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TMI Blog2013 (5) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... /2009. In this appeal, ground No.1 relates to the disallowance of claim u/s 10B of the Income Tax Act, 1961 [hereinafter referred to as the Act in short]. 4. The facts related to this issue in brief are that the assessee had filed the return of income on 31.10.2005 declaring an income of ₹ 1,88,92,010/-. The said income was related to the trading business of M/s Galaxy Exports. The assessee had also shown income of ₹ 4,03,61,890/- from 100% Export Oriented Unit (EOU) and claimed exemption u/s 10B of the Act. The Assessing Officer asked the assessee to justify its claim of exemption. The submissions of the assessee was that the activity of the unit was covered under the definition of manufacturing / production and processing, as such, it was entitled for exemption so claimed u/s 10B of the Act. However, the Assessing Officer did not find merit in the explanation of the assessee and rejected the claim for exemption u/s 10B of the Act. 5. The assessee carried the matter to the learned CIT(A) and submitted that 100% EOU had been set up to manufacture and produce slabs / tiles etc. and for the year under consideration an income of ₹ 4,03,61,690/- was earned fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only engaged in the activity of processing of marble and has not produced any new article or things. The Ld, A/R submitted elaborate explanation and also placed various juridical pronouncements in the matter. He further submitted that this point has already been decided in favour of the appellant vide appellate order dated 7-7-2006 in appeal No.268/2005-06 and vide order dated 20-12-2007 in appeal No.235/2006-07 for assessment years 2003-04 and 2004-05. The above decision for assessment year 2003-04 has also been confirmed by the Hon'ble ITAT vide order dated 10-8-2007 in ITA No.510/JU/2006. The A/R also placed reliance of the decision of the Hon'ble ITAT, Jaipur Bench-B, Jaipur in the case of DCIT, Circle-6, Jaipur Vs. M/s Galaxy Impex, Jaipur and cross appeal by the assessee. The Hon'ble ITAT, Jaipur Bench-B vide order in ITA NO. 155 156 for assessment years 2003-04. and 2004-05 ITAT followed the decision of Mumbai Bench of Tribunal in the case of Akash Stone Industries Ltd Vs. ACIT 13 SOT 15 (Mumbai) in which it has held that Where assessee used to transform rough raw marble blocks into finished polished slabs by subjecting to raw blocks to several process, lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the decision of the Hon'ble ITAT, Jaipur Bench-B (Supra), I hold that the appellant is entitled to claim exemption u/s 10B of the Act. Therefore, the AO was not justified in rejecting the claim of the appellant without considering the whole facts of the case and reliances placed. Therefore, the addition is deleted. The appeal is allowed on this ground. Now the Department is in appeal. 7. The learned Ld. D.R. supported the order of the Assessing Officer and reiterated the observations made in the assessment order. 8. In his rival submissions the ld. counsel for the assessee strongly supported the impugned order passed by the learned CIT(A) and further submitted that this issue now stands covered by the various decisions of this Bench of the Tribunal, Hon'ble Jurisdictional High Court and the Hon'ble Supreme Court. Reliance was placed on the following cases:- a) ITO Vs. Arihant Tiles Marble Pvt. Ltd. 320 ITR 79 (SC) b ACIT Vs. M/s Glaxy Impex ITAT Jaipur order dated 30.5.2008 c) CIT Vs. Sophisticated Marble Granite Industries (2009), 225 CTR 410, 27 DTR 117 9. We have considered the submissions of both the parties and carefully gone through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings noticed that the assessee has claimed clearing and forwarding expenses of ₹ 4,13,34,599/- under the head selling and distribution expenses . The Assessing Officer asked the assessee to furnish about disallowance of such expenses in the case of non-deduction of TDS. The assessee submitted that it was not liable to deduct tax at source u/s 194C on the reimbursement of the actual expenses which were raised separately by way of debit note. The Assessing Officer was not satisfied with the explanation of the assessee and made the impugned disallowance by observing in para 3.4 of the assessment order which reads as under:- I have gone through the submission made by Id. A.R. on behalf of the assessee firm and examined the issue in the light of provision u/s 40(a)(i), 194C, 172, Circular No. 715 dated 08-08-1995 and Circular No. 723 dated 19-09-1995. Circular No. 715 vide answer to query No. 6 clearly states that:- As regards payments made to clearing and forwarding agents for carriage of goods, the same shall be subjected to tax deduction to source under section 194C of the Act Here assessee has made payment to C F agents for expenses on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dated 9.10.2007 and 20.9.2007 respectively were submitted wherein the said agents have clearly stated that the reimbursement of expenses incurred on behalf of the assessee are the actual expenses and they have not charged any overheads/profits over and above the actual expenses. Both are being assessed to income-tax from year to year and supporting evidence was adduced. However, the Id. A.O. has disallowed a sum of ₹ 13,43,208/-. It stands established that there was no element of profit in the said amount. Further the agent has issued debit note for the expenses incurred on behalf of the assessee. The agent has not issued a single bill. The scheme of tax deduction at source is to deduct / collect tax in advance from the income of the deductee and the deductee gets its credit in own assessment, on furnishing of certificate u/s.203 of the Act. As established on records, the said amount was by way of reimbursement and there was no element of income by the agents in respect of such amount. Hence, there was no liability to deduct tax at source and the assessee was all along under the bonafide belief and was also advised that there is no necessity of deducting tax u/s. 194C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are made to shipping agents of non-resident ship owners charterers of ship for carriage of passenger etc. Shipped at port in India. Since the agent acts on behalf of the non-resident ship owners or charterer, he steps into the shoes of the Principal. Accordingly, provisions of section 172 shall apply and those of section 194C and 195 will not apply Further 194C deals with works contract, including carriage of goods and passengers by any mode of transport other than rail to -any resident mentioned in sub section (1) in clause (a) to (j). It is clear that areas of operation for TDS are confined to resident. On the other hand section 172 operates in the area of computation of profit of shipping business of non resident who pay the tax by themselves as per section 172 and no TDS is attracted. Regarding balance amount they are in the nature of agency payment but other misc. payment such as licence verification charges, custom duty charges, license bulletin charges etc, doc charges and service charges, container detention charges and packing charges. Further the Agent raised bill separately for reimbursement of actual expenses in respect of clearing and forwarding charges and other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, therefore, it does not attract the provisions for deducting of the tax at source. The payment to the Railways were also made through CONCOR by separate bills in the names of the assessee, therefore, it was also reimbursement of the expenses and the provisions of TDS were not attracted. Furthermore, in the present case, nothing was payable at the year end, therefore, no TDS was to be deduced at source as has been held by the ITAT Jaipur Bench in the case of Jaipur Vidyut Vitran Nigam Ltd. Vs. DCIT (2009) 123 TTJ 888 wherein it has been held as under:- The bare provision of s. 40(a)(ia) provides for non-deduction of amount which remains payable to a resident in respect of fees for technical services etc. It is not applicable where expenditure is paid. It is applicable only In cases where the payments are due and outstanding. The word payable is not defined though the word paid is defined under s. 43(2) to mean actually paid or incurred. Hence, by implication the word payable does not include paid. The difference in the word paid and payable is also there in the rules for depositing the TDS and also for levy of interest under s. 234B where interest is worked out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an separate Export Oriented Unit at plot N. 934 Brahmano Ka Guda, Udaipur in March 2000 in order to manufacture/produce marble slabs and tiles. It maintains separate books of account for the trading unit and the Export Oriented Unit. Products of the two units remain separate. Expenditure incurred in respect of the relevant unit is debited to the accounts of the concerned unit. Separate trading and profit and loss account is prepared for each of the said units. In order to boost sale of trading unit, it had taken space for display of goods of trading unit at Madrid Trade Fair from 05-05-2004 to 08-05-2004. During the accounting period 01-04-2004 to 31-03-2005 relevant for the assessment year 2005-06, goods belonging to/purchased for the trading unit were exported for exhibition at Madrid fair vide invoice dated 25-03-2004 and at Verona fair vide invoice dated 12-08-2004 (copies enclosed). The exhibits were displayed and distributed in exhibitions for business promotion. Expenditure was also incurred for photographs, travel, commission and other expenses. We are submitting herewith details of expenditure of ₹ 15,32,200/- for Madrid Trade Fair and of ₹ 20,67,309/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connected and inseparable and that for the purpose of taxation, two separate divisions had been maintained. It was further contended that there was no evidence that on account of participating in the trade fair, gain was in respect of EOU. On the contrary, the assessee had participated in the trade fair for the purpose of business of trading and it stands proved that with such participation it could compete and could earn better margin of profit. Alternatively, it was submitted that on account of disallowance out of clearing and forwarding charges and the trade fair expenses, income of the EOU would enhance and such income being exempt u/s 10B of the Act, the disallowance would be of no consequence. 22. The learned CIT(A) after considering the submissions of the assessee observed that it was established that the goods displayed at the trade fair, samples purchased and export expenditure incurred for photographs, travel commission and other expenses were related to the trading unit and had been debited in the trading unit. He further observed that on account of participation in the said fair, the assessee firm could increase its gross profit and maintained the same though there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... until proved otherwise by controverting the facts submitted by the assessee by collecting some corroborative material on record. The learned CIT(A) therefore, held that the apportionment made by the Assessing Officer without any material on record was not justified. Now the Department is in appeal. 23. The learned Ld. D.R. for the Revenue strongly supported the order of the Assessing Officer and reiterated the observations made in the assessment order dated 28.12.2007. 24. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by learned CIT(A). 25. After considering the submissions of both the parties and material on record, it is noticed that the assessee was having two divisions i.e. trading division and Export Oriented Unit (EOU) Division. The assessee maintained separate books of account for both the units. The trading unit was selling the goods to foreign buyers as well as to the local buyers while the EOU unit was selling the goods only to the foreign buyers. The trading division participated in Madrid and Verona Trade fairs, displayed and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, our findings given in ITA Nos 350/JU/2009 for the assessment year 2005-06 (supra), shall apply with the same force for this year also. 29. In ITA No. 260/JU/2012 for the assessment year 2008-09, ground Nos. 1, 2 4 relates to deletion of addition made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act and in ground No.3, the issue agitated by the Department also relates to the deduction u/s 10B r.w Sec. 40(a)(ia) of the Act, these issues had already been adjudicated in the former part of this order while deciding the appeals of the Department in the preceding assessment years i.e. assessment year 2005-06, 2006-07 and 2007-08. In view of the discussion made in the former part of this order, we do not see any merit in these grounds of the Departmental appeal. 30. The grievance of the Department vide ground No.5 relates to the deletion of disallowance of loss amounting to ₹ 2 lakhs relating to the trading unit. 31. The facts related to this issue in brief are that the assessee claimed a loss of ₹ 2 lakhs in the trading unit. The Assessing Officer required the assessee to explain about the claim of this loss. However ..... X X X X Extracts X X X X X X X X Extracts X X X X
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