India Agro Exports Pvt Ltd., CHENNAI V. ITO, CHENNAI

ITA 1446/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5126 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS VIJAYA PRABHA JCITD R
• Assessee Lawyers: S SRIDHAR
• Section: 143(3); 10AA; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.1446.CHNY/2017 / ASSESSMENT YEAR : 2006-07 M/S.INDIA AGRO EXPORTS P. LTD., 15, RACE COURSE ROAD, GUINDY, CHENNAI 600 032. VS. THE INCOME TAX OFFICER, CORPORATE WARD 2(4), CHENNAI 34. [PAN AABCI 3254 L ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE !' /RESPONDENT BY : MRS.VIJAYAPRABHA, JCIT, D.R # $ %& / DATE OF HEARING : 26 - 0 6 - 201 8 '( %& / DATE OF PRONOUNCEMENT : 26 - 0 6 - 201 8 !' / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-9,CHENNAI IN I.T.A NO.07/CIT(A)-9/2011-12 DATED 28.02.2017 FOR THE A SSESSMENT YEAR 2006-07. ITA NO.1446/CHNY/2017 :- 2 -: 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS CONTRARY TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE IN SO FAR AS HE CONFIRMS THE ADDITION MADE U/S 143(3) BY DISALLOWANCE OF DEDUCTION U/S.10 B AND DISALLOWANCE OF ESTIMATED PERCENTAGE ON PURCHASES, WHICH IS AN AGRI CULTURAL PRODUCT. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONCLUDING THAT THE MANUFACTURING ACTIVITY HAS A BEARING ON THE COMMENC EMENT DATE AND IGNORED THE APEX COURT JUDGEMENT CITED BY THE APPEL LANT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N HOLDING THAT THE HONOURABLE COURTS HAD CONSIDERED THE EFFECT OF SUBS TITUTION OF SECTION 10B OF THE ACT WITH EFFECT FROM 2001, EVEN THOUGH IT HA D BEEN HELD THAT FOR THE PURPOSE OF SECTION 10A, 10AA AND 10B, THE DEFINITIO N OF MANUFACTURE AS MENTIONED IN CHAPTER IX OF EXPORT IMPORT POLICY 200 2 TO 2007, AND AS MENTIONED IN SECTION 2(R) OF SPECIAL ECONOMIC ZONES ACT, 2005 WILL BE CONSIDERED. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT GIVING DUE WEIGHTAGE TO THE DISALLOWANCE MADE FOR PURCHASES ON ESTIMATED BASIS WHICH IS NOT RELEVANT TO THE FACTS OF THE CASE AND FURTHE R ERRED IN STATING THAT THIS ADDITION WILL NOT HAVE EFFECT IF THE ASSESSING OFFI CER ALLOWS DEDUCTION U/S 10B OF THE ACT. THE COMMISSIONER OF INCOME TAX OUGHT TO HAVE MADE A SPEAKING ORDER. 5. THE CIT (A) SHOULD HAVE HELD THAT THE CLAIM OF T HE APPELLANT IS LEGITIMATE AND CANNOT BE DENIED ON EXTRANEOUS CIRCUMSTANCES. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT GIVING DUE CREDENCE TO THE JUDGMENTS OF THE COURTS AND THE ORD ERS OF THE TRIBUNAL/CBDT GUIDELINES, 1CM GUIDELINES RELIED ON BY THE ASSESSEE TO SUBSTANTIATE ITS CASE, WHERE IT HAS BEEN HELD THAT THE MANUFACTURING ACTIVITY IS ENTITLED FOR DEDUCTION U/S 10B OF THE ACT. ITA NO.1446/CHNY/2017 :- 3 -: 3. MR.S.SRIDHAR REPRESENTED ON BEHALF OF THE ASSESSEE, AND MRS.VIJAYAPRABHA REPRESENTED ON BEHALF OF THE REVENUE. 