9911796707
TMI Blog2005 (8) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer to allow exemption under section 10A whereas the Assessing Officer had denied the exemption since the assessee had violated the conditions laid down in clause ( i )( a ) of sub-section (2) of section 10A of the Income-tax Act. 3. We have heard the parties and have also perused the materials placed on record and applicable legal position. 4. Briefly stated, facts of the case are that the assessee is a company engaged in the dealing of computer related goods services comprising of three units viz., Domestic Unit, Computer Division (located in SEEPZ) and Consumer Electronics Division (located in SEEPZ) started in financial year 1994-95 only. The assessee was allowed exemption under section 10A in earlier asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TP and EHTP and relaxation as claimed by the assessee was not acceptable in the light of evidence given by the assessee. The Assessing Officer accordingly disallowed the claim of Tax holiday of the assessee and completed assessment under section 147 of the Act. The assessee preferred appeal before the learned CIT(A). The learned CIT(A) reversed the decision of Assessing Officer and recorded her findings as under : "During the course of the appellate proceedings, the appellant s counsel drew my attention to the relevant portion of the Export Import Policy. As per this policy the EOU/EPZ units were allowed 25% of DTA sales except in the exempted categories and a 5% of rejects may be sold in the DTA subject to applicable duties. The DTA sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convey an implied admission of the eligibility of the appellant company in terms of these conditions by not referring to them. The major thrust of the Assessing Officer s argument is that with the introduction of 10A(2)(1a) the units in SEEPZ have to export at least 75% of its exports thereby implying that prior to the introduction of this clause the units by compulsion have to export 100% of its produce. The wording of the department circular has been interpreted to mean that in order to alleviate the problem of export the law provided a relaxation of selling 25% in the domestic market. However, a close reading of the clause reveals that the scope of the clause is limited to an undertaking which begins to manufacture or produce on or af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10A(2)( i )( a ). It was also contended that the condition of export of 100% production was to be necessarily complied to claim tax holiday under section 10A of the Act. It was also contended that provisions of section 10A(2)( i )( b ) were applicable. 6. The learned counsel of the assessee besides relying on the order of learned CIT(A) contended that section 10A(2)( i )( a ) was not of clarificatory nature as it was applicable to an undertaking located in FTZ/EHTP/STP and starting manufacturing or production of any article or thing on or after 1-4-1995. The learned counsel further contended that both sections 10A(2)( i )( a ) and 10A(2)( i )( b ) were effective and applicable to units situated in respective locations/designated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t least 75 per cent of their turnover : 21.1 Under section 10A of the Income-tax Act, a five-year tax holiday is allowed to any industrial undertaking in a Free Trade Zone (FTZ) which manufactures or produces any article or thing. This tax holiday is in operation from the assessment year 1981-82. Similarly, the provisions of section 10B exempt the entire profits of 100 per cent EOUs from the assessment year 1989-90. 21.2 Units in FTZs/100 per cent EOUs get special treatment by virtue of the fact that they export their entire produce. However, in order to provide economic flexibility to them and to allow them to dispose of the export rejects and by-products, they are allowed under the scheme to sell 25 per cent of their product in the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in DTA. As per para 21.3, it is noticed that in some cases units situated in FTZ were allowed to sell more than 25% of their produce in the domestic market and, therefore, to check this undue benefit an obligation has been cast upon new units, which begin to manufacture or produce an article or thing on or after 1-4-1995 to export at least 75% of their turnover. After taking into consideration above position, it is absolutely clear that there was no requirement of 100% export in the impugned year to avail the benefit of section 10A of the Act. 8. In view of above discussion, we are of the considered opinion that the learned CIT(A) s order is in accordance with law and, therefore, we decline to interfere in the same. Thus, this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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