2013 (5) TMI 783 - AT - Income Tax

Deduction u/s 10B - 100% EOU - exclusion of Trading profits - Held that - During the course of the assessment proceedings, the Assessing Officer noticed that the assessee-company has purchased granites to the extent of ₹ 42,62,996 and the same was exported. The Tribunal, Mumbai Bench in the case of T. Two International P. Ltd. v. ITO 2008 (10) TMI 384 - ITAT MUMBAI has observed that to allow deduction under section 10A the material consideration is export of eligible goods and not whether those goods are manufactured or purchased by the assessee. Profits from both, the self manufactured as well as trading in goods have been made eligible for deduction under section 10A of the Act. The above decision was rendered by the Mumbai Bench of the Tribunal in respect of deduction relating to section 10A of the Act. However, we are of the opinion that section 10A and section 10B are similar. The apprehension of the Commissioner of Income-tax (Appeals) is that if the trading receipt also is included in the eligibility under section 10B, the assessee will set up token production and start free trading. The facts in the present case are not supporting the view taken by the Commissioner of Income-tax (Appeals) . Therefore, the decision rendered in the case of T. Two International P. Ltd. even applies to section 10B. - Decided in favour of assessee.

Summary

Issues:
1. Deduction claimed under section 10B of the Income-tax Act, 1961.

Analysis:
The judgment dealt with the appeal against the order of the Commissioner of Income-tax (Appeals) regarding the deduction claimed under section 10B of the Income-tax Act, 1961. The assessee, engaged in the manufacture and export of granite monuments and slabs, filed a return showing unabsorbed depreciation and claimed exemption under section 10B for one of its units. The Assessing Officer observed that trading profits cannot be considered for the purpose of arriving at the export turnover under section 10B, restricting the exemption to the export of manufactured granite slabs only. The Commissioner of Income-tax (Appeals) upheld this view, emphasizing the essential requirement of "manufacture or production" for availing the exemption.

The assessee contended that trading receipts should be eligible for deduction under section 10B, citing a Tribunal decision. The Tribunal analyzed the case, noting that while section 10B is for 100% export-oriented undertakings, the Mumbai Bench had allowed trading profits for deduction under section 10A. The Tribunal found section 10A and section 10B to be similar, disagreeing with the Commissioner's apprehension that including trading receipts would lead to token production and free trading. Relying on the Tribunal's decision and the facts of the case, the Tribunal allowed the appeal, stating that the deduction under section 10B should also cover trading profits.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the eligibility for deduction under section 10B should include trading profits, similar to the provisions of section 10A. The judgment clarified the interpretation of "manufacture or production" in the context of claiming exemptions under section 10B, aligning it with the Tribunal's decision regarding section 10A and emphasizing the importance of considering the specific facts of each case in determining eligibility for deductions under the Income-tax Act, 1961.