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TMI Blog2015 (1) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and then selected for scrutiny under CASS. Statutory notices as required under the provisions of the Act were issued. In the assessment concluded u/s 143(3) of the Act vide order dated 12/12/2011, the assessee s total income has been determined at ₹ 2,78,50,117/- due to the disallowances/additions of the following amounts for purposes of calculating the deduction u/s 10B of the Act:- 3. Aggrieved by the order of the AO, the assessee filed appeal before the CIT(Appeals). 4. With respect to setting off of carried forward and unabsorbed depreciation against profits of the undertaking u/s. 10B amounting to ₹ 26,09,261, the facts are that the assessee declared income of ₹ 1,38,68,696 for the year before setting off of unabsorbed depreciation and declaring income of ₹ 1,00,16,037 after adjusting unabsorbed depreciation of ₹ 26,09,261 and deduction under Chapter VIA of ₹ 12,43,398. The contention of the assessee before the CIT(A) was that brought forward unabsorbed depreciation of ₹ 26,09,261 for the AY 2006- 07 has to be allowed without factoring the same for calculation of deductible export profit u/s. 10B of the Act, followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : On perusal of the computation of 10B filed by the assessee company it was observed that the assessee company has included deemed export amounting to ₹ 7,97,60,585/ - in export turnover for the purpose of computation of deduction u/s. lOB. The company was asked to explain why the same should not be excluded from export turnover in the light of decision of IT AT, Bangalore in the case of Granite ~art Ltd, for A Y 2005-06.The assessee company replied vide letter dated 25.10.2011 stating that the assessee's claim for third party export has been allowed by the Hon'ble IT AT of Bangalore for A Y 2006-07 in assessee's own case and the same is further confirmed by CIT(A)-I, Bangalore for A Y 07-08. 6. The reply of the assessee company is not tenable as department has not accepted the above said decisions and further appeals are pending before higher appellate authorities. From the details furnished, it was found that the assessee has claimed exemption under Section lOB on account of deemed exports to the extent of ₹ 7,97,60,58!5/-. On this issue of deemed-exports, detailed reasons are given by the assessing officer in the assessment order for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of such export andas such they are entitled for deduction u/s. 10B. It is very interesting to note as stated above that even a deemed sale made to another export unit is held to be not ell titled for education u/s. 10A in the case already relied on us in Tata Elxsi Ltd. Vs. ACIT. Therefore, the answer to this ground is readily available in the that judgment itself. By following tile ratio of the ratio of the above judgment, we come to the conclusion that the as. ;cannot claim the deduction u/s.10B in respect of the so called exports made through third parties/export houses. In the above judgment, Hon'ble ITAT has relied on the decision in case of Tata Elxsi Vs. ACIT. The relevant portion of the order are reproduced as under: We have heard rival submissions and perused tlte records. Chapter 8 of the Exim Policy issued by the Ministry of Commerce Industry defines deemed export' as under: 8.1 Deemed Exports refers to those transactions in which goods supplied do not leave country and payment for such supplies is received either in Indian rupees or in free foreign exchange. Under cl. 8.3 benefit for deemed exports are as under : 8.3 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot claim benefit u/s.1OB on account of exports made by merchant exporter and therefore the c laim of deduction u/s. lOB on such exports i.e. deemed exports is denied. Accordingly the export turn over has been determined after excluding the deemed exports for the purpose of computation of deduction u/s. 10B of the IT Act. 10(a) We find that the ITAT, B Bench in ITA No.814/Bang/2009 A.Y. 2006- 07 held as follows :- 3. The next issue is with regards to exclusion of deemed exports amounting to Rs.;13,05,22,177 for the purpose of calculating deduction u/s. 10B. In appeal, the CIT(A) granted relief. We find that the as. Filed declaration from M/s. S.K. International, New Delhi as well as M/s. ELE Stones (India) Pvt. Ltd., certifying the payments of ₹ 9,76,52,462 ₹ 3,28,69,715 totaling Rs.;13,05,22,177 had been realised in convertible foreign exchange against materials purchased from the assessee under the third party export basis. The Chapter VI of the Foreign Trade Policy as well as the policy statement of the Government of India clarifies that even the third party exports were eligible for benefit available u/s. 10B of the Act. The third party exports are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the co-ordinate bench in the case of M/s. Tata Elxsi Ltd. Vs. ACIT 115 TTJ 423. Further, as per the revenue the reasoning given by the learned CIT(A) was not in accordance with section 10B(3) and definition of export turnover in explanation (iii). 