounting to local sales for the purpose of granting 100% exemption to the assessee.
9. In view of the above, the order of the Tribunal is set aside, thereby, the order of the Assessing Officer is restored. The above Tax Case (Appeal) is allowed. No costs. X X X X Extracts X X X X X X X X Extracts X X X X
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