Intercraft Engineering Pvt. Ltd., Kolkata V. CIT-III, KOLKATA, Kolkata

ITA 1250/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3239 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP CHAUBE
• Assessee Lawyers: D S DAMLE
• Keywords: Opportunity of being heard
• Section: 143(3); 10AA; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1250 / KOL / 2014 ASSESSMENT YEAR :2009-10 INTERCRAFT ENGINEERING PVT. LTD., 16A, SHAKESPEARE SARANI, KOLKATA 700 071 [ PAN NO.AABCI 6767 L ] V/S . COMMISSIONER OF INCOME TAX, KOLKATA-III, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI D.S.DAMLE, FCA /BY RESPONDENT SHRI SANDEEP CHAUBE, CIT-DR /DATE OF HEARING 16-12-2015 /DATE OF PRONOUNCEMENT 05-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX, KOLKATA-III IN APPEAL NO. CIT-III/DC(HA )-3/KOL/281/U/S263/2013- 14/7264-66 DATED 27.03.2014. ASSESSMENT WAS FRAMED BY ITO, WARD-8(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28.12.2011 FOR ASSESSMEN T YEAR 2009-10. ASSESSEE RAISED THE FOLLOWING GROUNDS:- 1.0 DEDUCTION UNDER SECTION 10AA OF THE INCOME TAX ACT, 1961 1.1 THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN ASSESSING THE QUANTUM OF DEDUCTION UNDER SECTION 10AA IN HIS ORDE R UNDER SECTION 263 PASSED ON MARCH 26, 2014. ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 2 1.2 HE ERRED IN STATING THAT THE APPELLANT WAS ENTI TLED FOR A DEDUCTION OF RS.8,05,512/- UNDER SECTION 10AA OF THE INCOME T AX ACT, 1961. 1.3 HE ERRED IN LAW BY INTERPRETING THAT THE AMENDE D PROVISIONS OF SUB-SECTION (7) OF SECTION 10AA WERE MADE APPLICABL E FROM ASSESSMENT YEAR 2010-11 AND HENCE IT WAS NOT APPLIC ABLE FOR ASSESSMENT YEAR 2009-10. HE ERRED IN APPRECIATING T HAT A PROVISO TO THE SUB-SECTION (7) WAS ALSO INSERTED BY THE FIN ANCE ACT, 2010, W.E.F. APRIL 01, 2010 WHICH STATE THAT THE PROVISIO NS OF SUB-SECTION (7) [AS AMENDED ] SHALL HAVE EFFECT FOR THE ASSES SMENT YEAR BEGINNING ON APRIL 01,2006 AND SUBSEQUENT ASSESSMEN T YEARS.. 1.4 THE APPELLANT SUBMITS THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS ERRONEOUS AND THEREFORE OUGHT TO B E QUASHED. 2. THE ONLY ISSUE RAISED BY ASSESSEE IN ITS APPEAL IS THAT LD. CIT ERRED IN TREATING THE ORDER OF THE ASSESSING OFFICER PREJUDI CIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF EXCESSIVE DEDUCTION PROVIDED TO THE A SSESSEE U/S 10AA OF THE ACT FOR AN AMOUNT OF RS. 13,82,723.00. 2.1 THE FACTS OF THE PRESENT CASE ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF ELECTRICAL AND LIGHTING PRODUCTS ETC. THE ASSESSEE HAS ITS UNITS S ITUATED IN SPECIAL ECONOMIC ZONE (SEZ FOR SHORT) AND DOMESTIC TARIFF AREA (DTA) . ASSESSEES SEZ UNIT IS LOCATED AT 152, NSEZ, PHASE-2, NOIDA-201305. THE NE CESSARY DETAILS OF THE TURNOVER OF ASSESSEE ARE GIVEN BELOW:- 1. TOTAL TURNOVER OF ASSESSEE (INCLUDING SEZ & DTA UNITS) RS.14,38,79,959/- 2. NET PROFIT OF THE ASSESSEE (INCLUDING SEZ & DTA UNIT) RS. 64,13,322/ - 3. TOTAL