Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 59893 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 11 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2012
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
J
Next Hearing Date
25-01-2012
Assessment Year
2003-2004
Appeal Filed On
21-03-2007
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO , J.M. ITA NO. 2257/MUM/2007 ASSESSMENT YEAR : 2003-04 TARA JEWELS EXPORTS PVT. LTD., APPEL LANT G-44, GEMS & JEWELLERY COMPLEX, SEEPZ, ANDHERI (EAST) MUMBAI 400 096 (PAN AAACT 1161 H) VS. JT. COMMISSIONER OF INCOME TAX, RESPOND ENT (OSD), RANGE 8(3), AAYAKAR BHAVAN, MUMBAI 400 020 ITA NO. 2295/MUM/2007 ASSESSMENT YEAR : 2003-04 JT. COMMISSIONER OF INCOME TAX, APPELLA NT (OSD), RANGE 8(3), AAYAKAR BHAVAN, MUMBAI-20 VS. TARA JEWELS EXPORTS PVT. LTD., RESPO NDENT G-44, GEMS & JEWELLERY COMPLEX, SEEPZ, ANDHERI (EAST) MUMBAI 400 096 (PAN AAACT 1161 H) ASSESSEE BY : MR. B.V. JHAVERI REVENUE BY : MR. KUSUM INGALE DATE OF HEARING : 25/01/2012 DATE OF PRONOUNCEMENT : 16/03/201 2 ORDER PER V. DURGA RAO, J.M.: THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE ORDER OF CIT(A)- XXIX, MUMBAI, PASSED ON 22/12/2006 FOR THE ASSESSMENT YEAR 2003-04. ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 2 ITA NO. 2257/MUM/2007 APPEAL BY THE ASSESSEE 2. GROUND NO. 1 IS PERTAINING TO DEDUCTION U/S 10A OF THE ACT. 3. THE FACTS RELATING TO RAISE THIS GROUND ARE THAT THE ASSESSEE IS A PVT. LTD. COMPANY ENGAGED IN THE BUSINESS OF MANUFA CTURING AND EXPORT OF STUDDED DIAMOND AND GOLD JEWELLERY. THE A SSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION D ECLARING TOTAL INCOME OF RS. 67,07,218/- AND CLAIMED DEDUCTION U/S 10A TO THE EXTENT OF RS. 4,83,99,550/- AND DEDUCTION U/S 80HHC OF RS. 16,82,502/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSEE WAS FOCUSSED ON PAYMENT OF LABOUR CHARGES OF RS. 1,88,71,966/- DURING THE YEAR AS AGAINST ONLY RS. 3 ,30,221/- INCURRED IN THE IMMEDIATELY PRECEDING YEAR. ON BEING ASKED B Y THE AO TO FURNISH THE DETAILS OF THE PARTIES TO WHOM LABOUR C HARGES HAVE BEEN PAID, THE NATURE OF JOB WORK DONE BY THESE PARTIES, THE PROCESSES EMPLOYED IN THE COURSE OF LABOUR WORK, THE PLACE OF CARRYING OUT THE WORK I.E. WHETHER WITHIN THE SEZ LOCATION OR OTHERW ISE, IN RESPONSE, THE ASSESSEE FURNISHED THE DETAILS BEFORE THE AO. F ROM THE SAID DETAILS, IT TRANSPIRED THAT JOB WORK CHARGES TO THE EXTENT OF RS. 83,71,311/- HAD BEEN PAID TO SUCH PARTIES WHO HAD C ARRIED OUT THE MANUFACTURING PROCESS OUTSIDE THE SEZ LOCATION WHIC H AMOUNTED TO THE ABOVE 44.35% TOTAL CHARGES PAID AT RS. 1,88,71, 966/-. THE ASSESSEE HAD FURTHER SUBMITTED THAT INCREASE IN THE EXPORT TURNOVER OF 40% DURING THE YEAR WOULD NOT HAVE BEEN POSSIBLE BU T FOR SUCH OUTSOURCED JOB WORK ACTIVITIES WHICH ARE PERMISSIBL E AS PER THE APPLICABLE STATUTORY REGULATIONS GOVERNING SEZ OPE RATIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO HAD OBSERVED THAT DEDUCTION U/S 10A IS AVAILABLE IN RESPECT OF A N UNDERTAKING WHICH MANUFACTURES OR PRODUCES ARTICLE OR THING IN ANY SPECIAL ECONOMIC ZONE (SEZ). HE FURTHER OBSERVED THAT THE A SSESSEE HAD NOT ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 3 AT ALL SPECIFIED THE