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DEPUTY COMMISSIONER OF INCOME-TAX & ASSISTANT COMMISSIONER OF INCOME-TAX Versus SEVERN GLOCON (INDIA) P. LTD.

2015 (11) TMI 851 - ITAT CHENNAI

Exclusion of expenses from the export turnover and total turnover - Held that:- As rightly argued by the learned representative for the assessee, both export turnover and total turnover shall be of the same factor. What was excluded from the export turnover cannot form part of total turnover. Therefore, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly directed the Assessing Officer to exclude the expenses from the total turnover also. This Trib .....

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ot clear from the material available on record whether ratification was accorded by the Board constituted by the Government of India under section 14 of the Industries (Development and Regulation) Act, 1951. In the absence of any material to show that whether the approval was accorded by the Board constituted under the Industries (Development abd Regulation) Act, 1951, this Tribunal is of the considered opinion that the matter needs to be re-examined. Moreover, section 10A also gives exemption t .....

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the Special Bench in ITO v. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D ] the expenses which were excluded from the export turnover are also to be excluded from the total turnover. Since the Commissioner of Income-tax (Appeals) excluded the communication charges, foreign travel expenses, commission charges, etc., from export turnover, this Tribunal is of the considered opinion that the same are also to be excluded from the total turnover. In other words, the items which were excluded from t .....

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th the Revenue and the assessee, filed the appeals against the order passed by the Commissioner of Income-tax (Appeals)-VI, Chennai, dated August 29, 2014. Therefore, we heard both appeals together and disposing the same by this common order. 2. Let us first take the Revenue's appeal in I. T. A. No. 2816/Mds/2014. The only ground raised by the Revenue is with regard to exclusion of expenses from the export turnover and total turnover. 3. Sh. Joe Sebastian, the learned Departmental representa .....

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the contrary, Sh. T. Banusekar, the learned representative for the assessee, submitted that the export turnover and total turnover should be of the same factor. What was excluded from the export turnover has also to be excluded from the total turnover in view of the decision of the Special Bench of this Tribunal in ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) [SB]. 5. We have considered the rival submissions on either side and perused the relevant material on record. As rightly argued .....

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nfirmed. 6. Now coming to the assessee's appeal in I. T. A. No. 2770/Mds/2014, the first issue that arises for consideration is with regard to deduction under section 10B of the Income-tax Act, 1961 (in short "the Act"). 7. Sh. T. Banusekar, the learned representative for the assessee, submitted that the assessee is 100 per cent. export oriented unit eligible for exemption under section 10B of the Act. The Assessing Officer disallowed the claim of the assessee on the ground that th .....

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he assessee by the Development Commissioner, a copy of which is available at page 8 of the paper-book. Therefore, according to the learned representative, it may not be correct to say that the Board's approval was not obtained. Even otherwise, according to the learned representative, the assessee is eligible for exemption under section 10A of the Act. Referring to the Instruction of the Central Board of Direct Taxes, a copy of which is available at page 11 of the paper book, the learned repr .....

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the file of the Assessing Officer for reconsideration. 8. On the contrary, Sh. Joe Sebastian, the learned Departmental representative, submitted that Explanation 2(iv) to section 10B of the Act clearly says that 100 per cent. export oriented unit means an undertaking which is approved by the Board appointed by the Government of India under section 14 of the Industries (Development and Regulation) Act, 1951. Therefore, the Board nominated by the Government of India under the provisions of sectio .....

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e on the record to show that the assessee was approved by the Board constituted by the Government of India. According to the learned representative, the approval granted by the Development Commissioner was subsequently ratified by the Board nominated by the Ministry of Commerce. It is not known whether the Board of Approval nominated by the Ministry of Commerce was appointed under section 14 of the Industries (Development and Regulation) Act, 1951. Income-tax Act, being a special enactment, the .....

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bmitted that the assessee is also not eligible for exemption under section 10A of the Act. 9. We have considered the rival submissions on either side and perused the relevant material on record. Explanation 2(iv) to section 10B clearly says that approval by the Board appointed by the Government of India under section 14 of the Industries (Development and Regulation) Act, 1951 is an essential condition. In this case, though the assessee claims that the approval initially granted by the Developmen .....

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er needs to be re-examined. Moreover, section 10A also gives exemption to 100 per cent. export oriented unit. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer in the light of the provisions of section 10A of the Act, in case the assessee is not eligible under section 10B of the Act. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Ass .....

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that arises for consideration is with regard to determination of eligible export turnover. 11. During the course of hearing, the learned representative for the assessee submitted that the assessee is not pressing this ground. Accordingly, the ground raised by the assessee with regard to determination of eligible export turnover is dismissed. 12. The next ground of appeal is with regard to exclusion of foreign travel expenses, 50 per cent. of telephone charges and communication expenses, freight .....

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e export turnover. The Commissioner also directed the Assessing Officer to exclude the same from the total turnover also. Referring to Explanation 2(iv) to section 10A of the Act, the learned representative submitted that the export turnover does not include freight, telecommunication charges or insurance attributable to the delivery of the articles, etc. These facts are not appreciated by the Commissioner as well as the Assessing Officer. According to the learned representative, the assessee ha .....

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