4. IT WAS SUBMITTED BY THE LD.A.R THAT THE ASSESSE E IS IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GHERKIN PICKL ES. IT WAS A SUBMISSION THAT ASSESSEE WAS ENTITLED TO CLAIM DEDU CTION U/S.10B OF THE ACT. IT WAS A SUBMISSION THAT THE LD. ASSESSIN G OFFICER HAD DISALLOWED THE ASSESSEES CLAIM ON THE GROUND THAT THE ASSESSEE DOES NOT DO ANY MANUFACTURE. IT WAS A SUBMISSION THAT LD . ASSESSING OFFICER HAD HELD THAT ASSESSEE ONLY BUYS GHERKINS FROM FARM ERS, SORTS, GRADE THEM, PUTS IN HDPE DRUMS CONTAINING BRINE SOLUTION (SALT WATER) & EXPORT THEM, AND CONSEQUENTLY, THERE WAS NO MANUFAC TURING PROCESS INVOLVED. THEREFORE, LD. ASSESSING OFFICER WAS OF T HE OPINION THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.10B OF T HE ACT. IT WAS A SUBMISSION THAT THE ASSESSEE IS A 100 PERCENT EXPOR T ORIENTED UNDERTAKING (EOU) APPROVED BY THE APPROPRIATE AUTHO RITY. FOR THIS PURPOSE, LD.A.R PLACED BEFORE US A COPY OF THE LICE NSE ISSUED BY OFFICE OF THE DEVELOPMENT COMMISSIONER, COCHIN SPECIAL ECO NOMIC ZONE IN RESPECT OF ITS UNIT AT 47/1A & 48/1, EDDUMUDU VILLA GE, HOROHALLI POST, KANAKPURA MAIN ROAD, BANGALORE RURAL-562 112. IT W AS A SUBMISSION THAT ASSESSEE HAD EXPORTED THE ARTICLES AND REALIZE D THE PROCEEDS WITHIN THE STATUTORY PERIOD FOR WHICH EVIDENCES WER E PRODUCED. IT WAS ITA NO.1446/CHNY/2017 :- 4 -: A SUBMISSION THAT ASSESSEE WAS AN EXPORTER REGISTER ED AS A 100% EOU AND IT WAS MANUFACTURING AND PRODUCING THE PRODUCTS AS SPECIFIED. FOR THIS PURPOSE, THE LD.A.R PLACED BEFORE US A COPY OF THE GREEN CARD ISSUED TO THE ASSESSEE IN RESPECT OF THE SAID UNIT WHEREIN UNDER THE HEAD PRODUCTS MANUFACTURED IT IS SPECIFIED PROCE SSED FOODS, PICKLES, FRESH FRUITS AND VEGETABLES. IT WAS A SUBMISSION T HAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF STERLING AGRO PRODUCTS PROCESSING (P ) LTD., VS. ACIT REPORTED IN (2011) 48 SOT 0080(CHEN TRIB.), AS ALSO THE DECISION OF CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF INTERGARDEN (INDIA) P. LTD VS. ACIT REPORTED IN (2016) 46 CCH 0 359 (BANG TRIB) WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE ASSESSEE BEING 100% EOU AND AS THE ASSESSEE HAD UNDERTAKEN PROCESS WHICH HA D THE SIGNIFICANT EFFECT ON THE RAW NATURE, CONVERTING IT INTO MATERI AL CAPABLE OF WITHSTANDING DECAY FOR CONSIDERABLE PERIOD OF TIME, EVEN THOUGH IT WAS NOT MANUFACTURE AS COMMONLY UNDERSTOOD, IT CANNOT BE DENIED THAT IT RESULTED IN A PRODUCT WHICH CANNOT BE EQUATED WI TH RAW GHERKINS AND CONSEQUENTLY, THE ASSESSEE HAD BEEN GRANTED BEN EFIT OF CLAIM OF DEDUCTION U/S.10B OF THE ACT. THE LD.A.R ALSO PLACI NG RELIANCE UPON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF TATA TEA LTD., VS. ACIT, SUBMITTED THAT EVEN THOUGH PROCESSING ALS O QUALIFIED FOR EXEMPTION UNDER THE DEFINITION CLAUSE OF MANUFACTU RE CONTAINED IN ITA NO.1446/CHNY/2017 :- 5 -: SECTION 10B AND THE DEFINITION OF MANUFACTURE HAV ING BEEN DELETED FROM THE PROVISIONS OF THE SECTION 10B OF THE ACT W ITH EFFECT FROM ASSESSMENT YEAR 2001-02, WOULD NOT RESTRICT THE BEN EFIT OF EXEMPTION TO 100% EOU TO GOODS AS PRODUCED BY THEM, OTHER THA N THROUGH PROCESSING. IT WAS A SUBMISSION THAT HONBLE KERAL A HIGH COURT HELD IN FAVOUR OF THE ASSESSEE. IT WAS A SUBMISSION THAT CO NSEQUENTLY AS THE ASSESSEE IS A 100% EOU, WHICH HAS BEEN LICENSED FOR MANUFACTURING OF THE PROCESSED FOODS AND THE ASSESSEE IS HAVING O