MANUFACTURIN PROCESS WHICH HAD BEEN CARRIED OUT WITHIN THE SEZ AFTER RECEIVING MANUFACTURING GOODS FROM THE JOB WORK PARTIES WHICH ARE LOCATED OUTSIDE THE SEZ. HE FURTH ER OBSERVED THAT THE ASSESSEE HAD MERELY STATED THAT THE SOME PROCES SES ARE CARRIED OUT ALONG WITH PACKING AND LABELLING WITHOUT SPECIF YING THE NATURE OF SUCH PROCESSES. THE AO, THEREFORE, HELD THAT THE AS SESSEE IS NOT ENTITLED TO THE DEDUCTION IN RESPECT OF THE PROFITS DERIVED FROM THE EXPORT OF GOODS WHICH HAVE BEEN MANUFACTURED BY THE JOB WORK PARTIES OUTSIDE THE SEZ. HE FURTHER HELD THAT THE A SSESSEE HAS NOT GIVEN THE DETAILS OF EXPORT SALES WHICH HAVE BEEN G ENERATED FROM SUCH ACTIVITIES AND THE EXTRA TIME ASKED FOR BY THE ASSE SSEE IN THIS REGARD THAT TOO AT THE FAG END OF MARCH'06 WHEN THE CASE IS GETTING BARRED BY LIMITATION IS NOT ACCEEDED TO SINCE SUFFICIENT OPPO RTUNITIES WERE GIVEN TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEE DINGS. THE AO, THEREFORE, HAS ESTIMATED THE INELIGIBLE PORTION OF THE EXPORT TURNOVER RELATABLE TO JOB WORK ACTIVITIES ON PROPORTIONATE B ASIS AT 15,15,99,085/- BEING 44.35% OF RS. 34,18,24,319/- O F EXPORT TURNOVER IS GENERATED FROM THE INELIGIBLE ACTIVITIES OUTSIDE THE SEZ. ACCORDINGLY, THE CLAIM OF DEDUCTION U/S 10A WORKED OUT TO RS. 68,82,598/- WAS DENIED ON THE GROUND THAT THE SAME WAS DERIVED FROM SUCH ACTIVITIES WHICH WERE NOT CARRIED OUT INSIDE T HE LOCATION. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE HAD FILED WRITTE N SUBMISSIONS VIDE LETTER DATED 12/12/2006, THE CONTENTS OF WHICH WERE REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGES 3,4 &5, ARE EXT RACTED BELOW:- 2. WHILE CHECKING THE WORKING OF DEDUCTION CLAIMED BY THE ASSESSEE COMPANY U/S 10A AT RS. 4,83,99,550/- THE A O REFERRED TO THE FOLLOWING IN HIS ORDER. (A) THE ASSESSEE COMPANY HAD PAID LABOUR CHARGES OF RS. 1,88,71,966/- DURING THE YEAR ENDED 31 MARCH. 2003 AS AGAINST ONLY RS. 3,30,221/- PAID IN THE IMMEDIATELY PRECEDI NG YEAR. ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 4 (B) OUT OF THE LABOUR CHARGES OF RS. 1,88,71,966/-, THE ASSESSEE COMPANY HAD PAID LABOUR CHARGES OF RS. 83,71,311/- TO SUCH PARTIES WHO HAD CARRIED OUT THE MANUFACTURING PROCE SS OUTSIDE THE SEZ LOCATION. I.E. IN DOMESTIC TARIFF AREA (DTA ,), WHICH COMES ABOUT 44.35% OF THE TOTAL LABOUR CHARGES PAID BY TH E ASSESSEE COMPANY. (C) IT IS IMPERATIVE THAT THE MANUFACTURING OPERATI ONS ARE CARRIED OUT WITHIN THE CONFINES OF THE SPECIAL ECONOMIC ZON E (SEZ). (D) THE ASSESSEE COMPANY HAD STATED THAT AFTER RECE IVING THE MANUFACTURED GOODS FROM THE JOB WORK PARTIES WHICH ARE SITUATED OUTSIDE THE SEZ SOME PROCESSES ARE CARRIED OUT ALON G WITH PACKING AND LABELING. HOWEVER, THE ASSESSEE COMPANY HAS NOR SPECIFIED MANUFACTURING PROCESSES WHICH HAVE BEEN C ARRIED OUT BY IT IN SEZ. (E) IT IS, THEREFORE, HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION IN RESPECT OF THE PROFIT DERIVED FROM THE EXPORT OF GOODS WHICH HAVE BEEN MANUFACTURED BY THE JOB WORK PARTIE S OUTSIDE THE SEZ. (F) THE TOTAL JOB WORK CHANGES PAID WERE RS. 1,88, 71,966/- OUT OF WHICH RS. 83,71,311/- WERE PAID TO THE PARTIES IN D TA. THEREFORE 44.35% OF THE TOTAL LABOUR CHARGES WERE PAID TO THE PARTIES IN DTA. (G) INCREASE