14. Learned DR strongly assailing the order of the learned CIT(A) submitted that co-ordinate bench had in the case of M/s. Granite Mart Ltd. Vs. ITO (ITA No.22 763/Bang/2010 dated 17.09.2010) held that neither deemed exports, nor third parties export would be eligible for a claim of deduction under section lOB of the Act, that too, after considering the decision of M/s. Tata Elxsi Ltd., (supra). Reliance was also placed on the decision of Hyderabad Bench of this Tribunal in the case of ACIT Vs. Badhra Consulting Ltd.,(2010) 134 TTJ 214 and the judgment of Hon'ble Kerala High Court in the case of CIT Vs Electronic Controls Discharge Systems (P) Ltd., (2011) 245 CTR 465. 15. Per contra, learned AR placing reliance on a Coordinate Bench decision dated 19-10-2010 in revenue's appeal ITA No.814/Bang/2009 where assessee was the respondent, submitted that for assessment year 2006-07, the issue was decided in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totaling ₹ 13,05,22,177/- should not be excluded for the purpose of calculating deduction u/s. 10B of the IT Act. We uphold the same. As against this Co-ordinate Bench of this Tribunal in the case of Granite Mart Ltd.,(supra), held as under at para-8 9 of its order dated 17-09-2010. 8. Next, we will consider the ground raised by the assessee m respect of. the claim of exemption made u/ s lOB on the sales made to another export oriented units. This issue was also considered by the ITAT A Bench in the case mentioned above ie. TATA ELXSI Ltd, Vs A CIT, 115 TTJ 423. After examining the scheme of section u/ s lOA which is in pari passu to sec. 1OB, the Tribunal held that such deemed export is entitled only for the benefits of duty draw back and exemption from basic excise duty. Such deemed exports do not get entitled for the deduction. u/ s lOA. As the above judgment squarely applies to the present case, we hold that the assessee company is not entitled for deduction u/ slOB in respect of sales made to other export units. This ground of the assessee is rejected. 9. The third issue to be considered is whether the assessee is entitled for deduction u/s. lOB in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA.NO.125/DC-11(4)/A-I/09-10, dt.29-04-2010 by the CIT(A) following decision of ITAT in its own case of A.Y. 2006-07 disregarding the earlier decision of the same ITAT in the case of M/s. Tata Elxsi Vs. ACIT (A. Y.2002-03) 115 JTJ (Bang) 423. However the A.O. has cited the most recent judgement of the ITAT on the same issue vide., M/s. Granite Mart Ltd., (A. Y. 2005-0 6) dt. 17-09-2010. 7.2. In view of such latest decision brought to my knowledge by the assessment order I have no other go but to dismiss this ground of appeal, although allowed in appeal of AY-2007-08. Ground of appeal is dismissed. 12. Following the decision of the ITAT in ITA No.888/Bang/2010 for the A.Y. 2007-08 at para 10(b), we direct that deemed exports shall not be considered as part of the export turnover while computing deduction u/s. 10B of the IT Act, 1961. 13. The 3rd ground of appeal reads as follows:- 3) TRADED GOODS a) The Appellant has taken additional ground before the A.O. at the time of scrutiny assessment, about considering the Traded Goods of ₹ 8,64,86,069/- as part of Export Turnover for the purpose of calculation of deduction under section 10B as all these traded goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for deduction. 15. The CIT(Appeals) observed that the AO pointed out in the assessment order that the Assessee has not filed Revised Form 56G for Traded Goods. According to the assessee, the AO had not instructed for filing of Revised Form 56G at the time of scrutiny assessment and hence the same was not filed before the AO. However, the assessee filed revised From 56G for traded goods before him. 16. The CIT(Appeals) held as follows:- 5.1 Similar issue has been raised in appeal for assessment year 2007-08 and my predecessor decided the issue by holding thus:- 5.2. The ground as well as the citation was considered. Firstly, it must be pointed out that the decision is not from jurisdictional ITAT and therefore not binding. Secondly, I find the ITAT itself, before giving decision in para 9.2. of the order stated that not much precedents are available being the first year of implementation of changed law from 1-4-2001 and the issue being virgin, there is scope for much deliberation on each issue raised in that appeal. Thirdly, I consider the word derived is most important in the frame work providing for deduction either u/s.10A or u/s.10B of I.T.Act. The word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made such a claim in its return or before the AO. Be that as it may, assessee is making this claim based on the decision of Mumbai Bench in the case of M/s T Two International (P) Ltd., Claim in that case was also on deduction under section 10A on profit from export of traded goods. It was held by the co-ordinate Bench as under, at para-10 of its order: 10. The learned CIT(A) has not granted deduction to the assessee insofar as it relates to the profit from export of trading goods. From the above table, it can be seen that the assessee made export by trading in goods at ₹ 3.23 crores on which deduction was claimed. The learned CIT(A) opined that since such exports do not relate to the goods manufactured by the assessee, hence the benefit of deduction cannot be allowed. We