TURNOVER OF THE SEZ UNIT RS. 5,29,63,726 /- 4. EXPORT TURNOVER OF THE SEZ UNIT RS. 5,20,30,42 6/- 5. TOTAL PROFIT SEZ RS. 22,27,285/- THE ASSESSEE CLAIMED THE DEDUCTION U/S 10AA OF THE ACT IN RESPECT OF THE EXPORT PROFIT FROM SEZ UNIT BY CONSIDERING THE TOTA L TURNOVER OF SEZ UNIT AND EXPORT TURNOVER OF SEZ UNIT. THE DEDUCTION UNDER SE CTION 10AA OF THE ACT WAS ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 3 DULY CERTIFIED BY A QUALIFIED CHARTERED ACCOUNTANT IN FORM 56F AS PRESCRIBED. THE WORKING OF DEDUCTION UNDER SECTION 10AA OF THE ACT IS REPRODUCED BELOW:- TOTAL PROFIT OF SEZ X EXPORT TURNOVER OF SEZ = RS.21,88,235/- TOTAL T URNOVER OF SEZ THE AO IN HIS ASSESSMENT ORDER U/S 143(3) OF THE AC T HAS ACCEPTED THE CLAIM OF THE ASSESSEE UNDER SECTION 10AA IN RESPECT OF IT S UNIT LOCATED AT SEZ, NOIDA. HOWEVER LD. CIT FOUND THE ORDER OF AO IS ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE BY OBSERVING THAT THE ASSESSEE HAS CLAIMED THE EXCESSIVE DEDUCTION U/S 10AA OF THE ACT AND WORKED OUT THE DEDUCTION AS UNDER:- TOTAL PROFIT OF SEZ X EXPORT TURNOVER OF SEZ = RS.8,05,512/- TOTAL T URNOVER OF SEZ AS PER THE CALCULATION OF LD. CIT THE ASSESSEE HAS CLAIMED THE EXCESSIVE DEDUCTION U/S 10AA OF THE ACT BY AN AMOUNT OF RS.13 ,82,723/- (RS.21,88,235/- - RS 8,05,512/-). ACCORDINGLY THE LD. CIT EXERCISED HIS POWER U/S 263 OF THE ACT BY ISSUING A SHOW CAUSE NOTICE. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SE CTION 10AA OF THE ACT, THE DEDUCTION SHALL BE WORKED AFTER CONSIDERING THE EXP ORT TURNOVER AND TOTAL TURNOVER VIZ A VIZ PROFIT OF THE SEZ UNDERTAKING ON LY. HOWEVER, THE LD. CIT HAS DISREGARDED THE CLAIM OF A SSESSEE BY OBSERVING AS UNDER THAT : 1) THE AO HAS FAILED TO INTERPRET THE PROVISIONS OF SECTION 10AA OF THE ACT. 2) THE LD. CIT ALSO OPINED THAT THE AMENDED PROVISI ONS OF SECTION 10AA OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE FOR THE CURRENT YEAR. THEREFORE THE LD. CIT HELD THAT THE ORDER PASSED BY AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HE NCE, MATTER WAS RESTORED BACK ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 4 TO THE FILE OF AO FOR FRESH ADJUDICATION AFTER NECE SSARY VERIFICATION OF THE FACTS AND REASONABLE OPPORTUNITY TO ASSESSEE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT ASSESSEE P REFERRED AN APPEAL BEFORE US U/S. 263 OF THE ACT. SHRI D.S.DAMLE LD. AUTHORIZED REPRESENTATIVE APPEAR ING ON BEHALF OF ASSESSEE AND SHRI SANDEEP CHAUBE LD. DEPARTMENTAL R EPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 3. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. AR SUBMITTED PAP ER BOOK WHICH IS CONTAINING PAGES FROM 1 TO 13. BEFORE US THE LD. A R SUBMITTED THAT THE TOTAL TURNOVER/ EXPORT TURNOVER AND PROFIT ARISING FROM T HE UNDERTAKING LOCATED AT SEZ SHALL ALONE BE CONSIDERED FOR THE WORKING OF TH E DEDUCTION UNDER SECTION 10AA(7) OF THE ACT. THE TOTAL TURNOVER OF THE ASSES SEE SHALL NOT BE TAKEN INTO ACCOUNT WHILE WORKING OUT THE DEDUCTION UNDER SECTI ON 10AA OF THE ACT. THE ASSESSEE ALSO SUBMITTED THAT THE PROVISIONS OF SECT ION 10AA ARE ALSO APPLICABLE TO THE ASSESSEE FOR THE YEAR UNDER CONSI DERATION AS AMENDED PROVISIONS ARE EFFECTIVE FROM THE ASSESSMENT YEAR 2 006-07 AND ONWARDS. THE CBDT HAS ALSO CLARIFIED IN ITS CIRCULAR NO. 01 OF 2 011 DATED 6.4.2011 THAT THE AMENDED PROVISIONS ARE EFFECTIVE FROM ASSESSMENT YE ARS 2006-07. AT THE END, LD. AR PRAYED THAT THE ORDER IS NOT ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 4. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTE D THE VIEW OF THE LD. CIT. 5. FROM THE AFORESAID DISCUSSION WE FIND THAT THE L D. CIT TREATED THE ORDER OF THE AO ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS BECAUSE THAT THE ASSESSEE HAS CLAIMED EXCESSIVE DED UCTION UNDER SECTION 10AA OF THE ACT BY AN AMOUNT OF RS. 13,82,723.00 AN D AO HAS NOT VERIFIED ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 5 THIS FACT AT THE TIME OF ASSESSMENT UNDER SECTION 1 43(3) OF THE ACT. THEREFORE THE LD. CIT HELD THE ORDER ERRONEOUS IN SO FAR PREJ UDICIAL TO THE INTEREST OF REVENUE. NOW TO ARRIVE AT THE CORRECT CONCLUSION OF THE CASE, WE DEEM IT NECESSARY TO REPRODUCE THE RELEVANT PROVISIONS OF S ECTION 263 OF THE ACT. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE R ECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE, MY , AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SU CH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSE SSMENT AND DIRECTING A FRESH ASSESSMENT. THE SUM AND SUBSTANCE OF THE ABOVE REPRODUCED SECTI ON 263(1) CAN BE SUMMARIZED IN THE FOLLOWING POINTS:-: 1) THE COMMISSIONER MAY CALL FOR AN EXAMINE THE REC ORD OF ANY PROCEEDING UNDER THE ACT; 2) IF HE CONSIDERS THAT THE ORDER PASSED BY THE AO IS (I) ERRONEOUS; AND (II) IS PREJUDICIAL TO THE INTEREST OF REVENUE; 3) HE HAS TO GIVE AN OPPORTUNITY OF HEARING IN THIS RESPECT TO THE ASSESSEE; AND 4) HE HAS TO MAKE OR CAUSE TO MAKE SUCH ENQUIRY AS HE DEEMS NECESSARY; 5) HE MAY PASS SUCH ORDER THEREON AS THE CIRCUMSTAN CES OF THE CASE JUSTIFY INCLUDING, (I) AN ORDER ENHANCING OR, (II) MODIFYING THE ASSESSMENT OR (III) CANCELLING THE ASSESSMENT AND DIRECTING A FRE SH ASSESSMENT. NOW IN THE LIGHT OF ABOVE WORDS, WE HAVE TO EXAMINE AS TO WHETHER THE ORDER OF THE LD. CIT IS A VALID ORDER IN THE LIGHT OF THE ABOVE STATED POINTS/ PROVISIONS ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 6 OF SECTION 263 OF THE ACT. IN THE CASE IN HAND, LET US UNDERSTAND THE RELEVANT PROVISIONS OF SECTION 10AA(7) OF THE ACT WHICH READ S AS UNDER : (7) FOR THE PURPOSE OF SUB-SECTION (1), THE PROFITS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR SERVICES (INCLUDING COMPUTER SOFTWARE) SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF T HE BUSINESS OF THE UNDERTAKING, BEING THE UNIT, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR SERVICES B EARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED DON [BY THE UNDERT AKING] [PROVIDED THAT THE PROVISIONS OF THIS SUB-SECTION [ AS AMENDED BY SECTION 6 OF THE FINANCE (NO.2) ACT, 2009 (33 OF 2009)] SHA LL HAVE EFFECT FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2006 AND SUBSEQUENT ASSESSMENT YEARS.] 