IN THE EXPORT TURNOVER IN COMPARISON T O THE PRECEDING YEAR WAS RS. 34,18,24,319/- AND THEREFORE, 44.35% O F THE SAME, I.E., RS. 15,15,19,085/- IS THE EXPORT TURNOVER WHI CH IS GENERATED FROM THE INELIGIBLE ACTIVITIES (OUTSIDE THE SEZ). (H) THE PROFIT OF RS. 5,10,25,214/-IS 4.54% OF THE TOTAL TURNOVER. THEREFORE, THE SAME PERCENTAGE OF PROFIT TO THE INELIGIBLE PORTION OF THE EXPORT TURNOVER OF RS. 15,15,19,085/ - IS TAKEN AS NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT WHICH WORKS OUT TO RS. 68,82,598/- 3. IT IS SUBMITTED THAT THE AFORESAID APPROACH OF THE ASSESSING OFFICER IS NOT CORRECT IN LAW. SECTION 10A PROVIDES AS UNDER: ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 5 10A(1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTA KING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE F OR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UND ERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR T HINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALL OWED FROM THE TOTAL INCOME OF THE ASSESSEE: 4. ANALYSING THE CONTENTS OF SECTION 1OA OF THE ACT , THE FOLLOWING INGREDIENTS ARE EMERGING: (A) THE UNDERTAKING MUST DERIVE INCOME FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE; (B) THERE SHOULD BE PROFITS AND GAINS FROM SUCH ACT IVITY OF EXPORT; (C) THE DEDUCTION OF SUCH PROFIT AND GAINS OF THE U NDERTAKING IS ALLOWED FOR A PERIOD OFTEN CONSECUTIVE ASSESSMENT Y EARS BEGINNING WITH THE ASSESSMENT EAR IN WHICH THE UNDE RTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR T HINGS. 5. IT IS SUBMITTED THAT ALL THE INGREDIENTS REFERRE D TO HEREINABOVE ARE SATISFIED IN THE PRESENT CASE. THEREFORE, THE A SSESSEE SHOULD GET DEDUCTION IN RESPECT OF ITS ENTIRE PROFIT WHICH MAY BE THE RESULT OF THE WORKERS WORKING IN THE ASSESSEES OWN UNIT AT SEZ OR THE SAME UNIT WHICH IS LOCATED IN SEZ GIVES RAW MATERIALS TO OUTSIDERS FOR FASHIONING THE PRODUCTS ACCORDING TO ITS SPECIFICATIONS. WHAT IS IMPORTANT IS NOT THAT THE E NTIRE WORK IS CARRIED ON IN SUCH A UNIT INSIDE SEZ BUT THE WORK M AY BE EXECUTED BY OUTSIDE PARTIES WHO ARE PROVIDED WITH T HE REQUIRED RAW MATERIALS BY THE SEZ UNIT WHICH ARE FASHIONED I NTO ARTICLES CAPABLE OF BEING EXPORTED OUTSIDE INDIA BY THE UNIT IN THE SEZ. 6. IN RESPECT OF THE CIRCULAR NO. 694, DATED 23 RD NOVEMBER, 1994 ISSUED BY CBDT MAY BE REFERRED TO, WHICH IS AS UNDER: II. TREATMENT OF ON-SITE DEVELOPMENT BOARDS CI RCULAR HAS RECOGNIZED THE ROLE OF ON SITE DEVELOPMENT IN. THE COMPUTER SOFTWARE INDUSTRY SO THAT THE INERT FACT THAT SOME WORK IS DONE AT CLIENTS SITE ABROAD NEED NOT LOSE THE BENEFIT OF S ECTION 10A OR SECTION LOB AS IS EVIDENT FROM THE FOLLOWING EXTRAC T IN THE BOARDS CIRCULAR. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE LEARNED CIT(A) HELD AS UNDER:- ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 6 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMIS SION MADE BY APPELLANT. THE FACTS AS AVAILABLE ON RECORD SHOW TH AT AN AMOUNT OF RS. 83,71,311/- HAVE BEEN PAID AS JOB WORK CHARG ES TO PARTIES ENGAGED IN MANUFACURING PROCESS OUTSIDE THE SEZ LOC ATION. THIS PAYMENT WAS 44.35% OF THE TOTAL LABOUR CHARGES PAID AT RS. 1,88,71,966/-. SINCE THIS MANUFACTURING PROCESS TOO K PLACE