TMI Blog2016 (10) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the difference in the definition of "export turnover" in both the sections, we are of the view that the aforesaid decision of Hon'ble Kerala High Court cannot be relied by the Revenue authorities for denying the deduction to assessee. Before us, Revenue has not placed any other direct decision where the issue related to provisions of S.10AA in its support. In view of the aforesaid facts, we set aside the order of Ld CIT(A) and thus allow the ground of Assessee. - I.T.A. No.1028/Ahd/2013 - - - Dated:- 30-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Shri Tushar Hemani, AR For The Respondent : Shri Sanjay Kumar, Sr.DR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : This appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-Gandhinagar dated 22/01/2013 for the Assessment Year (AY) 2009-10. 2. The relevant facts as culled out from the materials on record are as under:- 2.1. Assessee is a partnership-firm stated to be engaged in the business of manufacturing of castor oil and its derivatives. Assessee filed its return of income for AY 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y issue which to be decided is with respect to allowing of deduction u/s.10AA of the Act. 3.1. During the course of assessment proceedings, AO noticed that assessee had claimed deduction of ₹ 18,29,20,780/- u/s.10AA of the Act. On perusing the Profit Loss Account, AO noticed that assessee had shown total Export turnover of ₹ 3,43,39,26,561/- which included Export sales as supporting manufacturer (Rs.17,11,24,107/-), Sales to Export Oriented Units (EOU s) (Rs.33,13,920/-) and Sales to other SEZ (Rs.20,57,277/-). AO was of the view that deduction u/s.10AA can be claimed only on the direct exports made by the assessee unit and not through any other entity or agency. AO was further of the view that deduction u/s.10AA of the Act is available to an assessee who manufactures or produces article or thing from own units and that deductible profits should be the profits and gains derived from exports made by the assessee. He further held as per the provisions of section 10AA, the export turnover means the consideration in respect of export by the Undertaking being the unit of articles or things. AO therefore concluded that the export sales made by the assessee as support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture never intended the benefit to be extended to local sales made by the units in the Special Economic Zone, whether as part of Domestic Tariff Area sales or inter-unit sales within the Zone or units in other Zones. In fact all Special Economic Zones are allowed to make 25 per cent sales to Domestic Tariff Area and the profit derived from such sales are not entitled to exemption. Exemption under section 10AA is specifically geared to profits on actual exports, that too, made against receipt of convertible foreign exchange. I have noted that the provisions of section 10AA and section 10A are same as far as the definition of export turnover is concerned. The Hon ble Kerala High Court in the case of Electronics Control Discharge Systems Pvt.Ltd. 245 CTR 465 while deciding the issue in respect of section 10A has observed the following: After hearing both sides and after going through the above referred provisions of the income-tax act and the provisions of the Special Economic Zones Act, 2005, we are unable to uphold the order of the Tribunal because the concept of deemed export under the Special Economic Zones Act is not incorporated in the scheme of exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. When the exemption is only on actual profits derived on exports mode against receipt in convertible foreign exchange, the Tribunal, in our view, has no justification to extend it to profits received on local sales within India against payment received in Indian rupees. For the above reasons, we are unable to sustain the orders of the Tribunal and we, therefore, allow the appeals by reversing the orders of the Tribunal and by restoring the orders cancelled by the Tribunal. Following the decision of the Hon ble Kerala High Court in the above case, it is held that only the direct exports where the assessee brings in foreign convertible exchange into India qualify eligible export turnover for the purpose of computation of deduction u/s.10AA of the Act. The Hon ble ITAT, Bangalore Bench had also decided the issue on the lines above in the case of Tata Elxsi Ltd. 184 (Taxman (Mag) 46. The grounds of appeal are dismissed and the decision of the AO is confirmed. 4. Aggrieved by the order of ld.CIT(A) assessee is now in appeal before us. 4.1. Before us, ld.AR reiterated the submissions made before AO and ld.CIT(A) and further submitted that ld.CIT(A) confirmed the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er u/s.10AA of the Act, the only conditions are that the goods or services are ultimately exported and that the consideration for export sales is received in India. In the case of the assessee in all three cases, where the AO has denied the claim of deduction u/s.10AA of the Act, the goods have left India and the consideration was received in India and therefore the conditions for Export Turnover were fulfilled. In his written submissions, he also placed in a tabular form the various definitions of Export Turnover u/s.10AA, 10A, 10B 10BA which is reproduced hereunder:- 4.2. He therefore submitted that the assessee be allowed deduction on the export sale as support manufacturer, sales to export oriented units and sales in SEZ . 4.3. The ld.Sr.DR, on the other hand, supported the orders of lower authorities. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is whether the export sales as supporting manufacturer, Sales to EOUs and SEZs are eligible for deduction u/s.10AA of the Act. Section 10AA of the Act provides for deduction of 100% of the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r export of own goods or bringing in of foreign currency of the goods exported. We further find that Ld CIT(A) has relied on the decision of Hon'ble Kerala High Court in the case of Electronics Control and Discharge Systems Pvt. Ltd. 245 CTR 465 in coming to the conclusion that only direct exports where the assessee brings foreign convertible exchange into India qualifies for being eligible export turnover for the purpose of computing deduction u/s 10AA of the Act. We find that Hon'ble Kerala High Court in the aforesaid case was dealing with the provision of s. 10A and not with respect to s.10AA and in view of the difference in the definition of export turnover in both the sections, we are of the view that the aforesaid decision of Hon'ble Kerala High Court cannot be relied by the Revenue authorities for denying the deduction to assessee. Before us, Revenue has not placed any other direct decision where the issue related to provisions of S.10AA in its support. In view of the aforesaid facts, we set aside the order of Ld CIT(A) and thus allow the ground of Assessee. 6. In the result the appeal of Assessee is allowed. This Order pronounced in Open Court on 30/08/ ..... 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