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TMI Blog2020 (8) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... t fee while dealing with Section 10B especially when the service income was received from the Associate Enterprises which is not for any technical services rendred by the assessee? 2. Whether the income from Management fee could be treated as profit derived from export of valves and no deduction could be allowed to the Assessee under Section 10B since the Associate Enterprise has its own expertise to assemble the valves and therefore cannot be construed as technical services rendered by the assessee?" 4. The assessee is a 100% Export Oriented Unit [EOU] engaged in the business of assembling valves in India and exporting the same to M/s.Oliver Valves Limited, UK. The raw material is stated to be procured locally. The assessee had stated that a technical support team of Engineers providing "on-demand" technical support and service for the product range supply and this technical support does an array of services that are intricately linked to the business of the assessee. The assessee states that this includes services like provision of technical assistance for product enrichment, product service, minor repairs and also extend maintenance support for the broken-down products. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith this reasoning, the Assessing Officer added back the Section 10B deduction amount to the total income of the assessee and arrived at the assessed income for both the assessment years. 5. The assessee preferred appeals to the Commissioner of Income Tax (Appeals)-3 [CIT(A)], who dismissed the appeals by common order dated 28.02.2017. Aggrieved by the same, the assessee preferred appeals before the Tribunal. The assessee had also challenged the reopening of the assessment before the CIT(A) as well as before the Tribunal. The Tribunal accepted the assessee's case holding that the management fee is in relation to export of valves and cannot be reduced from the profit of undertaking. Aggrieved by such finding, the revenue is before us by way of these appeals. Though the reopening of the assessment was held to be valid by the Tribunal, the assessee having succeeded on merits before the Tribunal has not preferred any appeal before this Court. 6. The undisputed fact is that the assessee is a 100% Export Oriented Unit was entitled to claim deduction under Section 10B of the Act. The revenue does not dispute the fact that the assessee is an "eligible undertaking". The dispute is wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement fee for export of service which is incidental to the business of export of valves. There can be no estoppel on this aspect and the assessee's stand cannot be brushed aside as being inconsistent, more particularly, because the revised return was filed pursuant to notice issued under Section 148 of the Act. In the considered view of this Court, the crucial test which had to be applied to the instant case has not been applied by the Assessing Officer as well as by the CIT(A). In terms of the provisions of Section 10B(1), deduction shall be allowed for profits and gains derived by a 100% EOU from the export of articles or things from the total income of the assessee. The method of computation is in terms of sub-section (4) of Section 10B which states that for the purpose of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. It has not been disputed by the revenue that the only so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity is a common feature. Noting that the assessee in the said case was undisputedly a 100% Export Oriented Unit, the provisions of Section 10B were held to be applicable. It was further pointed out that the methodology for computation as envisaged under sub-section (1) of Section 10B is by way of a mathematical formula set out in sub-section (4) whereby the profits derived from the exports of articles or things or computer software is stated to be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles/things/computer software bears to the total turnover of the business carried on by the undertaking. 10. M/s. R.Hemaltha, learned Senior Standing Counsel appearing for the appellant/revenue relied on the decisions of the Division Bench in the case of Commissioner of Income-tax vs. Menon Impex (P.) Ltd. ([2003] 128 Taxman 11 (Madras)), India Comnet International vs. Income-tax Officer ([2012] 26 taxmann.com 349 (SC)) and Commissioner of Income-tax, Cochin vs. Electronic Controls & Discharge Systems (P.) Ltd. ([2011] 13 taxmann.com 193 (Kerala)). The decision in Menon Impex (P) Ltd. and India Comn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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