TMI Blog2016 (4) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A.O. erred in holding that the definition of the Export Turn Over u/s 10B of the I.T. Act excludes the Deemed Export. 2. On the facts and circumstances of the case and in law, the Ld. A.O. erred in disallowing the deduction claimed u/s 10B of the income-tax Act at ₹ 1,52,51,935/-. 3. That the Appellant prays for addition, deletion, amendment and modification in the ground of appeal before the disposal of the same in the interest of substantial justice to the applicant. The Ld. CIT(A) confirmed the order of the A.O. He had further held that I) The Section does not recognize the Foreign Exchange received by a third party allegedly on behalf of the Assessee. II) Conditions laid down u/s 10B are not fulfilled as the sale proceeds are not brought into India by the Assessee in convertible Foreign Exchange. On the above facts, following grounds of Appeal are raised: a) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the Assessee Firm is not entitled to Exemption u/s 10B on a sum of Rs.l,52,51,935/-. b) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not giving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x u/s 10B of the Income Tax Act, 1961. 4. The assessee has taken the opinion and did the export sales accordingly with bona-fide intention that the sales are exempted u/s 10B as it is earlier also in case of Section 80HHC. There was no malafide intention illegally claim the exemption. 5. The assessee has brought into India all foreign exchange against sales proceeds within stipulated time as prescribed. 6. It is kindly note that the total sales of the firm is ₹ 25,60,57.574/- against which the value of third party export is ₹ 403,66,362/- lacs only. The stated amount for disallowance of ₹ 9,64,64,001/- lacs is on the entire amount, which is accordance to the parameters of EOU scheme and bona-fide belief of deduction against deemed export against ₹ 403 lacs. 7. Further, it is to be kindly noted that the overall Gross Profit and Net Profit of the firm is 59.92% and 37.42% respectively. However, the same is not at par on all transactions Deemed Export through third party is having lower gross profit and resultant lower net profit on account of: Sates rate (Margin retained by Stone World) (ARE -1 of ESG issued by Excise Department, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial provision in respect of newly established 100% Export Oriented Undertaking in free trade zone and there is no provision of deemed export in Section 10A of the Act. He further observed that the assessee had accepted that M/s Stone World exported the purchases made by it at a higher value and in the process earned profit for itself, the foreign exchange was also received in the hands of M/s Stone World and no part of such profit or the foreign exchange was receivable by the assessee. He also observed that the assessee s attempted bifurcation of its profits into profits arising out of export business and profit earned out of local sales was also not acceptable. The AO observed that the provisions of Section 10B of the Act provides the procedure to compute the profit from export activity and the assessee though had tried to recast the profit on the basis of the nature of the turnover but it was only on estimate basis as the assessee had not maintained separate books of accounts in respect of its export business and local business. The AO held that the deduction u/s 10B of the Act was claimed excessive by the AO. He worked out the allowable deduction at ₹ 8,12,12,066/- instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed that the assessee firm and the partner are separate assessable entities, filing returns of income in independent capacities. She also observed that Section 10B of the Act does not recognize foreign exchange receipt by third party allegedly on behalf of the assessee. The ld. CIT(A) was of the view that the case laws relied upon the by the assessee were generic in nature and none of those dealt with deduction u/s 10B of the Act and that the said section not only requires that the profits be derived from export turnover to be eligible for the deduction, but also lays down the procedure for computation of the deduction when the export turnover is of a different amount than the total turnover. The ld. CIT(A) held that the AO has correctly applied the provisions of Section 10B of the Act to compute the deduction equal to the profits derived from the export of articles or things, in the same proportion as the export turnover bears to the total turnover. Accordingly, disallowance of the alleged excess deduction claimed at ₹ 1,52,51,935/- was upheld. 9. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 6 7 of the impugned order and strongly supported the said order. 11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the assessee is 100% Export Oriented Unit and exporting the goods directly and also through a sister concern, namely, M/s Stone World, proprietorship concern of the partner Sh. Lokesh Arora. The goods which were exported through Sh. Lokesh Arora were directly sent for shipment by the assessee which is evident from the copy of the shipping bill for export placed at page no. 117 of the assessee s paper book. In the said declaration, the name of exporter is mentioned as Earth Stone Group i.e. the assessee vide shipping bill No. 1723123, those goods were sent to the consignee M/s Fitex Trade Networks Road, USA through the sister concern M/s Stone World which is evident from page no. 117 and 118 of the assessee s paper book. The detail has been given in Form A.R.E.1, which is a application for removal of excisable goods for export (copy of which is placed at page no.116 of the assessee s paper book). In the said form, a declaration has been given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore B Bench in ITA No. 814/Bang./2009 for the assessment year 2006-07 in the case of DCIT, Circle-11(4), Bangalore Vs M/s International Stones India Pvt. Ltd., Bangalore (supra) wherein the relevant findings have been given in para 3 of the said order which read as under: 3. The next issue is with regards to exclusion of deemed exports amounting to ₹ 13,05,22,177/- for the purpose of calculating deduction u/s 10B. In appeal, the CIT(A) granted relief. We find that the assessee filed declaration from M/s S.K. International, New Delhi as well as M/s ELE Stones(India) Pvt. Ltd., certifying the payments of ₹ 9,76,52,462/- ₹ 3,28,69,715/- totaling ₹ 13,05,22,177/- had been realized in convertible foreign exchange against materials purchased from the assessee under the third party export basis. The Chapter VI of the Foreign Trade Policy as well as the policy statement of the Government of India clarifies that even the third party exports were eligible for benefit available u/s 10B of the IT Act. The third party exports are also considered as exports and since the consideration in respect of such third party exports made by 100% EOU which manufactures the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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