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TMI Blog2016 (7) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee - ITA No. 784/JP/2014 - - - Dated:- 14-7-2016 - SHRI BHAGCHAND, AM SHRI LALIET KUMAR, JM For The Revenue : Shri Rajendra Singh (Addl.CIT) For The Assessee : Shri H.M. Singhvi (CA) ORDER PER: LALIET KUMAR, J.M. This is an appeal filed by the revenue against the order dated 17/09/2014 passed by the ld CIT(A)-I, Jaipur for the A.Y. 2011-12. The effective grounds of appeal are as under:- i Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in allowing deduction U/s 10B of the Act amounting to ₹ 1,34,31,888/-. ii. Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in holding that exemption U/s 10B is available to the assessee for the first time w.e.f. A.Y. 2002-03 and ten consecutive years ignoring the fact that the assessee firm started manufacturing on 12/3/2001 as certified by Auditor. Hence exemption U/s 10B is available to assessee from A.Y. 2001-02 to 2010-11 only. iii. Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in allowing the deduction U/s 10B for eleventh year when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riented unit (EOU) from 09/02/2001. It is also the case of the assessee that there were no export sales in export oriented unit in A.Y. 2001-02. The assessee did not claim the deduction U/s 10B of the Act of the year 2001-02 and has filed the audit report in form NO. 56G of the Act. 2.1 The assessee claimed exemption U/s 10B of the Act for the assessment year 2011-12. However, the ld Assessing Officer declined the benefit of 10B to the assessee for the following reasons:- During assessment proceedings, the A/R of the assessee vide his submission dated 26.11.2013 has furnished copy of form No. 56G alongwith annexure-A giving necessary details and working of exemption u/s 10B of the I.T. Act, 1961. Perusal of para-6 of Annexure-A of form 56G reveals that the firm was registered as 100% EOU on 26.02.2001 and unit has commenced manufacturing and production on 12.03.2001 as certified by the auditor vide para-7 of said annexure. Further, vide para-8 of the Annexure-A, the auditor has certified that assessment year 2011-12 is the eleventh consecutive year for the exemption is claimed. Since, the exemption u/s 10B is available on the profits and gains derived by an 100% EOU from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the day undertaking begins to manufacture or produce articles or things, and in no way rely when the company starts its exports. Furthermore, the act provides no liberty to the assessee to choose its first year of exemption. It is worthwhile to submit here that the assessee firm has submitted its manufacturing trading and Profit Loss account of the eligible unit for A.Y.2001- 02 alongwith certificate of the auditor in form 56G, which are forming part of this order. The auditor in the respective columns of Annexure-A of 56G for A.Y. 2001-02 has certified that the eligible unit was registered as 100% EOU on 26.02.2001 and commenced its manufacturing activities with effect from 12.03.2001 which further proves from the manufacturing account of the eligible unit in which it has consumed raw material of ₹ 77,54,305/-and paid wages of ₹ 82,288/- and transferred the cost of production of ₹ 78,66,593/- to the trading account. The depreciation chart of the assessee for A.Y. 2001-02 clearly shows that assessee has claimed depreciation of ₹ 10,790/-on plant and machinery which shows that they were put to use for business purpose. Moreover electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at unit II (the EOU) had incurred a loss of ₹ 50,974/- in that year. In form 56G filed by the appellant along with the return, it was clearly mentioned in column 18 that no sales had been made up to 31.03.2001 and hence, no profit was determined. No exemption under this section was claimed by the appellant even in the return filed by it. This is also clear from the Annexure-08 of the tax audit report filed by the appellant. These facts clearly show that the appellant had not claimed the exemption in that year. It is also noted that the assessee had filed a letter dated 18.12.2013 before the AO mentioning that it had claimed deduction u/s 10B for the first time w.e.f. 2002-03 and 10 consecutive years will complete in the assessment year 2011-12 though the registration of EOU unit was effective from 09/02/2011. 4.2 As per section 10B (8), the assessee is entitled to opt out of the scheme of the section if he informs the AO that section may not be made applicable to him. Hon ble Madras High Court in the case of Tamilnadu Jai Bharat Mills Ltd. (287 ITR 512) has held that it is open to the taxpayer to withdraw from the exemption in any year. The Hon ble Court has so held on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe, perforated media or other information storage device ; or (b) any customized electronic data or any product or service of similar nature, as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means; (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 Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force; (iii) 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 convertible foreign exchange in accordance with sub-section (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 ; (iv) hundred per cent. export-oriented undertaking means an undertaking which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as well. Initial assessment year for the purpose of Sec. 80IA is the assessment year relevant to the previous year in which the commercial production was started i.e. A.Y. 1999-2000 and not A.Y. 1998-99 in which there was a trial production. As per provisions contained in sub sec(8) of 10B the assessee has been given option for not applying the provision of this section for any relevant assessment year. The assessee vide letter dated 18/12/2013 to the AO in reply to the show cause for disallowing the claim u/s 10B filed detailed submissions. However, the AO intentionally did not reproduce the letter as a whole leaving three lines of the para. For the sake of convenience we are reproducing his reply:- The assessee claimed deduction u/s 10B for the first time w.e.f. A.Y. 2002-03 and ten consecutive years will complete in A.Y. 2011-12. Though the registration of EOU Unit was effective from 09/02/2001. The copy of computation and return for A.Y. 2001-02 and A.Y. 2002-03 are enclosed for your kind consideration. The Learned AO disagreeing to the explanation given in letter dt.:-10/12/2013 disallowed the claim. The Learned CIT(A) has allowed the assessee s claim giving reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admittedly, it is the case before the ld Assessing Officer that no export was done in the assessment year 2001-02 and therefore there was no positive income to the assessee. The sole basis of denying the claim to the assessee was the commencement of the manufacturing activity by the assessee and seeking the claim of depreciation of ₹ 10,790/- in the assessment year 2001-02. In our view, the bare reading of Section 10B(1) clearly provides that a deduction of such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things or computer software. Therefore, decisive element for the purposes of claiming the deduction U/s 10B would be (i) There should be 100% export oriented undertaking. (ii) The deduction of profit and gains are derived by the EOU from the export of articles or things or computer software then for the 10 years beginning for the assessment year in which undertaking begins to manufacture or produce things or computer software shall be allowed. Admittedly, the assessee was not having any positive income from the export of articles on account of activities in the export oriented unit, therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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