ACIT, CHENNAI V. M/s. Pradeep Stainless India P. Ltd, CHENNAI

ITA 143/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61067 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO.143/MDS/2011 ASSESSMENT YEAR : 2005-06 THE ACIT COMPANY CIRCLE V(2) CHENNAI VS M/S PRADEEP STAINLESS INDIA P. LTD C-3 PHASE II, 3 RD MAIN ROAD, MEPZ TAMBARAM, CHENNAI 600 045 [PAN AADCP 2554 Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI S. SRIDHAR DATE OF HEARING : 27.4.2012 DATE OF PRONOUNCEMENT : 30.4.2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A)-V, CHENNAI, DATED 25.10.2010. 2. THE SOLE GRIEVANCE OF THE REVENUE, AS PROJECTED IN THE GROUNDS OF APPEAL OF THE REVENUE, IS THAT THE LD.C IT(A) ERRED IN DELETING THE DISALLOWANCE OF ` 1,17,24,066/- REPRESENTING THE ASSESSEES CLAIM U/S 10A IN RESPECT OF TRADING EXP ORT PROFITS. I.T.A.NO. 143/2011 :- 2 -: 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER, WHILE MAKING THE ASSESSMENT, OBSERVED THAT THE ASS ESSEE HAS CLAIMED DEDUCTION U/S 10A OF ` 5,21,46,221/- AND THAT THIS CLAIM WAS MADE ON THE TOTAL EXPORT TURNOVER OF ` 24,32,12,186/- WHICH INCLUDES TRADING EXPORT TURNOVER OF ` 5,63,76,187/-. HE WAS OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 10A IN RESPECT OF TRADING EXPORT RECEIPTS AND THEREFORE, EXCLUDED THE SAME FR OM THE COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. 4. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE CONT ENDED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY TRADING EXPORTS DURING THE ASSESSMENT YEAR 2005-06 BUT DID TRADING EXPORT TURN OVER ON ACCOUNT OF THE FACT THAT IMPORTED RAW MATERIAL PRICES HAD G ONE UP VERY STEEPLY AND THE PRICES OF FINISHED PRODUCTS WAS NOT INCREAS ED AS EXPECTED AND THE ONLY OPTION AVAILABLE BEFORE THEM WAS TO EXPORT THE IMPORTED MATERIAL INSTEAD OF EXPORTING THE FINISHED PRODUCTS . HAD THEY NOT DONE SO, THEY WOULD HAVE INCURRED CASH LOSSES. IT WAS A LSO SUBMITTED THAT THE ASSESSING OFFICER HAD FAILED TO CONSIDER THE FA CT THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSISTANT COMMISSIONE R, SEZ(MEPZ) HAD GRANTED PERMISSION TO UNDERTAKE TRADING EXPORTS OF STAINLESS STEEL COILS/SHEETS IN ADDITION TO THE ITEMS ALREADY APPRO VED IN THE LOA FOR MANUFACTURE OF STAINLESS STEEL UTENSILS AND KITCHEN WARES, WATER I.T.A.NO. 143/2011 :- 3 -: BOILERS, CATERING URN AND CHEF IN DISH. IT WAS SUBM ITTED THAT AS PER SECTION 10A, THE ASSESSEE IS ENTITLED TO CLAIM DED UCTION FROM ITS TOTAL INCOME FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT Y EARS IN RESPECT OF PROFITS EARNED OUT OF EXPORT TURNOVER OF ARTICLE O R THINGS OR COMPUTER SOFTWARE AND THAT NOWHERE THE SECTION MENTIONS THAT DEDUCTION SHOULD BE GIVEN ONLY FOR EXPORT SALES OF MANUFACTURED ITEM S. THE ASSESSEE RELIED ON THE BOARDS CIRCULAR NO.794 DATED 9.8.200 0, 245 ITR (STATUTE) 21 . THE LD.CIT(A), AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE CLAIM FOR DEDUCTION U/S 10A OF THE ENTIRE CLAIM MADE IN THE RETURN OF INCOME. 