2016 (4) TMI 1299 - AT - Income Tax

Deduction u/s 10A - deduction u/s.10A was restricted by CIT(A) to the extent of receipt of foreign exchange upto 30-9-2008 - Held that - Deduction u/a.10A was restricted to the extent of export receipts realised uptll 30-9-2008. The assessee company is situated In SEZ the RBI the Competent Authority u/s.10A(3) of the Act had vide its Circular bearing A.P. -(DIR Series) Circular No 91 dated 1st April 2003 relaxed the realization of export proceeds. See Tara Jewels Exports case 2014 (1) TMI 1828 - ITAT MUMBAI wherein held that RBI has clarified that it has not stipulated any time period for the realization of the sale proceeds for the SEZ units as the assessee. it can-only be considered as having allowed an indefinite time period for the same. Consequently it cannot be said that the condition of section 10A(3) is not satisfied. The objection of the Revenue is in our view not valid. In view of the above we restore the matter back to the file of AO for recomputing eligible deduction after considering the RBI Circular and also considering the decision of coordinate bench as discussed above. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Restriction of deduction u/s.10A to the extent of export sale proceeds received by a certain date.
2. Interpretation of RBI circular regarding realization of export proceeds for units in Special Economic Zones (SEZs).
3. Consideration of previous tribunal decision on the same issue.

Analysis:
Issue 1: The appeal filed by the assessee was against the order of CIT(A)-Mumbai, restricting the claim of deduction u/s.10A to the extent of export sale proceeds received by 30-9-2008. CIT(A) held that the export turnover eligible for deduction u/s.10A should be limited to a specific amount, contrary to the assessee's claim.

Issue 2: The assessee, engaged in manufacturing and export of diamond studded jewellery, argued that the RBI circular had relaxed the realization of export proceeds for units in SEZs. The circular removed the stipulation of a specific time limit for realization of export proceeds, providing SEZ units an indefinite period for the same. The assessee cited a previous tribunal decision supporting this interpretation, emphasizing that the condition of Section 10A was satisfied.

Issue 3: The Tribunal, Mumbai Bench, in a previous case (ACIT vs. Tara Jewels Exports Pvt. Ltd.), dated 29th January 2014, had ruled that since the RBI did not specify a time period for realization of sale proceeds for SEZ units, it implied an indefinite time period. Consequently, the condition of Section 10A(3) was deemed satisfied. The current judgment referred to this decision and directed the matter to be reconsidered by the AO in light of the RBI circular and the previous tribunal ruling.

In conclusion, the appeal of the assessee was allowed for statistical purposes, with the matter being remanded back to the AO for recomputation of the eligible deduction after considering the RBI circular and the decision of the coordinate bench. The judgment highlighted the significance of the RBI circular in determining the eligibility for deduction u/s.10A and emphasized the need for a consistent interpretation of relevant provisions and precedents in such cases.