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2016 (3) TMI 83 - ITAT HYDERABAD

2016 (3) TMI 83 - ITAT HYDERABAD - TMI - Deduction u/s. 10B - Held that:- Assessee is eligible for deduction u/s. 10B, the fact of which was already acknowledged by the CIT(A) in the order for AY 2011-12. However, in AYs. 2007-08 to 2010-11, Ld. CIT(A) in his own way categorized the export of rough granite blocks into dimensional blocks and un-dimensional blocks and restricted the deduction to so called type-3 un-dimensional blocks. Even though Ld. CIT(A) deviated from the issue in analyzing the .....

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is issue, we direct the AO to allow the deduction of Ongole unit as claimed by Assessee. To that extent, Assessee’s appeals are allowed with reference to allowing of 10B claim in all the impugned AYs. 2007-08 to 2011-12.

Addition on Excess Cash - Held that:- If there is enough cash balance on the day which can be explained, there cannot be any excess cash, considering that Assessee has no local sales and no need for generating cash outside the Books of Accounts when the incomes are ex .....

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valuation, considering the fact that this value was done with the help of Assessee-company’s officials. It is also contended that so called excess valuation is less than 5% of the total stock available with Assessee and AO accepted the closing stock value as the Books of Accounts were not rejected. Even though there is merit in Assessee’s contentions, it is difficult to adjudicate whether there is excess stock considering the fact that the sales and stock were reconciled on the date of search an .....

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alternate contention is accordingly allowed. - ITA No. 1908, 1909, 1924, 1925, 1926, 1927/Hyd/14, ITA No. 90, 91, 1158, 250, 251, 252, 253, 254/Hyd/15 - Dated:- 22-1-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri P. Murali Mohan Rao, AR For The Revenue : Smt K. Mythili Rani, CIT-DR ORDER PER BENCH : In these batch of appeals, there are five appeals by Assessee (ITA Nos. 1908/Hyd/14, 1909/Hyd/14, 90/Hyd/15, 91/Hyd/15 & 1158/Hyd .....

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e by the Assessee. 2. We have heard the Ld. Counsel and Ld. DR and perused the Paper Book placed on record pertaining to pages 1 to 147 and another Paper Book containing pages 1 to 90 (Paper Book No.2). In ITA No. 1158/Hyd/2015 for AY. 2011-12, Assessee has filed appeal belatedly of 192 days. Assessee has submitted an affidavit and stated that this particular appeal papers have been misplaced by one of the office staff and the same could be traced out and appeal could be filed on 14-09-2015 with .....

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ations u/s. 132 of the Act carried out in the case of Assessee on 04-02-2011. AY. 2011-12 is the search year, whereas in six earlier years also notices were issued u/s. 153A. In all the impugned assessments, the AO disallowed the claim u/s. 80-IB of the Act. Assessee had two units, one at Hosur in Karnataka and one at Ongole in Andhra Pradesh which are engaged in processing of granite and exporting them. Initially, Assessee s claim of 10B was disallowed in earlier years and ITAT in batch of appe .....

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. 80HHC/10B of the Act vide para Nos. 7 & 8 in page Nos. 5 & 6 of the said order. In the consequential proceedings u/s. 153A, AO noted that ITAT has allowed deduction u/s. 10B (wrongly noted as Section 80-IB) in earlier years and company is eligible for deduction u/s. 10B of the Act even for exporting rough blocks of granite. It was also noted that ITAT while finalizing the said order, relied on the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Fateh Granites Pvt. Ltd. .....

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disturbed in the reassessment proceedings u/s. 153A, Assessee carried the matter to the CIT(A) in appeal. In the mean time, AO in the impugned years, except AY. 2011-12, has passed an order u/s. 154 dt. 25-04-2013. In that order, AO partially allowed the claim of deduction u/s. 10B in the impugned assessment years. The appeal on this order was dismissed by the CIT(A), as main appeal wherein the entire claim was disallowed was pending for adjudication. Ld. CIT(A), while accepting that the ITAT ha .....

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₹ 12,43,60,975/-. The operative part of this order u/s 154 at para 2.5 reads as under: "After examination of the data brought on record and also in light of the ITAT order and keeping in view the departmental stand, the exemption claimed by the Assessee company with regard to export of granite slabs u/s 10B is considered to the extent of cut and polished granite and the same is proportionately allowed. 5.3 Aggrieved against the partial allowance, the appellant preferred an appeal aga .....