5. THE LD. DR RELIED ON THE DECISION OF COCHIN BENCH O F THE TRIBUNAL IN THE CASE OF DY. CIT VS GIRNAR INDUSTR IES, 22 DTR 140, WHEREIN IT WAS HELD THAT BLENDING OF TEA IS NOT MAN UFACTURE OR PRODUCTION HENCE, NOT ENTITLED TO RELIEF U/S 10A. HE ALSO RELIED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF TONIRA PHARMA LTD VS ACIT, 39 SOT 28 (AHD) WHERE IT HAS BE EN HELD THAT THE REFINED ASCORBIC ACID DOES NOT AMOUNT TO MANUFACTUR E OR PRODUCTION WITHIN THE MEANING OF SECTION 10B AND THEREFORE, TH E ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S 10B AS IT WAS ONLY A TRADING ACTIVITY. HE ALSO RELIED ON THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF I.T.A.NO. 143/2011 :- 4 -: CIT VS ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P) LTD, 202 TAXMAN 33 (KER), WHEREIN IT WAS HELD THAT EXEMPTION U/S 1 0A IS AVAILABLE ON ACTUAL EXPORTS AGAINST RECEIPT OF CONVERTIBLE FORE IGN EXCHANGE AND LOCAL SALES IN INDIAN RUPEE TO UNITS IN SEZ DO NOT QUALIFY FOR EXEMPTION U/S 10A BY INCORPORATION OF DEFINITION OF EXPORT U /S 2(M)(III) OF THE SPECIAL ECONOMIC ZONE ACT, 2005. 6. ON THE OTHER HAND, THE LD. A.R OF THE ASSESSEE SUBM ITTED AND VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE L D.CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE RETURN OF IN COME FILED CLAIMED DEDUCTION U/S 10A OF ` 5,21,46,221/-. THE ASSESSING OFFICER, FINDING THAT THE EXPORT TURNOVER OF THE ASSESSEE OF ` 24,32,12,186/- INCLUDED TRADING EXPORT TURNOVER OF ` 5,63,76,187/- RESTRICTED THE CLAIM FOR DEDUCTION U/S 10A TO THE ASSESSEE AT ` 4,05,35,373/- AS AGAINST THE CLAIM OF THE ASSESSEE OF ` 5,21,46,221/- BY OBSERVING THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 10A IN RESPECT OF TRADING EXPORT RECEIPTS. ON APPEAL, THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: I.T.A.NO. 143/2011 :- 5 -: B. WITH RESPECT TO CLAIMING OF DEDUCTION U/S 10A , IT IS CLEAR FROM THE PROVISIONS OF THE SECTION THAT NO WHERE IT SAYS THAT ONE SHOULD NECESSARILY EXPORT THE MANUFACTURED GOODS FOR CLAIMING DEDUCTION UNDER SECTION L0A OR THE TUR NOVER MEANS 'MANUFACTURED TURNOVER ONLY' NOT TRADING TURN OVER. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER EXCLU DED THE EXPORT TRADING TURNOVER FROM THE TOTAL EXPORT TURNO VER BASED ON HIS OWN PERCEPTION AND IT IS NOT SUPPORTED BY LA W. FROM THE PLAIN READING OF THE SECTION IT IS OBVIOUS THAT IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO RESTRICT T HE DEDUCTION ONLY FROM THE MANUFACTURING ACTIVITY, THEN IT WOULD HAVE BEEN VERY FORTHRIGHT AND CLEAR AND PROVIDED SO IN CLEAR TERMS IN THE SECTION ITSELF AND WOULD NOT HAVE GIVEN MUCH SCOPE FOR WIDER INTERPRETATION. HENCE 1 AM SATISFIED THAT THE EXPOR T TURNOVER INCLUDES EXPORT TRADING TURNOVER ALSO. I AM ALSO FO RTIFIED IN MY CONCLUSION BY THE DECISION IN THE CASE OF T. TWO INTERNATIONAL (P) LTD. V. INCOME-TAX OFFICER, WARD *(3)-3, ITAT M UMBAI BENCH FB' (2008) 26 SOT 583 (MUM.) DT. 17 TH OCTOBER, 2008 WHEREIN IT WAS HELD AS UNDER: 'THE MATERIAL CONSIDERATIONS ARE THE EXPORT OF ELIG IBLE GOODS AND NOT WHETHER THESE ARE MANUFACTURED OR PURCHASED BY THE ASSESSEE. SECTION 10A IS AKIN TO SECTION 80HHC IN THE SOME RESPECTS, AS WILL BE SEEN INFRA AND THE LATER SECTION ALSO PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS F ROM THE EXPORT OF THE GOODS OR MERCHANDISE MANUFACTURED BY THE ASSESSEE AS WELL AS FROM THE EXPORT OF TRADING GOOD S. THUS PROFITS FROM THE BOTH THE SELF MANUFACTURED AS WELL AS TRADING IN GOODS HAVE BEEN MADE ELIGIBLE FOR DEDUCTION. IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO RESTRICT T HE DEDUCTION ONLY FROM THE MANUFACTURING ACTIVITIES, THEN IT WOULD HAVE BEEN PROVIDED SO IN UNAMBIGUOUS TERMS IN THE SECTIO N ITSELF SINCE THE BENEFIT HAS BEEN GRANTED TO THE PROFITS & GAINS DERIVED FROM THE EXPORT OF ELIGIBLE ARTICLES, WITHO UT FURTHER RESTRICTING TO THE ARTICLES MANUFACTURED BY THE ASS ESSEE IN ITS INDUSTRIAL UNDERTAKING, WE ARE OF THE CONSIDERED OP INION THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN THE EXCLU DING THE EXPORT OF TRADING IN GOODS WORTH ` 3.23 CRORES FROM THE QUALIFYING EXPORT. I.T.A.NO. 143/2011 :- 6 -: 8. THE CONTENTION OF THE LD. DR WAS THAT SINCE THE ASSESSEE WAS IN THE MANUFACTURE AND EXPORT OF STAINLESS STEE L UTENSILS, KITCHENWARES, WATER BOILERS ETC FROM STEEL COILS IM PORTED BY THE ASSESSEE AND AS THE ASSESSEE IN THE PRESENT YEAR H AS EXPORTED THE STEEL COILS WITHOUT MANUFACTURING ANY ARTICLE OR TH ING, THEREFORE, WAS NOT ELIGIBLE FOR DEDUCTION U/S 10A IN RESPECT OF T HE SAID EXPORTS. HE HAS ALSO RELIED ON THE DECISION OF THE AHMEDABAD BE NCH OF THE TRIBUNAL IN THE CASE OF TONIRA PHARMA LTD VS ACIT (SUPRA) WHERE IT WAS HELD THAT ASCORBIC ACID REFINED REMAINS THE SAM E AND THEREFORE, THERE WAS NO MANUFACTURE OR PRODUCTION AND HENCE, ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 10B OF THE ACT. THE LD. DR HAS ALSO RELIED ON THE DECISION OF COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS GIRNAR INDUSTRIES(SUPRA) WHERE IT WAS HELD THAT BLE NDING OF TEA WAS NOT MANUFACTURE OR PRODUCTION AND HENCE, ASSESSEE WAS NOT ENTITLED TO RELIEF U/S 10A. HE FURTHER RELIED ON THE DECISIO N OF HON'BLE KERALA HIGH COURT IN THE CASE OF ELECTRONIC CONTROLS & DIS CHARGE SYSTEMS (P) LTD (SUPRA) WHERE IT WAS HELD THAT EXEMPTION U/S 10A WAS AVAILABLE ONLY ON ACTUAL EXPORTS AGAINST RECEIPT OF CONVERTIB LE FOREIGN EXCHANGE AND NOT ON LOCAL SALES IN INDIAN RUPEES. WE FIND T HAT IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAS RE-EXPORTED THE C OILS IMPORTED FOR MANUFACTURE OF STAINLESS STEEL UTENSILS, KITCHEN WA RES, WATER BOILERS I.T.A.NO. 143/2011 :- 7 -: ETC. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE MUMBAI BENCH IN THE CASE OF T. TWO INTERNATIONAL (P ) LTD VS ITO (SUPRA) WHEREIN ALSO THE ASSESSEE WAS EXPORTING MA NUFACTURED JEWELLERY, HAD ALSO EXPORTED GOLD AND DIAMONDS WHIC H WERE THE RAW MATERIALS OF THE ASSESSEE FOR MAKING OF JEWELLERY AND THE TRIBUNAL HAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 10A ON THE EXPORT OF RAW MATERIALS ALSO BECAUSE IF THE INTENTI ON OF THE LEGISLATURE HAD BEEN TO RESTRICT THE DEDUCTION ONLY FROM MANUFA CTURING ACTIVITIES THEN IT WOULD HAVE BEEN PROVIDED SO IN AN UNAMBIGUO US TERMS IN THE SECTION ITSELF. SINCE THE BENEFIT WAS GRANTED TO T HE PROFITS AND GAINS DERIVED FROM THE EXPORT OF ELIGIBLE ARTICLES WITHOU T FURTHER RESTRICTING TO THE ARTICLES MENTIONED BY THE ASSESSEE IN ITS INDU STRIAL UNDERTAKING, THE ASSESSEE WAS ENTITLED TO DEDUCTION ON THE ENTI RE EXPORT MADE BY THE ASSESSEE WITHOUT EXCLUDING EXPORT OF TRADING G OODS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IN THE PRESENT CASE H AS RECEIVED PAYMENT IN CONVERTIBLE FOREIGN EXCHANGE FOR EXPORT OF STEEL COILS. THEREFORE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTE RFERE WITH THE ORDER OF THE LD.CIT(A) WHICH IS SUPPORTED BY THE ORDER O F THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF T. TWO INTERNATIONAL (P) LTD (SUPRA). FURTHER, THE DECISIONS RELIED ON BY THE LD. DR IN T HE CASE OF DY. CIT VS GIRNAR INDUSTRIES (SUPRA) IS NOT APPLICABLE TO T HE FACTS OF THE I.T.A.NO. 143/2011 :- 8 -: ASSESSEES CASE AS IN THAT CASE IT WAS HELD THAT TH E BLENDING OF TEA WAS NOT A MANUFACTURE AND SINCE THE ASSESSEE WAS NOT A MANUFACTURER OF ANY ARTICLE OR THING IT WAS NOT ELIGIBLE FOR DEDUCT ION U/S 10A. THE DECISION RELIED ON BY THE LD. DR IN THE CASE OF CIT VS ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P) LTD (SUPRA) IS ALS O NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THAT CASE IT WA S HELD THAT EXEMPTION U/S 10A WAS AVAILABLE ONLY ON ACTUAL EXPORTS AGAINS T RECEIPT OF CONVERTIBLE FOREIGN EXCHANGE AND NOT ON LOCAL SALES IN INDIAN RUPEES. IN THE PRESENT CASE, THERE IS NO LOCAL SALES IN IND IAN RUPEES MADE BY THE ASSESSEE ON WHICH DEDUCTION U/S 10A OF THE AC T HAD BEEN CLAIMED. FURTHER, THE DECISION RELIED ON BY THE LD . DR IN THE CASE OF TONIRA PHARMA LTD VS ACIT (SUPRA) IS ALSO NOT APPLI CABLE IN THE CASE OF THE ASSESSEE BECAUSE IN THAT CASE, THE ASSESSEE E XPORTED ASCORBIC ACID AFTER DILUTING THE SAME AND IT WAS HELD BY THE TRIBUNAL THAT THE DILUTED ACID ALSO REMAINED ASCORBIC ACID AND THEREF ORE, THERE IS NO MANUFACTURE. IN THE PRESENT CASE, IT IS NOT IN DIS PUTE THAT THE ASSESSEE IS THE MANUFACTURER OF STAINLESS STEEL UTE NSILS ETC. WHICH HAS BEEN EXPORTED BY THE ASSESSEE. THEREFORE, THE AS SESSEE IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. I.T.A.NO. 143/2011 :- 9 -: 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.4 .2012. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 30 TH APRIL, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR