NOVA COSMETICS P.LTD, THANE V. ITO WD 1(3), THANE

ITA 2254/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2926 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: RAJENDRA R RANADE
• Section: 10B

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMB AI BEFORE SHRI B. R. BASKARAN, AM AND SHRI PAWAN SINGH, JM ./ I.T.A. NO. 2254/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) NOV A COSMETICS PRIVATE LIMITED B- 80, ADDITIONAL, MIDC, ANAND NAGAR, AMBERNATH(E) DISTRICT-THANE -421506 / VS. I TO WARD 1(3), KALYAN ROOM NO. 29, A- WING, 6 TH FLOOR, ASHAR I.T. PARK, ROAD NO. 16 Z, WAGLE INDUSTRIAL ESTATE, THANE (W) 400604 ./ ./PAN/GIR NO. AABCN1871C ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SH. RAJENDRA R. RANADE -AR / RESPONDENT BY : SH. NAVEEN GUPTA - DR / DATE OF HEARING : 08.07.2016 / DATE OF PRONOUNCEMENT : 14.09.2016 / O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX APPEALS-I, THANE, DATED 27 TH NOVEMBER 2012 FOR AY 200910. THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS OF APPEAL; 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LEARNED CIT APPEALS, APPEARS TO HAVE HEARD IN HOLDING THAT THE AMOUNT OF REFUND OF SALE TAX FOR RS.23,43,837/-, RECEIVED BY THE APPELLANT, WHO HAS BEEN THE 100% EXPORT ORIENTED UNIT (EOU) FOR THE RELEVANT YEAR, CANNOT BE TREATED AS FORMING PART OF THE PROFITS QUALIFIED FOR EXEMPTION UNDER SECTION 10B OF THE IN COME TAX ACT. ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CONSIDERED IN THE LIGHT OF THE PROVISIONS OF LAW, THE APPELLANT CONTENDS THAT THE AMOUNT OF SALE TAX REFUND, RECEIVED BY IT FOR THE RELEVANT YEAR, BE CONSIDERED TO BE FORMING PART OF EXPORT INCOME OF THE APPELLANT, AND FURTHER BE CONSIDERED TO BE ELIGIBLE FOR EXEMPT ION UNDER SECTION 10B OF THE INCOME TAX ACT. ITA 2254/M/2013 NOVA COSMATIC PVT LTD 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF COSMETICS, PERFUMES AND 100% EXPORT ORIENTED UNIT. THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30 SEPTEMBER 2009 DECLARING TOTAL INCOME AT RS. 7,06,570/-. IN THE RETURN OF INCOME THE ASSE SSEE HAS SHOWN NET PROFIT AT RS. 35,12,898/- AND CLAIMED EXEMPTION UNDER SECTION 10B ON ACCOUNT OF PROFIT FROM 100% EOU. THAT DURING THE PREVIOUS YEAR THE ASSESSEE RE CEIVED THE AMOUNT OF RS. 23,43,837/- ON ACCOUNT OF SALES TAX REFUND, WHICH WAS CLUBBED UNDE R THE HEAD OF INCOME FROM OTHER SOURCES. THE RETURN WAS SELECTED FOR SCRUTINY. WHI LE FRAMING ASSESSMENT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXEMPTION UNDER SEC TION 10B THEREBY DENYING THE SAID INCOME FOR ELIGIBLE FOR QUALIFYING FOR DEDUCTION IN THE ASSESSMENT ORDER DATED 28 DECEMBER 2011. AGGRIEVED BY THE ORDER OF AO ASSESSEE FILED A PPEAL BEFORE THE COMMISSIONER OF INCOME TAX APPEALS, BUT WITHOUT ANY SUCCESS. THUS T HE PRESENT APPEAL IS FILED BEFORE US RAISING THE GROUNDS OF APPEAL AS NARRATED ABOVE. 3. WE HAVE HEARD LD AR OF THE ASSESSEE AND LD DR FOR R EVENUE AND FURTHER PERUSED THE MATERIAL AVAILABLE ON RECORD. LD AR OF THE ASSESSEE ARGUED THAT THE ESTABLISHMENT OF ASSESSEE HAS BEEN RECOGNIZED AND ENROLLED AS HUNDR ED PERCENT EXPORT ORIENTED UNIT (EOU) BY DEVELOPMENT COMMISSIONER, SEEPZ, SPECIAL ECONOMI C ZONE, MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA. THE ASSESSEE IS ENTITLED FOR REFUND OF SALE TAX UNDER MAHARASHTRA VALUE-ADDED TAX, BE CONSIDERED TO BE F ORMING PART OF ITS PROFIT, QUALIFYING FOR EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT. THE ASSESSEE FULFILL ALL THE ELIGIBILITY AND ENTITLEMENT. DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE RECEIVED AMOUNT OF SALE TAX REFUND OF RS 23,43,837. THE AO AS WELL AS LD CI T(A) FAILED TO APPRECIATE THAT THE SAID AMOUNT OF INCOME IS QUALIFIED AND ELIGIBLE FOR BEIN G CONSIDERED FOR GRANTING THE DEDUCTION UNDER SECTION 10B OF THE ACT. THE LD AR OF THE ASSE SSEE FURTHER RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VERSUS M/S MEG HALAYA STEEL LTD. REPORTED IN 383 ITR 217(SC) AND FURTHER ON THE DECISION OF JAMMU AN D KASHMIR HIGH COURT IN SHREE BALA JI ALLOYS VS CIT IN ITA NO. 2/2010 DATED 31.01.2010 , WHICH HAS BEEN UPHELD BY SUPREME COURT IN CA NO. 10061 OF 2011. ON THE OTHER HAND, THE LD DR FOR REVENUE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LOWER AUTHORITIES DENIED THE EXEMPTION OF SALE TAX REFUND RECEIVED BY THE ASSESSEE HOLDING THAT IT HAS NO DIRECT OR IM MEDIATE NEXUS WITH THE PROFIT AND GAIN RECEIVED BY EXPORTS OF GOODS AS THIS IS NOT THE INC OME WHICH HAS BEEN DIRECTLY DERIVED FROM ITA 2254/M/2013 NOVA COSMATIC PVT LTD THE EXPORT OF ARTICLES OR THINGS AS CONTEMPLATED IN THE PROVISIONS OF SECTION 10B. THE MERE FACT THAT IT GOT GENERATED TO ENABLE THE ASSESSEE C OMPANY TO EFFECT ITS PURCHASE WITHOUT THE CHARGE OF SALE TAX WOULD NOT PLACE IT IN THE CATEGO RY OF DIRECT NEXUS BETWEEN THE PROFIT AND GAINS FOR EXPORTS OF GOODS. THE AMOUNT RECEIVED ON ACCOUNT OF SALES TAX REFUND FORM PART OF OTHER INCOME AND NOT DIRECTLY RELATES TO THE REC EIPT OF INCOME DERIVED FROM THE EXPORT OF GOODS. IN A RECENT JUDGMENT THE HONBLE SUPREME COURT IN C IT VERSUS MEGHALAYA STEEL LTD REPORTED IN 3, 83 ITR 217 HELD THAT ANY REVENUE REC EIPT OF INCOME, THAT HAS BEEN REIMBURSED TO THE ASSESSEE FOR ELEMENTS OF COST RELATING TO MA NUFACTURE OR SALE OF ITS PRODUCTS CAN CERTAINLY BE SAID TO BE A DIRECT NEXUS BETWEEN PROF IT AND GAIN IS OF THE INDUSTRIAL UNDERTAKING OR BUSINESS. THE HONBLE SUPREME COURT FURTHER HELD THAT SECTION 28(III) (B) SPECIFICALLY STATES THAT INCOME FROM CASH ASSISTANCE, BY WHATEVE R NAME CALLED, RECEIVED OR RECEIVABLE BY ANY PERSON, AGAINST EXPORT UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA, WILL BE INCOME CHARGEABLE TO INCOME TAX, UNDER THE HEAD PROFIT AN D GAIN IS BUSINESS OR PROFESSION. IF CASH ASSISTANCE RECEIVED OR RECEIVABLE AGAINST EXPORT SC HEME ARE INCLUDED AS BEING INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION , IT IS OBVIOUS THAT SUBSIDIES WHICH GOES TO REIMBURSEMENT OF COST IN THE PRODUCTION OF GOODS OF A PARTICULAR BUSINESS WOULD ALSO HAVE TO BE INCLUDED UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OF PROFESSION, AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS, RESPECT FULLY FOLLOWING THE ORDER OF HONOURABLE APEX COURT THE AMOUNT OF SALE TAX REFUND RECEIVED B Y THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR BE TREATED AS FORMING PART OF PROFI T QUALIFYING FOR EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT. THUS THE APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER ANNOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER 2 016. SD/- SD/- (B. R. BASKARAN) (PAWAN SINGH) ' / ACCOUNTANT MEMBER #$ ' / JUDICIAL MEMBER MUMBAI; $ DATED : 14.09.2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) / THE CIT(A) 4. ( / CIT - CONCERNED 5. + , + , / DR, ITAT, MUMBAI 6. ,- / GUARD FILE / BY ORDER, /