NLY THE PROCESSED FOODS MANUFACTURED AT ITS ENTITLED UNIT, THE ASSESS EE WAS ENTITLED TO CLAIM OF DEDUCTION U/S.10B OF THE ACT. 5. IN REPLY, LD.D.R SUBMITTED THAT THE ASSESSEE WAS ONLY ADDING SALT WATER TO THE GHERKIN IN PLASTIC CONTAINERS AND THERE WAS NO MANUFACTURING INVOLVED. IT WAS A SUBMISSION THAT PROCESS IS EXCLUDED AND WHAT IS REQUIRED IS MANUFACTURE. IT WAS A SUBMISSION THAT THE BASIC CHARACTER OF THE RAW MATERIALS REMAI NED INTACT. THE LD.D.R VEHEMENTLY RELIED UPON THE DECISIONS CITED B Y THE LD.CIT(A) IN PAGE-6 OF HIS ORDER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE VARIOUS TRIBUNAL DECISIONS RELIED UPON BY THE LD.A. R, MORE SPECIFIC IN THE CASE OF M/S. INTERGARDEN (INDIA) P. LTD VS. ACI T REFERRED TO SUPRA AND M/S. STERLING AGRO PRODUCTS PROCESSING (P) LTD. , VS. ACIT REFERRED ITA NO.1446/CHNY/2017 :- 6 -: TO SUPRA, SHOW THAT IN BOTH THE CASES, THE PROCESS INVOLVED IN THE MANUFACTURE OF THE PRODUCT WERE AVAILABLE BEFORE TH E TRIBUNAL. IN THE PRESENT CASE, THE BASIC FACT ITSELF IS MISSING. WH AT IS THE PROCESS DONE BY THE ASSESSEE, WHETHER THERE IS ACTUAL MANUFACTUR E OR NOT, HAS NOT BEEN SHOWN BEFORE THE TRIBUNAL. IN FACT, PERUSAL OF THE LICENSE ISSUED TO THE ASSESSEE AS A 100% EOU, SHOWS THAT UNDER THE HEAD PRODUCTS MANUFACTURED IT IS SPECIFIED PROCESSED FOODS, PIC KLES, FRESH FRUITS AND VEGETABLES. ADMITTEDLY, FRESH FRUITS AND VEGETABLE S ARE NOT MANUFACTURED ITEMS. WHAT IS THE BREAKUP OF THE PROC ESSED FOODS, PICKLES, FRESH FRUITS AND VEGETABLES WHICH HAVE BEE N EXPORTED, HAVE NOT BEEN BROUGHT OUT BEFORE US. IN FACT, IN THE ASS ESSMENT ORDER, THE LD. ASSESSING OFFICER HAS MADE A BLANKET DISALLOWAN CE, THE ASSESSEE HAS ONLY GIVEN A GENERAL REPLY AND CLAIMS THE ISSUE TO BE COVERED BY VARIOUS CASE LAWS. NEITHER THE LD. DEPARTMENTAL RE PRESENTATIVE NOR THE ASSESSEE HAS BEEN ABLE TO PLACE THE FACTS BEFOR E THIS TRIBUNAL. THIS BEING SO, IN THE INTEREST OF JUSTICE THE ISSUE IN THIS APPEAL IS RESTORED TO THE FILE OF LD. ASSESSING OFFICER FOR R E-ADJUDICATION AFTER VERIFICATION, IF NECESSARY PHYSICAL VERIFICATION, A S TO THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE AT ITS ELIGIBLE UNIT IN RESPECT OF WHICH CLAIM OF DEDUCTION U/S.10B OF THE ACT IS BEING MADE. AS T O WHETHER THERE IS MANUFACTURE PER SE, OR NOT, WHAT IS THE BREAKUP OF THE EXPORTS OF THE PROCESSED FOODS, PICKLES, FRESH VEGETABLES AND FRUI TS SEPARATELY, AND ITA NO.1446/CHNY/2017 :- 7 -: AFTER DETERMINING ALL THE FACTS, THE LD. ASSESSING OFFICER SHALL RE-ADJUDICATE THE ISSUE AFTER GRANTING ASSESSEE ADE QUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE. IN THESE CIRCUMSTANCES, T HE ISSUE RAISED IN THIS APPEAL IS RESTORED TO THE FILE OF LD. ASSESSING OFF ICER FOR RE-ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26 TH JUNE, 2018, AT CHENNAI. SD/ - SD/ - ( ) (S. JAYARAMAN) # !$ /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) % !$ / JUDICIAL MEMBER ) $ / CHENNAI * / DATED: 26 TH JUNE, 2018. K S SUNDARAM + !%,- . -% / COPY TO: 1 . / APPELLANT 3. # /% () / CIT(A) 5. -23 !%4 / DR 2. !' / RESPONDENT 4. # /% / CIT 6. 35 6$ / GF