OUTSIDE FTZ (FREE TRADE ZONE), AO HAD DISALLOWED PR OPORTIONATE CLAIM OF DEDUCTION U/S 1OA HOLDING THAT THE AMOUNT IS NOT COVERED UNDER THE PROVISIONS OF SECTION, 1OA. THE A PPELLANT HAS IZLQFRQ4 DEDUCTION ON THIS ON THE GROUND THAT THE O NLY CONDITION LAID DOWN IN SECTION 1OA IS THAT UNDERTAKING MUST D ERIVE INCOME FROM EXPORT AND THERE IS NO CONDITION THAT THE MANU FACTURING PROCESS SHOULD TAKE PLACE INSIDE SEZ. APPELLANT HAS STATED THE FOLLOWING: IT IS NOT IMPORTANT AS TO WHERE THE WORK, WHICH R ESULTS IN ULTIMATE EXPORT, IS EXECUTED, I.E. WHETHER EXECUTED IN INDIA OR OUTSIDE INDIA. THE IMPORTANT POINT TO BE NOTED IS I RRESPECTIVE OF THE FACT THAT THE WORK MAY BE EXECUTED INSIDE THE S EZ OR OUTSIDE THE SEZ, THE EXPORT PRICE WHICH IS REALIZED SHOULD REFLECT THE ELEMENT OF COST WHICH HAS GONE INTO PAYING LABOUR C HARGES FOR THE GOODS WHICH ARE ULTIMATELY EXPORTED APPELLANT HAS ALSO RELIED ON BOARDS CRCU1AR NO.91, DATED 01/04/2003 STATING THAT ON THE BASIS OF CIRCULAR, I T IS IMMATERIAL WHETHER THE OPERATION IN RESPECT OF THE EXPORTED GO ODS ARE DIRECTLY CONDUCTED WITHIN THE CONFINES OF THE SEZ U NIT OR NOT. SO FAR AS FOREIGN EXCHANGE IS RECEIVED, EVERYTHING IS ALLOWABLE. APPELLANT HAS ALSO REFERRED TO EXPLANATION 3 OF SEC TION 10A IN SUPPORT OF ITS CLAIM. IN MY CONSIDERED OPINION, THERE IS NO MERIT IN THE CONTENTION OF APPELLANT. THE KIND OF INTERPRETATION THE APPELLANT IS TRYING TO PUT TO THE PROVISION OF SECTION 1OA AND CBDT CIRCULAR N O.91 IS NEITHER PROPER NOR PERMISSIBLE IN LAW. THE COURTS H AVE HELL, AND FOR THIS NO AUTHORITY NEED TO BE CITED, THAT A DEDU CTION/EXEMPTION CAN BE GRANTED ONLY ACCORDING TO THE PLAIN MEANING OF THE STATUTE. THE MEANING AND WORDING OF THE STATUTE CANNOT BE TW ISTED TO ENLARGE THE SCOPE OF EXEMPTION/DEDUCTION. HOWEVER, ONCE DEDUCTION/EXEMPTION IS ALLOWABLE AS PER THE PLAIN M EANING, FULL BENEFIT SHOULD BE GIVEN. APPELLANT HAS COMPLETELY I GNORED THE FACT THAT HEADING OF SECTION 10A WHICH STATES AS FOLLOWS : SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKING IN FREE TRADE ZONE, ETC. IF APPELLANTS ARGUMENTS ARE ACCEPTED THEN, ACCORDI NG TO APPELLANT, THE HEADING OF THE SECTION IS REDUNDANT AND USELESS ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 7 AND HAS BEEN PUT BY THE LEGISLATURE WITHOUT ANY. PU RPOSE BECAUSE IN VIEW OF THE APPELLANT, ONCE FOREIGN EXCH ANGE ARE RECEIVED IN RESPECT OF THE SALE PROCEEDS, IT AS IMM ATERIAL AS TO WHETHER THE MANUFACTURING PROCESS HAS TAKEN PLACE I N SEZ OR NOT SUCH INTERPRETATION HAS TO BE REJECTED AT OUTSET. I T IS NOT OPEN TO ANYBODY TO SUGGEST THAT LEGISLATURE DID NOT KNOW IT S MIND WHEN IT PUT THE ABOVE HEADING OVER SECTION 1OA. SECTION WA IS IN RESPECT OF ONLY THOSE UNDERTAKINGS WHICH ARE SET UP AND MANUFACTURING OR PROCESSING ARTICLES OR THINGS OR C OMPUTER SOFTWARE WITHIN THE FREE TRADE ZONE ETC. APPELLANT S CLAIM THAT UNDERTAKING MAY BE INVOLVED IN MANUFACTURING ACTIVI TY ELSEWHERE BUT SO FAR AS IT HAS SET UP ON PAPER IN FREE TRADE. ZONE, THE PROVISION OF SECTION 1OA WILL APPLY. SUCH MEANING W ILL RENDER THE PROVISION OF SECTION 1OA REDUNDANT. IT CANNOT ALSO BE ANYBODYS CASE THAT IF PART OF MANUFACTURING PROCESS IS UNDER TAKEN IN FTZ AND PARTLY TAKEN OUTSIDE FTZ THEN ALSO THE