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so dimensional and were cut as per specified dimension and this was not a new point. This aspect was examined by the Hon'ble ITAT and deduction u/s 10B was allowed as evident from para 7 on page 6 of the Hon'ble ITAT order in ITA No.666/Hyd/l0 & Others. The relevant portion of this para reads as under: "…………. further, the Chennai Bench of this Tribunal in the case of ACIT Vs M/s Janani Holdings, Chennai in ITA NO.1094/MDS/2010 vide order dated 25.02.2 .....

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HHC/l0B of the Act on similar lines for AY 2000-01 to 2004-05. Accordingly, the revenue appeals in ITA NO.29 to 33/Hyd/2012 are dismissed. 8 For the AY 2006-07 in ITA No.35/Hyd/12, the issue is relating to allowability of deduction u/s l0B of the Act which is decided on similar lines as above as discussed in the above, the revenue appeal is dismissed. 5.5 It was submitted that even the AO had quoted this finding of the ITAT in the very first para 4.1 of the operative part of his assessment order .....

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t's argument that under these circumstances, it is not correct to deny the claim of deduction simply because the earlier orders of the ITAT were not accepted by the department, and that, no new material has been brought on record to deny the deduction, therefore appears valid. Respectfully, following the orders of the ITAT on the same issue, the deduction u/s. 10B is therefore to be allowed on such rough granite blocks subject to the following observations at para 5.7. 4.1. Even though ITAT .....

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invoices (where dimensions are mentioned) and directed the AO to disallow the deduction claimed on type-3 invoices (where dimensions were not stated) and passed the orders accordingly from AYs. 2007-08 to 2010-11. However, while disposing off the appeal in 2011-12 subsequently on 31-12-2014, the Ld. CIT(A) re-examined the whole issue and came to a finding that the so called rough granites without dimensions was wrongly categorized by him and he gave a finding that though invoice speaks of rough .....

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ur unit fully, while deduction on Ongole unit was restricted. Since no reasons were given in the order, he directed the AO to examine whether the Ongole unit is also eligible for deduction u/s. 10B and if the conditions are satisfied, the deduction to be allowed as claimed by the appellant. To that limited extent, the matter was sent to the AO to pass appropriate consequential orders. 5. In the mean time, Assessee filed petitions u/s. 154 to the Ld. CIT(A) in the other four assessment years of 2 .....

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basically on the initial direction give by the CIT(A) to examine the eligibility of Ongole unit. Revenue has raised five appeals against the orders in ITA Nos. 1924/H/14 to 1927/H/14 and 254/H/15 and further four appeals on the 154 order passed by him dt. 06-01-2015. Revenue was aggrieved on allowing the 10B deduction in all the years by the Ld. CIT(A). 7. Even though Assessee has filed additional grounds on the issue that the disallowance u/s. 10B cannot be made in the re-assessment proceeding .....

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fore CIT(A). Therefore, the issue whether there is incriminating material or not, whether there was original assessment concluding the issues in favour or against Assessee could not be ascertained. Therefore, even though the additional grounds are legal in nature, the corresponding facts are not available so as to admit them and adjudicate. Hon'ble Supreme Court in the case of S.A. Builders Ltd., [289 ITR 26] (SC) has categorically stated that additional grounds of appeal cannot be admitted, .....

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fore, additional grounds of appeal are rejected in all the impugned years of Assessee s appeals. 8. Coming to the main issue of allowing deduction u/s. 10B, as already stated above, the issue of allowing of 10B has already been crystallised by the orders of the ITAT in Assessee s own case in earlier years upto AY. 2006-07 dt. 28-12-2012. Vide para 7 & 8, the issue was considered and allowed as under: 7. As per the latest circular No. 729 dated 1.11.1995 cutting and polished granite is eligib .....

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essed into blocks and dressed by the Assessee and which was subjected to excise duty and sales tax, as the case may be, but still these were mentioned in the invoices or in the director's report as "rough blocks" in sale invoices. But it does not mean that they are unprocessed granites. It was not disputed by the Department that the Assessee is engaged in cutting and polishing and sizing of granites into required sizes. Once the Assessee is engaged in cutting, polishing and sizing .....

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the Chennai Bench of this Tribunal in the case of ACIT vs. M/s. .Janani Holdings, Chennai in ITA No. 1094/Mds/2010 vide order dated 25.2.2011 held that if the Assessee in the sales invoices described the exported goods "as processed dimensional rough or crude granite" and the granite has been processed into blocks and dressed by the Assessee and these were exported, because the Assessee described as "rough blocks or crude block" in sale invoices by which the Assessing Officer .....

