M/s. Indigra Exports Pvt. Ltd., Bangalore V. ITO, Bangalore

ITA 1323/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5515 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: C J BRITO
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1323/ BANG/2010 (ASST. YEAR 2005-06) M/S INDIGRA EXPORTS (P) LTD., 46, 2 ND FLOOR, CC VILLA, EJIPURA MAIN ROAD, VIVEKNAGAR POST, BANGALORE-560 047. . APPELLANT VS. THE INCOME-TAX OFFICER, WARD-11(2), BANGALORE. . BANGALORE APPELLANT BY : SHRI C.J BRITO RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) I AT BANGALORE DATED 20.10.2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. ITA NO.1323/B/10 2 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO EXCLUDING THE FREIGHT CHARGES FROM THE EXPORT TURNOVER ONLY WHILE COMPUTI NG DEDUCTING U/S 10B OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GRANITE CUT AND POLISHED SLABS. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE INCOME-TAX ACT. DURING THE ASSESSMENT PROCE EDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE AO OBSERVED THAT THE PRO FIT AND LOSS ACCOUNT WAS DEBITED TOWARDS FREIGHT AND CLEARING AN D FORWARDING CHARGES RESPECTIVELY BUT THE SAME WERE NOT REDUCED FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B OF THE INCOME-TAX ACT. THE ASSESSEES EXPLANATION WAS CAL LED FOR. THE ASSESSEE SUBMITTED THAT THE COMPANY INCURRED FREIGH T EXPENSES TOWARDS TRANSPORTATION OF GRANITE SLABS FROM THE FA CTORY AT DHARMAPURI TO CHENNAI PORT AND FROM THERE THE GOODS WERE EXPOR TED ON FREE ON BOARD (FOB) BASIS. IT WAS SUBMITTED THAT SINCE THE DELIVERY IS MADE IN INDIA, THESE FREIGHT EXPENSES CANNOT BE DEEMED TO BE FREIGHT ATTRIBUTABLE TO DELIVERY OUTSIDE INDIA. WITHOUT PR EJUDICE TO THIS CONTENTION, IT WAS ALSO SUBMITTED THAT IN CASE ANY EXPENSES ARE ITA NO.1323/B/10 3 EXCLUDED FROM THE TOTAL TURNOVER, THE SAME WILL HAV E TO BE EXCLUDED FROM THE TOTAL TURNOVER ALSO. 4. WITH REGARD TO CLEARING AND FORWARDING CHARGES, IT WAS SUBMITTED THAT THESE ARE THE EXPENSES PAID TO CLEAR ING AGENTS TOWARDS HANDLING OF EXPORT DOCUMENTS WITH CUSTOM AUTHORITY TERMINAL HANDLING CHARGES AND AGENTS AS COMMISSION INCURRED AT CHENNAI PORT FOR EXPORT OF GOODS AND THESE WERE PAID TO THE GOOD S CLEARING AND FORWARDING AGENTS IN INDIA AND, THEREFORE, DO NOT FORM PART OF FREIGHT CHARGES BUT ARE INCIDENTAL CHARGES IN THE COURSE OF EXPORT. THE AO HOWEVER DID NOT ACCEPT THIS CONTENTION AND HELD THA T THE ASSESSEES SALE TURNOVER WOULD INCLUDE THE COST OF THE PRODUCT I.E FREIGHT AND OTHER EXPENSES AS WELL AS THE PROFIT MARGINS. THE FREIGHT CHARGES EXCLUDING CLEARING AND FORWARDING CHARGES WOULD BE PART OF THE SALE PROCEEDS AND, THEREFORE, AS PER EXPLANATION (2) AND (3) TO SEC. 10B, THE FREIGHT CHARGES INCLUDING CLEARING AND FORWARDING C HARGES DO NOT FORM PART OF EXPORT TURNOVER AND HENCE, THE SAME ARE RED UCED FROM EXPORT TURNOVER. HE, HOWEVER REFUSED TO EXCLUDE THE SAME FROM THE TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION U/S 10B OF THE INCOME- TAX ACT. ITA NO.1323/B/10 4 5. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO HOLDING TH AT THE FREIGHT CHARGES PAID FOR TRANSPORTATION FROM FACTORY OF DHA RMPURI TO CHENNIA PORT AND ALSO CLEARING AND FORWARDING CHARGES ARE N OTHING BUT EXPENDITURE ATTRIBUTABLE TO DELIVERY OF GOODS OUTSI DE INDIA. HE ACCORDINGLY CONFIRMED THE ORDER OF THE AO. 6. AGGRIEVED BY THIS THE ASSESSEE IS IN SECOND APPE AL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW A ND SUBMITTED THAT THE FREIGHT CHARGES INCURRED BY THE ASSESSEE WITHIN INDIA CANNOT BE ATTRIBUTABLE TO THE EXPORT OF GOODS SINCE THE GOODS EXPORTED WERE ON FREE ON BOARD (FOB) BASIS. 8. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF T HE AUTHORITIES BELOW: 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE IS 100% EXPO RT ORIENTED UNDERTAKING (EOU). AS RIGHTLY POINTED OUT BY THE L EARNED CIT(A), IF ITA NO.1323/B/10 5 IT IS ACCEPTED THAT THE FREIGHT CHARGES PAID BY THE ASSESSEE FROM THE FACTORY AT DHARMAPURI TO CHENNAI PORT IS NOT FOR EX PORT OF THE GOODS, THEN THE SAID TRANSACTIONS HAVE TO BE TREATED AS DO MESTIC SALES AND NOT AS EXPORT. SINCE THE GOODS WERE TRANSPORTED FROM T HE FACTORY OF DHARMPURI TO CHENNAI PORT FOR EXPORT OF GOODS, THE AUTHORITIES BELOW HAVE RIGHTLY HELD IT TO BE ATTRIBUTABLE TO DELIVERY OF THE GOODS AND HAVE RIGHTLY EXCLUDED THE SAME FROM THE EXPORT TURNOVER. HOWEVER, WE ARE INCLINED TO ACCEPT THE ALTERNATIVE CLAIM OF THE ASS ESSEE HOLDING THAT WHEN SUCH EXPENSES ARE REDUCED FROM THE EXPORT TURN OVER, THE SAME WILL ALSO HAVE TO BE REDUCED FROM THE TOTAL TURNOVE R. WE RELY ON THE DECISION OF THE HONBLE CHENNAI SPECIAL BENCH IN TH E CASE OF SAK SOFT LTD., 313 ITR 353 (AT) AND ALSO ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE DECISION OF M/S GEM PLUS JEWELLER Y INDIA LTD., 330 ITR 175 FOR COMING TO THIS CONCLUSION. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH JUL, 2011. SD/- (P MADHAVI DEVI) JUDICIA L MEMBER VMS. BANGALORE DATED : 05/07/2011 ITA NO.1323/B/10 6 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.