WHOLE EX ERCISE OF MANUFACTURING CONSIDERED AS MANUFACTURING ACTIVITY UNDERTAKEN INSIDE FTZ. THE VERY PURPOSE OF SETTING ETC. SHOWS THAT THE BASIC IDEA IS THAT THE MANUFACTURING ACTIVITY SHOULD TAKE LACE INSIDE IT IS NOT MERELY A PAPER FORMALITY AS THE APPE ANT SEE MS TO SUGGEST. IN THIS REGARD, APPELLANTS RELIANCE ON BOARDS INS TRUCTION REFERRED ABOVE, AND EXPLANATION 3 OF SECTION TOTALL Y MISPLACED. ON THE CONTRARY, INSTRUCTION AND EXPLANATION 3 GO A GAINST THE CLAIM MADE BY APPELLANT. THE INSTRUCTIONS REFERRED TO BY THE APPELLANT AND EXPLANATION 3 HAVE MADE EXCEPTION TO THE PROVISION OF SECTION IOA THAT MANUFACTURING PROCESS SHOULD BE UNDERTAKEN BY THE IN FREE TRADE ZONE ETC. IN THIS E XCEPTION MANUFACTURING ACTIVITY UNDERTAKEN OUTSIDE VIZ. BUT WITHIN THE COUNTRY HAS NOT BEEN INCLUDED. THE ONLY EXCEPTION H AS BEEN MADE IN RESPECT OF ONSITE DEVELOPMENT OF COMPUTER PROGRA MME AND JOB WORK DONE ABROAD. NO EXCEPTION HAS BEEN MADE REGARD ING MANUFACTURING DONE OUTSIDE FTZ BUT IN THE DOMESTIC TARIFF AREA. EXPLANATION 3 AND CIRCULAR NO. 91 ARE VERY SPECIFIC AND PRECISE. THEIR SCOPE CANNOT BE ENLARGED BY PUTTING UNREASONA BLE INTERPRETATION TO THIS EXPLANATION OR BOARDS CIRCU LAR. THE VERY FACT THAT NO EXCEPTION HAS BEEN MADE IN RESPECT OF DOMESTIC TARIFF AREA, MAKES IT VERY CLEAR THAT NO SUCH EXCEPTION PE RMISSIBLE. FURTHER, IT IS ALSO UNDISPUTED THAT BUT FOR EXPLANA TION 3, ONSITE DEVELOPMENT OF COMPUTER SOFTWARE WOULD NOT BE ENTIT LED FOR WA DEDUCTION; THE IMPLICATION OF THIS, IS THAT ACCORDI NG TO PLAIN MEANING OF PROVISIONS OF SECTION 1 OA , THE MANUFAC TURING PROCESS SHOULD TAKE PLACE WITH FREE TRADE ZONE FOR ELIGIBILITY U/S 1OA. APPELLANT HAS STATED IN ITS SUBMISSION THAT PR OVISION OF SECTION 1OA NOWHERE PROVIDES THAT THE UNIT IN FTZ M UST MANUFACTURE EACH AND EVERY ITEM EXPORTED BY IT IN I TS FACTORY IN FTZ. APPELLANT HAS FURTHER STATED THAT WHAT IS REQU IRED THAT THE UNIT IN FTZ SHOULD MANUFACTURE ARTICLES OR THIN OR COMPUTER ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 8 SOFTWARE WHICH ARE EXPORTED OUTSIDE INDIA. IF THIS CONDITION IS FULFILLED THEN SUCH UNIT IN FTZ WILL BE ENTITLED TO DEDUCTION U/S 1OA. THE CONTENTION OF THE APPELLANT IS SELF CONTR ADICTORY. IF THE ONLY CRITERIA FOR GRANTING DEDUCTION U/S 1OA IS THA T THE UNIT SHOULD MANUFACTURE ARTICLES OR THINGS WHICH ARE EXP ORTED THEN THERE IS NO REASON FOR SUCH ELABORATE PROVISION UND ER THE HEADING SPECIAL PRO VISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS IN FREE TRADE ZONE, ETC. THE PROVISION SHOULD HAVE BEEN VERY SIMPLE AND SHOULD HAVE BEEN AS FOLLOWS: IF ANY UNDERTAKING BRINGS IN FOREIGN EXCHANGE IN R ESPECT OF EXPORTS MADE, IT WILL BE ENTITLED FOR DEDUCTION U/S 10A IT IS CORRECT THAT THE LEGISLATURE WANTS TO ENCOURA GE EXPORTS BUT THIS ENCOURAGEMENT IN THE FORM OF TAX DEDUCTION AND EXEMPTION ARE BASED ON CERTAIN CONDITIONS AND COMPLIANCE OF V ARIOUS PROVISIONS. THE GOVERNMENTS AIM IS NOT SIMPLY TO G RANT ALL AND EVERY BENEFIT MERELY ON THE BASIS OF FACT THAT FORE IGN EXCHANGE HAS COME TO THE COUNTRY. HAD IT BEEN SO, THERE WOUL D HAVE BEEN NO REASON FOR VARIOUS GOVERNMENT AGENCIES MONITORIN G HAVALA TRANSACTIONS. THEREFORE, THE SUBMISSION PF THE APPE LLANT THAT THE AO SHOULD