Oliver Valves India Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1056/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6165 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHY
• Assessee Lawyers: G BASKAR
• Section: 143(3); 10B; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NOS.1055 & 1056/MDS/2017 & '& / ASSESSMENT YEARS : 2009-10 & 2010-11 M/S OLIVER VALVES INDIA PVT. LTD., NO.6, FIRST CROSS STREET, SIDCO INDUSTRIAL ESTATE, AMBATTUR, CHENNAI - 600 098. PAN : AAACO 6874 B V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -5(1), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI G. BASKAR, ADVOCATE +,)* - . / RESPONDENT BY : SHRI ASISH TRIPATHY, JCIT / - 0' / DATE OF HEARING : 14.09.2017 12' - 0' / DATE OF PRONOUNCEMENT : 20.09.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS) -3, CHENNAI, DATED 28.02.2017 AND PERTAIN TO ASSESSMENT YEARS 2009-10 AND 2010-11. SINCE COMMON ISSUES ARI SE FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THESE A PPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.1055 & 1056/MDS/17 2. SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 1 0B OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDI NG TO THE LD. COUNSEL, THE ASSESSEE IS A 100% EXPORT ORIENTED UNI T. THE ASSESSEE EXPORTED VALVES AND ALSO EARNED MANAGEMENT FEE WHICH WAS INCIDENTAL TO THE EXPORT OF VALVES. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER T HAT MANAGEMENT FEE PARTAKES THE CHARACTER OF PROFITS AN D GAINS FROM BUSINESS OR PROFESSION. THE ASSESSING OFFICER HOWE VER, REJECTED THE CLAIM OF THE ASSESSEE AND FOUND THAT THE MANAGE MENT FEE, SALE OF SCRAP AND INTEREST ARE NOT DERIVED FROM INDUSTRI AL UNDERTAKING. REFERRING TO SECTION 10B OF THE ACT, THE LD.COUNSEL SUBMITTED THAT THIS SECTION CLEARLY SAYS THAT THE DEDUCTION SHALL BE FROM THE PROFITS AND GAINS OF 100% EXPORT ORIENTED UNIT. PLACING RE LIANCE ON THE ORDER OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MARA L OVERSEAS LTD. V. ADDL. CIT (2012) 16 ITR (TRIB) 565, THE LD.COUNSEL SUBMITTED THAT IN VIEW OF SECTION 10B(4) OF THE ACT, THE ENTIRE PROFI T OF THE UNDERTAKING IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE INTEREST ON THE FIXED DEPOSIT RECEIPT HAS TO BE TREATED AS PROFIT OF THE UNDERTAKING, THEREFORE, TH E ASSESSEE IS 3 I.T.A. NOS.1055 & 1056/MDS/17 ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT . THE LD.COUNSEL HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF KAR NATAKA HIGH COURT IN CIT V. MOTOROLA INDIA ELECTRONICS (P) LTD. (2014) 265 CTR 94 AND ALSO THE JUDGMENT OF DELHI HIGH COURT IN PRI VIERA HOME FURNISHING V. ADDL. CIT (2016) 138 DTR 149. 3. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THE ASSESSING OFFICER HAS ALSO REOPENED ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS UNDER SECTION 147 OF THE ACT. THE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT ON 1 3.03.2013 AND ON 27.02.2013 FOR ASSESSMENT YEARS 2009-10 AND 2010 -11 RESPECTIVELY. THE ASSESSING OFFICER HAD NO FRESH M ATERIAL FOR REOPENING THE ASSESSMENTS. REFERRING TO THE OBJECT ION FILED BEFORE THE ASSESSING OFFICER, A COPY OF WHICH IS AVAILABLE AT PAGE 62-63 AND 89-90 OF THE RELEVANT PAPER-BOOK, THE LD.COUNSE L SUBMITTED THAT THE MANAGEMENT FEE OF ` 56,52,503/- AND ` 56,13,961/- FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVELY A RE IN THE NATURE OF RENDERING TECHNICAL SERVICES IN CONNECTIO N WITH EXPORT OF VALVES FROM INDIA, THEREFORE, THE ASSESSEE EXPLAINE D BEFORE THE ASSESSING OFFICER THAT IT HAS TO BE TREATED AS PROF ITS AND GAINS FROM BUSINESS. 