UNI DESIGN JEWELLERY PVT LTD, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), MUMBAI

ITA 1345/MUM/2023

AI Insights

The case involves Uni Design Elite Jewellery Pvt. Ltd., which appealed against the order of the CIT(A)-47, Mumbai, confirming the disallowance made by the Assessing Officer (AO) regarding the deduction under Section 10AA of the Income Tax Act. The AO had restricted the deduction by considering only those export sales for which the proceeds were realized within six months from the end of the previous year, despite the absence of a specific time limit in Section 10AA. The Tribunal referenced a similar case involving the same assessee and found in favor of the assessee, leading to the decision to allow the appeal and direct the AO to grant the deduction as claimed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130218 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 25-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 19-04-2023
• Other Referred Cases: BT e-Serv (India) Private Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LIEDER PANICKER
• Keywords: Set aside
• Section: 10; 10AA; 143(2); 22

Judgement Text

P a g e | 1 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.1345/Mum/2023 (A.Y. 2017-18) Uni Design Elite Jewellery Private Limited 401 & 402, 4 th Floor Tower- II, SEEPZ ++ Andheri (East), Mumbai – 400 096 Vs. DCIT, CC-1(2) 906, 9 th Floor, Pratishtha Bhavan, Old CGO Bldg. M.K. road, Mumbai - 400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACK3499E Appellant .. Respondent [ Appellant by : Vijay Mehta Respondent by : Lieder Panicker Date of Hearing 26.07.2023 Date of Pronouncement 31.07.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A)-47, Mumbai, dated 17.03.2023 for A.Y. 2017- 18. The assessee has raised the following grounds before us: “On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the disallowance made by the Ld. AO by not considering export sale realized after limitation of time as export turnover and consequently restricting deduction u/s 10AA of the Act by Rs.6,87,170 by computing deduction u/s 10AA at Rs.5,66,02,032. The appellant prays that export sale realized after limitation of time be considered as export turnover and deduction u/s 10AA as claimed by the appellant be granted. The appellant craves, leave to add, amend, alter, omit any of the grounds of appeal before or during the hearing of the appeal, if so advised.” P a g e | 2 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) 2. Fact in brief is that return of income declaring total income of Rs.570,61,700/- was filed on 01.11.2017. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 11.08.2018. The assessee company is engaged in the business of manufacturing and export of diamond studded gold /platinum jewellery. During the course of assessment on perusal of the annexure A to Form 56F filed by the assesse the assessing officer observed as under: “1. Out of the current year's receivables of Rs.39,96,05,345/- outstanding as on 31.03.2017, a sum of Rs.46,23,669/- was outstanding on the date of filing Form No. 56F. 2. For the year under consideration, a sum of Rs.1,76,47,085/- has been realized after 9 months from the date of exports.” The assessing officer stated that no extension of the time limit for realisation of the sale proceeds has been allowed by the Reserve Bank of India. On query, the assessee explained vide letter dated 21.04.2021 that the entire sales made during the financial year 2016-17 has been realised by the assessee company and also provided the detail of realisation. The assesse further submitted that there is no any condition like Sec. 10A laid down in Sec. 10AA for claiming the deduction. The AO has not agreed with the submission of the assessee and observed that assesse is not entitled to claim deduction u/s 10AA of the Act on the export realised after limitation of time. Accordingly, the AO has disallowed the claim of deduction u/s 10AA by Rs.687,17/- considering the export sale realised after limitation of time. 3. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has sustained the order of assessing officer holding that export proceeds have not been realised within a period of 6 month from the end of the previous year. P a g e | 3 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) 4. During the course of appellate proceeding before us the ld. Counsel vehemently contended that no time limit has been laid down for export realisation u/s 10AA of the Act. He further submitted that in the case of the assessee the export sale has been realised before the completion of assessment. The ld. Counsel submitted that on identical issue and similar fact coordinate bench of the ITAT has adjudicated the issue in favour of the assesse in the case of assessee itself vide ITA No. 3006 & 3007/Mum/2022 dated 28.02.2023. On the other hand, the ld. D.R relied on the order of the CIT(A). 5. Heard both the sides and perused the material on record. The assessing officer has restricted the deduction u/s 10AA of the Act by Rs.687,170/- by computing deduction u/s 10AA at Rs.566,02,037/- on the ground that assessee has not realised the export sale within the limitation period. The ld. Counsel has referred the provision of Sec. 10AA of the Act and submitted that unlike Sec. 10A of the Income Tax Act 1961, Sec. 10AA of the Act does not provide a specific time period for realisation of export sales. With the assistance of ld. Representative we have perused the decision of coordinate bench in the case of Uni Design Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) vide ITA No. 3006 & 3007/Mum/2022 dated 28.02.2023. The relevant operating part of the decision is reproduced as under: “19. We find that the solitary issue raised in the present appeal stands decided in favour of the Appellant/Assessee by the decision of Delhi bench of the Tribunal bench in the case of BT e-Serv (India) Private Limited (Supra) wherein it was held as under: “24. Ground Nos. 14 to 22 are with respect to disallowance of deduction of Rs. 16639234/- u/s 10AA of the Act on the basis that export proceeds have not been realized within a period of six months from the end of the previous year. Ld Assessing Officer was of the view that as the assessee is a unit established under SEZ, therefore, if the proceeds have not been received in convertible exchange on or before 30th September 2010 then, the deduction u/s 10AA cannot be granted. Assessee submitted that there is no specific provision u/s 10AA requiring the realization of