ONLY SEE THAT THE FOREIGN EXCHANGE HAS CO ME TO THE COUNTRY AND THE UNIT HAS DONE SOME MANUFACTURING AN D NOTHING BEYOND THAT, CANNOT BE ACCEPTED. APPELLANT HAS ALSO STATED THAT MANUFACTURING HAS BEEN DONE UNDER ITS SUPERVISION A ND THEREFORE IN VIEW OF VARIOUS INTERPRETATIONS, THIS SHOULD BE CONSIDERED AS APPELLANTS OWN MANUFACTURING. THIS LINE OF ARGUMEN T IS ALSO REJECTED FIRSTLY BECAUSE NO EVIDENCE BAA BEEN BROUG HT ON RECORD BEFORE AO OR BEFORE THE UNDERSIGNED THAT MANUFACTUR ING HAS BEEN DONE UNDER ITS SUPERVISION. IN THIS REGARD, OBSERVA TION OF AO IS VERY RELEVANT WHEREIN HE HAS OBSERVED AS UNDER: MOREOVER, THE ASSESSEE HAS NOT AT ALL SPECIFIED TH E MANUFACTURING PROCESSES WHICH HAVE BEEN CARRIED OUT WITHIN THE SEZ AFTER RECEIVING THE MANUFACTURED GOO DS FROM THE JOB WORK PARTIES WHICH ARE LOCATED OUTSIDE THE SEZ THE ASSESSEE HAS MERELY SLATED THAT SOME PROCESSES ARE CARRIED OUT ALONG WITH PACKING AND LABELING WITHOUT SPECI1NG THE NATURE OF SUCH PROCESSES. SECONDLY, THE ISSUE INVOLVED IS NOT WHETHER THE MAN UFACTURING PROCESS BELONGED TO APPELLANT OR NOT. THE ISSUE IS WHETHER THE MANUFACTURING PROCESS HAS BEEN DONE WITHIN THE FREE TRADE ZONE AREA OR NOT. IT IS UNDISPUTED THAT MANUFACTURING PR OCESS HAS NOT BEEN DONE WITHIN THE FREE TRADE ZONE AREA. THEREFOR E, EVEN IF MANUFACTURING PROCESS HAS BEEN DONE UNDER THE SUPER VISION OF APPELLANT AND TECHNICALLY CONSIDERED AS APPELLANTS OWN MANUFACTURING EVEN THEN IT CANNOT BE CONSIDERED AS ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 9 MANUFACTURING PROCESS DONE BY THE UNDERTAKING WITHI N THE FTZ WHICH IS AN ESSENTIAL CONDITION FOR DEDUCTION U/S 1 0A. IT MUST BE NOTED THAT 10A IS QUA UNDERTAKING ESTABLISHED IN FR EE TRADE ZONE. THEREFORE, PRESUMING THAT MANUFACTURING HAS B EEN UNDER THE SUPERVISION, THIS WILL NOT ALTER THE FUNDAMENTA L FACT THAT IT HAS NOT BEEN DONE IN FTZ. IN VIEW OF ABOVE, THIS G ROUND IS DISMISSED AND ADDITION MADE BY AO S UPHELD . STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER SECTION 10A OF THE ACT, THREE CONDITIONS HAV E TO BE SATISFIED TO CLAIM DEDUCTION UNDER THIS SECTION, NAMELY, I) UNDE RTAKING MUST DERIVE INCOME FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE, II) THERE SHOULD BE PROFIT AND GAINS FROM SUCH ACTI VITY OF EXPORT, AND III) DEDUCTION OF SUCH PROFIT AND GAIN OF SUCH UNDE RTAKING IS ALLOWED FOR A PERIOD OF 10 CONSECUTIVE YEARS BEGINNING WITH ASSESSMENT YEAR IN WHICH UNDERTAKING BEGINS TO MANUFACTURE OR PRODU CE ARTICLE OR THING. IT IS SUBMITTED THAT AS PER SECTION 10A IT I S NOT REQUIRED THAT EVERY PIECE OF JEWELLERY MUST BE MANUFACTURED IN SE Z, AS THE ASSESSEE THE RAW MATERIAL RECEIVED BY THE ASSESSEE MAY BE GI VEN TO OUTSIDERS FOR THE PROCESS. HE THEREFORE CONTENDED THAT THE VI EW TAKEN BY THE AO THAT, THE ASSESSEE IS NOT MANUFACTURED THE ENTIRE P ROCESS INSIDE THE SEZ, IS NOT CORRECT. THE LEARNED COUNSEL FOR THE AS SESSEE RELIED UPON THE CIRCULAR NO. 694 DATED 23 RD NOVEMBER'94 ISSUED BY THE CBDT AND SUBMITTED THAT THE ABOVE CIRCULAR SUPPORTS THE CASE OF THE ASSESSEE. HE FURTHER RELIED UPON THE EXPLANATION 3 TO SECTION 10A, AS PER WHICH, THE ASSESSEE NEED NOT MANUFACTURE EVERYTHING INSIDE THE SEZ AND MANUFACTURING CAN BE DONE OUTSIDE SEZ ALSO. IN THIS CONNECTION, HE REFERRED PAGES 76 TO 79 OF THE PAPER BOOK WHERE AL L THE DETAILS ARE FILED PERTAINING TO WORK GIVEN OUTSIDE ON SUB-CONTR ACT AND, THEREFORE, THE LEARNED COUNSEL SUBMITTED THAT THE CLAIM OF DED UCTION OF THE ASSESSEE SHOULD NOT BE DENIED. