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TMI Blog2017 (10) TMI 1344X X X X Extracts X X X X X X X X Extracts X X X X ..... freight, Insurance charges and Misc. Balances w/off on the allegation that the same constituted indirect income not derived from export of goods. Next question that arises for consideration is the definition of export turnover which has been defined in explanation 1 to section 10AA of the Act and whether the same would have any effect in the instant case. The term “export turnover” has been defined as consideration in respect of export by the undertaking, being article or thing received in or brought into India by the assessee but doesn’t include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India. In our view, the same may not have any effect as where the freight or insurance charges are reduced from the export turnover, the same have to be reduced from the total turnover as well. The same has been the consistent stand of the various Coordinate Benches. Thus we donot find any infirmity in the order of the ld CIT(A) and confirm the allowance of exemption under section 10AA in respect of freight and insurance excess receipts. On parity of reason, the same position would hold good for misc balances written off. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yal and his wife hold 50% of the shares, each. The nature of business of the appellant company is manufacture of studded jewellery and its export. The appellant has claimed exemption u/s 10AA on this export turnover. Shri Ashok Goyal is also the proprietor of M/s Dwarka Jewels which is engaged also in the business of manufacture of studded jewellery and its sells them- both locally as well as for export. The profits of M/s Dwarka Jewels, are fully taxable. 4.3.2. M/s Dwarka Jewels has been engaged in the above business for a long time whereas the appellant company has started its business, a few years ago. The appellant company primarily purchases raw silver, silver Khokha, semi-precious stones from M/s Dwarka Jewels. It also gets job work of silver khokhas done from M/s Dwarka Jewels. During the year, the appellant has made purchases from M/s Dwarka Jewels of ₹ 5,76,86,690/- and it has got job work done from M/s Dwarka Jewels amounting to ₹ 10,48,172/- 4.3.3. The Assessing Officer found that the gross profit rate of Dwarka Jewels on its transactions with the appellant is much lower than gross profit rate with concerns other than the appellant. On the basis of a deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be material to indicate that the assessee had indulged in an arrangement with its foreign buyer so as to produce to the assessee more profits than ordinarily what profits the assessee might have expected to arise from out of such business and the Assessing Officer having not indicated any material or evidence to disclose any such arrangement between the assessee and its foreign buyer, held that, there is no reason to reject the profit attributable to such units as claimed by the assessee and as indicated in its profit and loss account statement, which according to the Appellate Commissioner was one conforming to the profit margin as was prevalent in other software manufacturing units which were also exporting the software created by it and claiming Section 10A benefit. The Appellate Commissioner applied this view for all the four assessment years of the assessee. 24. Insofar as the first question is concerned, while it is true that there did exist a close connection between the assessee-company and the foreign buyer and it is not disputed that the other requirement such as the nature of arrangement and the manner of rejection of the profits margin due to export sales as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of these two type of transactions, it has to be proved that there was an arrangement between these two entities or there was manipulation which was carried out and such a manipulation has to be shown to exist through demonstrable and credible evidence that these transactions were intentionally made at relatively lower rate than the rate prevailing in the market for the same products or the services availed by the assessee company. The assessee company has submitted before the lower authorities that prices charged by M/s Dwarka Jewels in respect of silver supplied to the assessee company is at the prevailing market price of the raw silver and similarly the job work charge in respect of silver Khokhas were also paid at the prevailing market price. The said facts are on records and have not been controverted by the lower authorities. Further, there is no independent exercise carried out by the AO to rebut the submissions of the assessee company. Once the assessee has demonstrated that the price charged for silver and job work charges is at prevailing market price, it is for the AO to either accept the same or in a scenario, where the AO is of the prima facie view that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same or similar line of business of export of gems and jewellery and operating in the same or similar business conditions. And if there are variations in the profits reported by the assessee company and these unrelated third party entities, it could give a starting point to the AO to carry out further investigation, as we have held above, to examine whether there exist an arrangement or not. The assessee company has in fact submitted some comparable data in respect of Jagdish Prasad Soni and Green Fire Export to demonstrate that the profits reported are comparable. However, the same has not been examined by the lower authorities. On this account also, the contention of the Revenue cannot be accepted that the assessee has earned more than normal profits. 5.13 In light of above discussion and in the entirety of the facts and in the circumstances of the case, we are of the view that there is no evidence demonstrating the existence of any arrangement between the assessee company and M/s Dwarka Jewels aimed at producing more than normal profit in the hands of the assessee company. Hence, the action of the authorities in invoking provisions of section 10AA(9) read with section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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