are not convinced with the view canvassed by the learned CIT(A) because sub-section (1) of section 10A allows deduction in respect of profits and gains derived by an eligible undertaking from the export of articles or things or computer software . The later part of this sub-section provides that this deduction is available for a period of ten consecutive assessment years starting with the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) in our opinion, fell in error in not following the decision of Co-ordinate Bench. Assessee had already preferred a claim before AO for deduction under section l0B, though only on manufactured goods. The claim made on trading goods exported was also under same section. It cannot be considered as a claim of different genie. It is also a fact that the AO never had an opportunity to verify this claim. In all fairness we are of the opinion that the claim can be looked afresh by the AO. We therefore, set aside the order of learned CIT(A) on this issue and remit it to the AO for consideration afresh in accordance with law. Grounds 2 3 of the assessee is allowed for statistical purposes. 19. Following the decision of the coordinate Bench of this Tribunal in assessee s own case ITA No.888(Bang)2010 dated 05.09.2014, we allow grounds 3(a) 3(b) raised by the assessee. 20. With respect to ground No.3(c) regarding the alternate ground in respect of export of traded goods raised before the CIT(A) and stated to be not considered by him, since we have decided the issue of deduction u/s. 10B in respect of export of traded goods, this ground becomes redundant. 21. In the result, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2009-10 hereinabove and the issue has been decided in favour of the assessee. For the reasons stated therein, we allow the first ground of appeal. 30. The 2nd ground raised by the assessee is as follows:- 2) TRADED GOODS a) The Appellant has taken additional ground before the A.O. at the time of scrutiny assessment, about considering the Traded Goods of ₹ 9,34,48,946/- as part of Export Turnover for the purpose of calculation of deduction under section 10B as all these traded goods are exported out of India and the proceeds are received in foreign exchange with in the stipulated time. b) The A.O. has erred in not considering and appreciating the provisions of law as detailed in section 10B and not following the decision of Hon ble Tribunal of Mumbai in the matter of T. Two International (P) Ltd. 26 SOT 582 (MUM) 2008. c) The Appellant relies on (its own) decision for the AY 2007-08 and AY 2008-09, where the jurisdictional Tribunal has held in favor of the Appellant, allowing the deduction for Traded goods. 31. Similar issue has been adjudicated in A.Y. 2009-10 and the issue has been decided in favour of the assessee, following the decision of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the AO erred in not appreciating the provisions of section 10B and not following the previous assessments from AY 2006-07 to 2010-11 which has been approved by the appellate authorities and the department is not in appeal on this issue in earlier years. 38. We have heard both the parties. The assessee has submitted ledger extract, sample bill, disclaimer certificate and supporting documents. The relevant extract of Foreign Trade Policy in respect of sale of other EOUs has been filed in the paperbook before us. We set aside this issue to the file of Assessing Officer to examine the details furnished by the assessee and decide the issue afresh, keeping in mind that similar issue from A.Y. 2006-07 has been approved by the revenue authorities and there has been no further appeal on this issue in the earlier years. Ground No.3 is allowed for statistical purposes. 39. Ground No.4 reads as follows:- 4. The A.O. was not correct in treating the interest of Fixed Deposits under income from other sources as this is part of business income and kept for bank guarantee purpose and not an income earned on investments of surplus funds. 40. The assessee declared interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versal Precision Screws v. ACIT, 38 ITR (Trib) 233 (ITAT[Del]), wherein it was held as under:- 7. After considering the rival submissions and perusing the relevant material on record, we find that the Assessing Officer held interest income as ineligible for deduction under section 10B(1) as it was not derived from the eligible business. The view point of the Assessing Officer would have been correct if there had been no further elaboration of the expression such profits and gains as are derived by a hundred per cent. export oriented undertaking from the export of articles or things . The position under consideration is not akin to some of the sections employing this expression without any further amplification of the same. Sub-section (4) of section 10B gives meaning to the expression profits derived from export of articles or things to mean 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, etc., bears to the total turnover of the business carried on by the undertaking. A bare perusal of sub-section (4) in juxta position to sub-section (1) of section 10B transpires th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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