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE AO WHILE DECIDING THE CLAIM OF T HE ASSESSEE HAS ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 10 NOT CONSIDERED THE CASE LAWS RELIED UPON BY THE ASS ESSEE. HE REFERRED TO ONE OF THE CASE LAW DECIDED BY THE HON'BLE KERA LA HIGH COURT IN THE CASE OF CIT VS. INDIAN RESINS & POLYMERS, 235 I TR 5 WHEREIN THE HON'BLE COURT WAS HELD THAT IT WAS IMMATERIAL AS TO WHETHER THE RAW CASHEW WAS PROCESSED FOR EXPORT IN THE FACTORY OF T HE ASSESSEE OR IN THE FACTORIES BELONGING TO THIRD PARTIES AND WHAT W AS REQUIRED WAS ONLY PROCESSING OF GOODS FOR EXPORT. 7. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT WHEN THE AO ASKED THE DETAILS OF WORK DONE BY THE OUTSIDERS, TH E ASSESSEE HAS NOT SUBMITTED THE DETAILS AS WHAT WAS THE WORK DONE BY INSIDERS AND WHAT WAS THE WORK DONE BY THE OUTSIDERS OR WHETHER ANY W ORK HAS BEEN DONE BY THE ASSESSEE OR NOT IS NOT CLEAR FROM THE F ACTS OF THE CASE. HE, THEREFORE, SUBMITTED THAT THE ISSUE NEEDS EXAMINATI ON AND UNLESS THE ASSESSEE MANUFACTURES THE GOODS, NOT ELIGIBLE FOR D EDUCTION U/S 10A OF THE ACT. THEREFORE, HE SUBMITTED THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR EXAMINATION IN THE LIGHT OF THE ABOVE SUBMISSIONS. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CA SE OF THE ASSESSEE IS THAT THE ASSESSEE IS A MANUFACTURING COMPANY AND EXPORTING STUDDED DIAMOND AND GOLD JEWELLERY THE COMPANY OF T HE ASSESSEE IS SITUATED IN SEZ AND THE ASSESSEE IS ELIGIBLE FOR DE DUCTION U/S 10A OF THE ACT. ACCORDING TO THE AO, THE ASSESSEE HAS NOT SUBMITTED THE DETAILS LIKE WHAT WAS THE WORK DONE IN SEZ AND WHAT WAS THE WORK DONE INSIDE SEZ AND OUTSIDE THE SEZ. THE AO WAS IN DOUBT THAT WHETHER THE ASSESSEE MANUFACTURED IN ITS COMPANY OR NOT. THE AO, THEREFORE, HAS ESTIMATED THE INELIGIBLE PORTION OF THE EXPORT TURNOVER RELATABLE TO JOB WORK ACTIVITIES ON PROPORTIONATE B ASIS AT 15,15,99,085/- BEING 44.35% OF RS. 34,18,24,319/- O F EXPORT TURNOVER ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 11 IS GENERATED FROM THE INELIGIBLE ACTIVITIES OUTSIDE THE SEZ. ACCORDINGLY, THE CLAIM OF DEDUCTION U/S 10A WORKED OUT TO RS. 68,82,598/- WAS DENIED ON THE GROUND THAT THE SAME WAS DERIVED FROM SUCH ACTIVITIES WHICH WERE NOT CARRIED OUT INSIDE T HE LOCATION. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON VA RIOUS CASE LAWS AND THE PROPOSITION IN THE SAID CASES ARE THAT IT I S IMMATERIAL THAT WHETHER THE WORK WAS DONE BY THE ASSESSEE INSIDE OR THE OUTSIDE THE SEZ, ONCE THE ASSESSEE LOCATED IN SEZ, THE ASSSSEE IS ELIGIBLE FOR DEDUCTION U/S 10A IRRESPECTIVE OF THE FACT THAT THE WORK WAS DONE INSIDE OR OUTSIDE THE SEZ. WHEREAS, THE LEARNED DR SUBMITTED THAT BARE DETAILS, WHICH ARE NECESSARY TO EXAMINE THE IS SUE, NAMELY, WHAT WAS THE WORK DONE BY THE ASSESSEE INSIDE THE SEZ AN D OUTSIDE THE SEZ WERE NOT FILED BEFORE THE AO. THE AO, THEREFORE , HELD THAT THE ASSESSEE HAS TO DO SOME MANUFACTURING WORK WITHIN T HE