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e Revenue appeal is dismissed . 9. In view of the above, we are of the opinion that Assessee is eligible for deduction u/s. 10B, the fact of which was already acknowledged by the CIT(A) in the order for AY 2011-12. However, in AYs. 2007-08 to 2010-11, Ld. CIT(A) in his own way categorized the export of rough granite blocks into dimensional blocks and un-dimensional blocks and restricted the deduction to so called type-3 un-dimensional blocks. Even though Ld. CIT(A) deviated from the issue in ana .....

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ound on this issue, we direct the AO to allow the deduction of Ongole unit as claimed by Assessee. To that extent, Assessee s appeals are allowed with reference to allowing of 10B claim in all the impugned AYs. 2007-08 to 2011-12. 10. There are two more issues in AY. 2011-12, other than claim of Section 10B. Assessee vide his Ground Nos. 5 & 6 is contesting the addition of ₹ 23 Lakhs made towards excess cash and in Ground Nos. 7 & 8 is contesting the addition of ₹ 1,24,01,063 .....

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r allowances were debited in the Books, but amount was not disbursed, as their units are available at different places and so there was excess cash. This explanation of Assessee was not accepted and the AO made an addition of the above amount. Before the CIT(A) it was submitted that the excess cash found during the search was pertaining to staff and labour payments. The expenses were entered in the Books of Accounts, payments were not made at that time. The search was on 04-02-2011 and though th .....

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on of Assessee, relying on the sworn statement of Manager Accounts extracted in para 6.2 of the order. He was of the opinion that it is not a case of expense being recorded in the Books of Accounts but not paid. Since no supporting documents or evidence indicating substantial withdrawals from the bank were produced, the CIT(A) confirmed the addition towards cash. 11.1. It was the submission that Ld. CIT(A) has not examined the Cash Book placed before him. Referring to the statement recorded, Ld. .....

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is exempt u/s. 10B, there is no need for keeping any extra cash in the business premises. There are no local sales and entire money pertains to withdrawals from the bank to be paid for staff salaries and labour payments. He submitted that this aspect that cash balance pertain the books can be examined by the AO, since CIT did not allow necessary examination even though relevant details were furnished by him. 11.2. Considering Assessee s plea and documents placed on record, we are of the opinion .....

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examination of Assessee s contentions and adjudication. The ground is considered allowed for statistical purposes. Excess Stock in the course of search/survey at Hosur: 12. The issue pertain to stock valuation and dimensions of the stock available. It turned out that in the valuation done by the officers on the date of search/ survey, there are differences in the quantity of the finished goods with reference to entries in the Books and the difference was quantified finished goods of ₹ 64, .....

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alued the stock at cost price or market price whichever is less. The addition in respect of finished goods was not correctly worked out and is not justified. It was explained that value of reject and scrap can only be concluded after their final sale. Total rejects are always salable and hence the value can be lesser than cost price or zero. At the time of taking of stock on the date of search, stock was valued at market price without considering that the stock was fit for sale for export or not .....

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es in slabs etc., There is a possibility of difference in measurements made edge to edge vis-à-vis net area worked out in the quantification. Assessee relied on the decision in the case of Midwest Gold Ltd., Vs. ACIT ITA No. 1294/Hyd/2014. Without prejudice to the above, it was contended that excess cash and excess stock would increase the profit of the unit and consequent rejection u/s. 10B is eligible and relied on the decision of ITAT, Hyderabad in the case of DCIT Vs. Planet Online Pv .....

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is eligible for deduction u/s. 10B and the same is ordered. There is no issue on quantification of stock which Assessee would be getting benefit in the later year as opening stock. 13. After considering the rival contentions, we are of the opinion that at this point of time, it is not possible to examine whether there is an excess stock of granite blocks in the quantity or in the valuation, considering the fact that this value was done with the help of Assessee-company s officials. It is also co .....

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g the Books of Accounts of the year, is not generally permitted by various decisions of the ITAT, since Assessee is eligible for deduction u/s. 10B on the additions/disallowance made on these units, we are of the opinion that the same amount can be allowed for deduction u/s. 10B as the stock pertains to Hosur and Ongole units, which are eligible for deduction u/s. 10B. Assessee s alternate contention is accordingly allowed. 14. Further, in case AO was not satisfied with the excess cash brought t .....

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