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2019 (6) TMI 1173 - AT - Income TaxDeduction u/s 10B - consideration received in convertible foreign exchange which was not brought to India within six months to India - whether to be excluded from export turnover for computing the eligible deduction under section 10B - CIT(A) held that as per the provisions of section 10B(3) of the Act assessee is eligible to claim deduction under section 10B only if the sale proceeds of the exports are received within six months from the end of the previous year or any further time granted by competent authority - HELD THAT - As rightly pointed out by the CIT(A) the sale proceeds of exports in convertible foreign exchange were not brought to India within six months from the end of the previous year or any further time granted by competent authority in terms of section 10B - No infirmity in the order of the CIT(A) in rejecting the above ground taken by the assessee and the same is confirmed. Accordingly this ground of appeal of the assessee is dismissed. Exclusion of exports made through sister concern from export turn over - HELD THAT - We are inclined to dismiss this ground of appeal of the assessee by following the judgment of the Jurisdictional High Court in the case of Electronic Controls . Discharge Systems (P) Ltd 2011 (7) TMI 541 - KERALA HIGH COURT if the provisions of the Special Economic Zones Act 2005 are brought into extend the exemption on profits derived on inter-unit sale made by industries within the Export Processing Zone the court will be re-writing the legislation which is exactly what the Tribunal has done. In fact the unit which purchased components from the assessee must be manufacturing final products and being a unit in the Special Economic Zone will be exporting the final product on which that unit will get exemption on the entire profits which include the value of the components supplied by the assessee. Probably the Legislature did not want duplicity in exemption on export profit. That is why inter-unit sales in the Export Processing Zone are not treated as export within the meaning of section 10A of the Income-Tax Act no matter such transfers are treated as exports for the purpose of Customs and Excise duty exemption. When the exemption is only on actual profits derived on exports made 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 - Decided against assessee.
Issues involved:
1. Condonation of delay in filing the appeal. 2. Exclusion of ?10,77,995/- from export turnover due to non-receipt of sale proceeds within six months. 3. Exclusion of ?1,61,62,499/- from export turnover due to inter-unit sales not treated as export under section 10A. 4. Restriction of deduction under section 10B. 5. Applicability of various Supreme Court decisions on the issue. Issue-wise detailed analysis: Condonation of delay in filing the appeal: The appeal was filed with a delay of three days. The assessee's chartered accountant was initially busy with tax filings and later fell ill, causing the delay. The Tribunal accepted the reasons provided and condoned the delay, admitting the appeal for adjudication. Exclusion of ?10,77,995/- from export turnover: The assessee argued that the exclusion of ?10,77,995/- from export turnover was erroneous as it was a procedural requirement and should not affect the export turnover. The Assessing Officer found that the sale proceeds were not brought to India within six months as required under section 10B(3) of the Act. The CIT(A) upheld this exclusion, stating that the deduction under section 10B is only available if the sale proceeds are received within six months or any further time granted by the competent authority. The Tribunal confirmed the CIT(A)'s order, finding no infirmity in rejecting the ground raised by the assessee. Exclusion of ?1,61,62,499/- from export turnover: The Assessing Officer excluded ?1,61,62,499/- from export turnover, arguing that inter-unit sales are not treated as export under section 10A of the Act. The CIT(A) supported this exclusion, referencing the High Court of Kerala's decision in Electronic Controls & Discharge Systems (P) Ltd., which held that inter-unit sales in the Export Processing Zone are not treated as exports for section 10A purposes. The Tribunal relied on the Supreme Court's dismissal of the SLP in the case of Metal Closures (P) Ltd., which supported the exclusion of deemed exports from the export turnover. The Tribunal upheld the CIT(A)'s decision, citing the jurisdictional High Court's judgment that inter-unit sales are not considered exports under section 10A. Restriction of deduction under section 10B: The restriction of deduction under section 10B was a consequence of the exclusions from export turnover. The Tribunal, agreeing with the CIT(A) and the Assessing Officer, found that the exclusions were in accordance with the provisions of the Act. Therefore, the restriction of deduction under section 10B was upheld. Applicability of various Supreme Court decisions: The Tribunal considered the Supreme Court's dismissal of SLPs in similar cases, which supported the exclusion of deemed exports from export turnover. However, it clarified that the dismissal of SLPs does not constitute a declaration of law under Article 141 of the Constitution. The Tribunal emphasized that the Income-Tax Act is a self-contained code, and the provisions of other Acts, such as the Special Economic Zones Act, are not incorporated unless explicitly stated. Consequently, the Tribunal upheld the CIT(A)'s decision based on the jurisdictional High Court's ruling. Conclusion: The Tribunal dismissed the appeal filed by the assessee, confirming the CIT(A)'s order on all grounds. The exclusions from export turnover and the restriction of deduction under section 10B were found to be in accordance with the provisions of the Income-Tax Act and supported by relevant judicial precedents. The appeal was pronounced dismissed in the open court on June 19, 2019.
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