4 I.T.A. NOS.1055 & 1056/MDS/17 4. ON THE CONTRARY, SHRI ASISH TRIPATHY, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE PROFIT DERIVED B Y THE UNDERTAKING FROM EXPORT OF ARTICLE OR THING ALONE IS ELIGIBLE F OR DEDUCTION UNDER SECTION 10B OF THE ACT. IN THIS CASE, THE MANAGEME NT FEE WAS NOT DERIVED FROM THE BUSINESS OF EXPORT. THEREFORE, AC CORDING TO THE LD. D.R., THE ASSESSING OFFICER, BY PLACING RELIANCE ON THE JUDGMENTS OF APEX COURT IN CIT V. STERLING FOODS (1999) 237 ITR 579 AND IN PANDIAN CHEMICALS LTD. V. CIT (2003) 262 ITR 278, F OUND THAT THE MANAGEMENT FEE WAS NOT DERIVED FROM THE EXPORT OF B USINESS, THEREFORE, HE REJECTED THE CLAIM OF THE ASSESSEE AN D THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT O F MANAGEMENT FEE OR NOT? BOTH THE AUTHORITIES BELOW HAVE REJECT ED THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON THE JUDGMENT OF APE X COURT IN STERLING FOODS (SUPRA) AND PANDIAN CHEMICALS LTD. ( SUPRA). THE ASSESSEE CLAIMED THAT IT BEING 100% EXPORT ORIENTED UNIT, THE PROFIT 5 I.T.A. NOS.1055 & 1056/MDS/17 HAS TO BE COMPUTED AS PROVIDED IN SECTION 10B(4) OF THE ACT. THEREFORE, THE MANAGEMENT FEE, WHICH IS IN RELATION TO EXPORT OF VALVES, CANNOT BE REDUCED FROM PROFIT OF THE UNDERT AKING. THE CONTENTION OF THE ASSESSEE IS THAT THE MANAGEMENT F EE IS PART OF EXPORT PROFIT, THEREFORE, ELIGIBLE FOR DEDUCTION UN DER SECTION 10B OF THE ACT. 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF D ELHI HIGH COURT IN PRIVIERA HOME FURNISHING (SUPRA). IN THE CASE BEFORE DELHI HIGH COURT, THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF HOME FURNISHINGS. THE AS SESSEE SET UP A 100% EXPORT ORIENTED UNDERTAKING WHICH WAS ELIGIB LE FOR DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT O F EXPORT DRAWBACK, CUSTOMER CLAIMS, FREIGHT SUBSIDY AND INTE REST ON FIXED DEPOSIT RECEIPTS. THE DELHI BENCH OF THIS TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT EXPORT DRAWBACK FORMS PART OF INCOME ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT . AS REGARDS OTHER THREE CLAIMS, VIZ. CUSTOMER CLAIMS, FREIGHT S UBSIDY AND INTEREST ON FDRS, THIS TRIBUNAL FOUND THAT IT CANNOT FORM PA RT OF INCOME ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT . ON FURTHER APPEAL BEFORE THE DELHI HIGH COURT, THE DELHI HIGH COURT AFTER 6 I.T.A. NOS.1055 & 1056/MDS/17 CONSIDERING THE JUDGMENT OF APEX COURT IN PANDIAN C HEMICALS LTD. (SUPRA) AND STERLING FOODS (SUPRA), FOUND THAT FREI GHT SUBSIDY, CUSTOMER CLAIMS AND INTEREST ON FDRS ARE PROFIT OF THE UNDERTAKING. MOREOVER, THE INTEREST WAS EARNED ON THE FIXED DEPO SIT FOR FACILITATING LETTER OF CREDIT AND BANK GUARANTEE. THEREFORE, THE DELHI HIGH COURT FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. 7. IN THE CASE BEFORE US, THE CLAIM IS ONLY IN RESP ECT OF MANAGEMENT FEE. THE MANAGEMENT FEE IS IN CONNECTIO N WITH EXPORT OF VALVES, THEREFORE, IN VIEW OF THE JUDGMENT OF DE LHI HIGH COURT IN PRIVIERA HOME FURNISHING (SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. IN OTHER WORDS, THE MANAGEMENT FEE OF ` 56,52,503/- AND ` 56,13,961/- FOR THE ASSESSMENT YEARS 2009-10 AND 20 10-11 RESPECTIVELY ARE ELIGIBLE FOR DEDUCTION UNDER SECTI ON 10B OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDERS OF TH E LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF BOTH THE A UTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF MANAGEMENT FEE UNDER SEC TION 10B OF THE ACT. 7 I.T.A. NOS.1055 & 1056/MDS/17 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED ON 20 TH SEPTEMBER, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 20 TH SEPTEMBER, 2017. KRI. - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-3, CHENNAI-34 4. PRINCIPAL CIT- 5, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.