6. FROM THE ABOVE WE INFER THAT THE TOTAL TURNOVER/ EXPORT TURNOVER AND PROFIT ARISING FROM THE UNDERTAKING LOCATED AT SEZ SHALL ALONE BE CONSIDERED FOR THE WORKING OF THE DEDUCTION UNDER SECTION 10AA (7) OF THE ACT. THE TOTAL TURNOVER OF THE ASSESSEE SHALL NOT BE TAKEN INTO AC COUNT WHILE WORKING OUT THE DEDUCTION UNDER SECTION 10AA OF THE ACT. FOR THE AP PLICABILITY OF THE AMENDED SECTION 10AA OF THE ACT TO THE INSTANT ASSESSEE FOR THE YEAR UNDER CONSIDERATION, WE REPRODUCE THE RELEVANT PORTION OF THE CBDT CIRCULAR 01 OF 2011 AS UNDER : 6. COMPUTATION OF EXEMPTED PROFITS IN THE CASE OF U NITS IN SPECIAL ECONOMIC ZONES (SEZS) 6.1 SECTION 10AA WAS INSERTED IN THE INCOME-TAX ACT BY THE SPECIAL ECONOMIC ZONE ACT, 2005 WITH EFFECT FROM 10.2.2006. THROUGH THE FINANCE (NO.2) ACT, 2009, SECTION 10AA(7) OF THE IN COME-TAX ACT, 1961 WAS AMENDED AND THE WORDS BY THE UNDERTAKING WERE SUBSTITUTED FOR BY THE ASSESSEE WITH EFFECT FROM ASSESSMENT YEAR 2010-11 AND SUBSEQUENT ASSESSMENT YEARS. THIS WAS DONE AS THE E XISTING FORMULA WAS PERCEIVED TO BE DISCRIMINATORY IN SO FAR AS THO SE ASSESSEES ARE CONCERNED WHO HAVE MULTIPLE UNITS IN BOTH THE SEZ A ND THE DOMESTIC TARIFF AREA (DTA) VIS--VIS THOSE ASSESSEES WHO WER E HAVING UNITS IN ONLY THE SEZ. WITH A VIEW TO REMOVING THE ANOMALY, THE PROVISIONS OF SUBSECTION (7) OF SECTION 10AA OF THE INCOME-TAX AC T WERE AMENDED. 6.2 APPLICABILITY - IN ORDER TO MAKE THE AMENDMENT EFFECTIVE FOR EARLIER YEARS, A PROVISO TO SUBSECTION (7) HAS BEEN INSERTE D TO PROVIDE THAT THE PROVISION OF SUB-SECTION (7), AS AMENDED BY FINANCE (NO. 2) ACT, 2009, ITA NO.1250/KOL/2014 A.Y. 2009-10 INTERECRAFT ENGG. PVT. LTD. V. CIT-III KOL. PAGE 7 IS APPLICABLE TO THE ASSESSMENT YEAR 2006-07 AND SU BSEQUENT ASSESSMENT YEARS . FROM THE AFORESAID DISCUSSION IT IS AMPLY CLEAR THA T THE ASSESSEE HAS CORRECTLY CLAIMED THE DEDUCTION UNDER SECTION 10AA OF THE ACT . THEREFORE THE ORDER OF THE AO IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE. ACCORDINGLY THE ORDER OF THE LD. CIT CANNOT BE HELD TO BE SUSTA INABLE IN LAW AND THE SAME IS ACCORDINGLY SET ASIDE. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 05/ 02/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 05 / 02 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-INTERCRAFT ENGINEERING PVT. LTD. 16A, SH AKESPPEARE SARANI, KOL-71 2. /RESPONDENT-CIT-III, AAYAKAR BHAWAN,P-7, CHOWRINGHE E SQ. KOLKATA-69 3. ) *+, , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5.01233*+, , *+ , / DR, ITAT, KOLKATA 6.26789 / GUARD FILE. BY ORDER/ ,, /TRUE COPY/ / , *+ ,