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TMI Blog2014 (9) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to find any, that has a bearing on the issue before us. Second proviso to section 10B(1) as it earlier stood was no doubt omitted by Finance Act, 2001, with effect from 01-04-2002. But the earlier proviso was only for fixing a limit of 25% on domestic sales, for computing profits and gains derived from exports. Here on the other hand, claim of the assessee is not on domestic sale, but on export sales of goods purchased as such by it. Sections 10A(i) and 10B(i) are no different, since these are similarly worded. Learned CIT(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 10B, 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. Expenditure on freight and insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 5,35,39,934 Tax thereon Rs.1,60,61,980 Surcharge ₹ 16,06,198 Education cess Rs. 3,53,363 Total payable Rs.1,80,21,541 Less: TDS & Advance tax ₹ 12,35,270 Balance payable Rs.1,67,86,271 Add: Interest u/s 234B Rs. 52,94,019 Total Payable Rs.2,20,80,290 Less: Tax paid u/s 141A ₹ 19,16,249 Balance payable Rs.2,01,64,041 No doubt, the AO has curtailed the claim of deduction under section 10B substantially vis-à-vis the claim of the assessee. However, set off of depreciation has been done after computing the total income and not vice versa. It is also not clear from where the figure of ₹ 2,29,70,688/- has been taken by the AO, since set off done by the assessee was ₹ 1,85,17,875/-. We are therefore, of the opinion, that the issue requires a fresh look by the AO, keeping in view judgment of Hon'ble jurisdictional High Court in the case of CIT Vs Yokogawa and CIT Vs Tata Elxsi Ltd.,(supra). Order of the lower authorities on this issue is set aside and remitted back to the AO for consideration afresh, in accordance with law. Ground 1 of the assessee is allowed for statistical purposes. 6. Vide its grounds 2 & 3, assessee is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of its business was first made by the assessee before the CIT(A). Assessee had never 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 subsection( 1) of sec.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 availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports. Here on the other hand, claim of the assessee is not on domestic sale, but on export sales of goods purchased as such by it. Sections 10A(i) and 10B(i) are no different, since these are similarly worded. Learned CIT(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 10B, 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 assesese is allowed for statistical purposes. 13. Now, we take up the appeal of the revenue. Grievance of the revenue is that learned CIT(A) deemed exports of ₹ 13,20,96,953/- also as part of export turnover for computing eligible deduction under section 10B. As per the revenue such directions were given disregarding dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise direct exports and exports made through third parties furnished by the assessee that it has been consistently indulging in export through third party mainly M/s S.K.International and M/s ELE Stones (Ind.) Ltd., On receipt of confirmed export orders from respective overseas custo0mers for export cut and polished granite slabs, titles, slates etc., the above parties placed purchase orders on the assessee along with disclaimer certificates declaring that they will not be claiming export benefit on the third party export sales made by them thereby transferring the same to the manufacturers viz., the assessee and also simultaneously undertaking to indicate the assessee as the 100% EOU manufacturer of the materials being exported in the shipping bills filed with the customs authorities. Copies of purchase orders, invoices, disclaimer certificates, application made for removal of excisable goods for export (form A.R.E 1) & Shipping bills were produced before the CIT(A) to substantiate. In view of the foregoing analysis and in the light of the incontrovertible evidence filed on behalf of assessee, the CIT(A) held that the deemed export totaling ₹ 13,05,22,177/- should not be exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Electronic Controls & Discharge Systems (P)Ltd., (supra), in a judgment rendered on 27th July, 2011 has considered the very same issue. Their Lordship held as under at para-3 to 6 of the judgment. "3. The very short question that arises for consideration is whether assessee is entitled to exemption on the profits derived on the sale of components to an industrial unit in another SEZ within India under s. 10A(3) of the IT Act, which provides for exemption on the profit derived on export sale proceeds of articles or things or computer software received or brought to India in convertible foreign exchange within a period of six months from the end of the previous year or within such period as the competent authority may allow. Convertible foreign exchange as defined under cl. (ii) of Explanation to s. 10A(8) means foreign exchange which is treated by the RBI as convertible foreign exchange for the purposes of Foreign Exchange Regulation Act, 1973 or the Rules made thereunder. Admittedly assessee was given full exemption on the profits received on actual exports for which payment was received in convertible foreign exchange. Dispute is only with regard to the interstate sale of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approval of the Reserve Bank of India. (8) Explanation 2.-For the purpose of this section,- (ii) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder or any other corresponding law for the time being in force; (iv) "export turnover" means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in covertible foreign exchange in accordance with sub-s. (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India." Senior counsel appearing for the Revenue contended that the assessee's claim of exemption is thoroughly untenable because both the conditions required for allowing the claim contained in s. 10A(3) are not satisfied inasmuch as sale is only an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange." Specific reference is made to Notification issued by the Ministry of Finance, Central Board of Excise and Customs, New Delhi, on 30th July, 2003 wherein there is a statement that SEZ will be considered as foreign territory for purposes of duties and taxes. Counsel for the assessee has also relied on decision of the Supreme Court in Satyawati Sharma vs. Union of India (2008) 5 SCC 287. Even though this decision is on Rent Control Act, assessee's counsel submitted that the principle laid down therein has application inasmuch as there can be no discrimination in regard to taxation on the profits on exports and profits on deemed exports. So far as the decision of this Court above referred, the contention of assessee's counsel is that the provisions of the Act should be liberally construed to achieve the object i.e., to grant exemption on export profit. On the factual position, the assessee contended that the industrial unit at MSEZ after purchasing the components from the assessee, manufacture the final products and export whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 s. 10A of the IT 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. For the above reasons, we are unable to sustain the orders of the Tribunal and we, therefore, allow the appeals by reversing the orders of the Tribunal and by restoring the orders cancelled by the Tribunal. 19. Once a High Court has given a judgment, though a nonjurisdictional one, we are bound to follow it, unless assessee is able to show a contrary judgment from the jurisdictional High Court. Decisions of lower authorities would pale into insignificance. Assessee here has not been able to bring any decision from the jurisdictional High Court, which go in its fqavour. We therefore, are inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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