export proceeds within a prescribed time limit. Further, assessee relied on the P a g e | 4 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) master circular on export of goods and services issued by the RBI under FEMA. The ld Assessing Officer rejected the contention of the assessee for the reason that according to section 10AA(8) which makes applicable subsection 5 and 6 of section 10A to this section i.e. 10 AA of the act, and according to form No. 56F, the realization of export proceeds is required to be shown. In that form assessee has shown that full consideration in convertible foreign exchange for exports made by the undertaking was brought into in India within a period of 6 months from the end of the previous year. The auditor has also certified the above fact as correct. Therefore, the ld Assessing Officer considered the export turnover at Rs. 190912493/- instead of Rs. 265997897/- and computed the deduction at Rs. 42306994/. The ld DRP on objection by the assessee confirmed the action of ld Assessing Officer. Therefore, assessee is in appeal before us. 25. The ld AR reiterated the same argument as advanced before the lower authorities and ld DR vehemently relied upon the orders of lower authorities. 26. We have carefully considered the rival contentions. According to section 10 AA of the act 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 the business of the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the undertaking. Explanation 1(i) For the purposes of this section, defines "export turnover", it means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India. Explanation 1 (ii) defines export as "export in relation to the Special Economic Zones" taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise. Therefore primarily there should be export and consideration for export should be brought in to India. The Ld. assessing officer as well as the Ld. DRP has disallowed the claim of the assessee on the sum of Rs. 75085404/. The above sum comprises of a sum of Rs. 480000000/-being foreign currency received of the export amount received by the assessee on 04/02/2011 and 24/2/2011. A sum of Rs. 27085404/- is unbilled revenue of the assessee. The unbilled revenue is like work in progress in case of ITES industries. The explanation 1 (ii) defines export means taking goods or providing services out of India from SEZ by land, sea, or by any other mode whether physical or otherwise. Regarding the unbilled revenue the assessee has not exported the goods and therefore such sum do not fall in the definition of export and therefore it cannot fall into the definition of export turnover. Hence, according to us the deduction under section 10 AA of the income tax act cannot be allowed on this sum as it does not qualify the definition of export and export turnover. Even otherwise assessee has not given any details of receipt of foreign exchange and therefore the consideration in respect of that is either received in or P a g e | 5 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) brought into India by the assessee. Hence, we confirm the finding of the lower authorities regarding disallowance of deduction under section 10 AA of the income tax act on this sum. With respect to the other sum of Rs. 4.80 crores The assessee has given foreign inward remittance certificates and such sum has also been received in India on 04/02/2011 and 24/2/2011. The provisions of section 10AA does not provide any time-limit of bringing such consideration into India like section 10A(3) which provides for receipt of consideration or sale proceeds in India in convertible foreign exchange within a period of 6 months from the end of the previous year, or within such further period as the competent authority may allow in this behalf. Further the contention of the revenue that provision of sub-section (5) and (6) of section 10A shall apply by virtue of the provision of section 10AA(8) of the Act. The provision of section 10A(5) speaks about the audit of the accounts and submission of report of an accountant in specified Performa. In this case same has been complied with by the assessee. Further section 10A(6) speaks about the restrictions of other deduction during the holiday period, which is not the dispute in this case. In view of this it is apparent that there is no time-limit prescribed for bringing the consideration of export into India. Admittedly, the consideration has been received in India, albeit Subsequent to filing of the return by the assessee. However, merely because the consideration has been received after 6 months from the close of the financial year the deduction cannot be denied to the assessee on the sum. In view of this we direct the Ld. assessing officer to consider a sum of Rs. 4.80 crores as export turnover of the assessee and accordingly grant deduction to the assessee under section 10 AA of the income tax act. Accordingly, Ground No. 14 to 22 of the appeal of the assessee are partly allowed.” (Emphasis Supplied) 20. We are in agreement with the above decision of the Tribunal since Section 10AA does not prescribe any time limit for realization of export proceeds, the benefit of Section 10AA cannot be denied to an Assessee merely because the export proceeds were realized after the expiry of 6 months from the end of relevant previous year in which export sales were made. In our view, in case an assessee is able to show that the consideration in respect of exports was received in India or brought into India, the deduction under Section 10AA of the Act should be allowed. In the present case the Appellant had filed the details of realization of export sales with the Assessing Officer and the CIT(A). Therefore, we direct the Assessing Officer to allow deduction to the Appellant under Section 10AA of the Act by taking into account the export sales realized by the Appellant. Accordingly, the order passed by the Assessing Officer and the CIT(A) are set aside. Ground No. 1 raised in the appeal is allowed.” Following the decision as referred supra we don’t find any justification in the decision of the ld. CIT(A), therefore, we direct the Assessing Officer to allow the claim of deduction u/s 10AA of the Act on the sale proceeds which has been realised by the assessee company. P a g e | 6 ITA Nos. 1345/Mum/2023 Uni Design Elite Jewellery Pvt. Ltd. Vs. DCIT, CC-1(2) 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 31.07.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 31.07.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.