SEZ FOR CLAIMING DEDUCTION U/S 10A OF THE ACT. WE FIND FORC E AND JUSTIFICATION IN THE ARGUMENT OF THE LEARNED DR. THEREFORE, AFTER CONSIDERING THE FACTS OF THE CASE UNDER CONSIDERATION, RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE AFRESH IN ACC ORDANCE WITH LAW AFTER CONSIDERING THE CASE LAWS RELIED UPON BY THE ASSESSEE BEFORE HIM AND THE CBDT CIRCULAR, AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE DETAILS AS REQUIRED BY THE REVENUE (SUPRA) IN SUPPORT OF ITS C ASE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS TREATED AS ALLO WED FOR STATISTICAL PURPOSES. 9. GROUND NO.2 IS PERTAINING TO INTEREST INCOME CHA RGED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO HAD OBSERVED THAT THE ASSESSEE HAD CLAIMED INTEREST AND OTHER INCOME OF RS. 25,44,225/- AS PART OF THE PROFIT DERIVED FROM THE UNDERTAKING FOR ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 12 THE PURPOSE OF DEDUCTION U/S 10A OF THE ACT, WHICH INCLUDED INTEREST AT RS. 25,03,608/-, DIVIDEND ON SHARES OF RS. 3,141 /- AND SALES TAX REFUND OF RS. 37,476/-. FOLLOWING THE DETAILS REASO NS DISCUSSED IN AY 2002-03 IN ASSESSEE'S CASE, THE AO TREATED THE ABOV E INCOME AS 'INCOME FROM OTHER SOURCES' NOT ALLOWING THE DEDUCT ION U/S 10A IN THE YEAR UNDER CONSIDERATION. THE CIT(A) UPHELD THE ACT ION OF THE AO IN AY 2002-03. THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE FILED A DET AILED WRITTEN SUBMISSIONS, WHICH WERE REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGES 10 TO 15. AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE AO FOLLOWING THE DECISION IN THE CASE OF THE ASSESSEE IN AY 2002-03. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR THE ASSESSEE HAS AGREED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2002-03 IN ITA NO 7053/M UM/05 VIDE ORDER DATED 03/06/2011. HOWEVER, HE HAS SUBMITTED T HAT ANY EXPENSES INCURRED TO EARN THE INCOME MAY BE ALLOWED IN THE LIGHT OF SECTION 57 CLAUSE (III) OF THE ACT. WE HAVE HEARD B OTH THE SIDES, PERUSED THE RECORDS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 20 02-03 (SUPRA) WHEREIN THE TRIBUNAL HELD AS UNDER:- 9. WE HAVE CONSIDERED BOTH THE PARTIES AND HAVE PER USED THE RECORD OF THE CASE. ALL THE DECISIONS RELIED UPON T HE LEARNED COUNSEL FOR THE ASSESSEE WERE RENDERED PRIOR TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA, WHEREIN IT HAS BEEN OBSERVED THAT THE WORDS 'DERIVED FROM' IS NARROWER IN CONNOTATION AS COMPARED TO THE WORDS 'ATTRIBUTABLE TO'. BY USING THE EXPRESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. THEREFORE, THE INTEREST INCOME WAS TO BE TREATED AS INCOME FROM OTHER SOURC ES. SINCE NO EXPENDITURE WAS INCURRED FOR EARNING THIS INTEREST INCOME, IT COULD NOT BE NETTED OFF. THEREFORE, GROSS INTEREST IS TO BE EXCLUDED ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 13 IN COMPUTING DEDUCTION U/S 10A. IN THE RESULT, THIS GROUND IS DISMISSED. 11. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICA L TO THE CASE OF THE ASSESSEE IN AY 2002-03, RESPECTFULLY FOLLOWING THAT DECISION, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROU ND RAISED BY THE ASSESSEE. HOWEVER, WE DIRECT THE AO IF ASSESSEE INC URRED ANY EXPENSES TO EARN THE INCOME, THE SAME MAY BE VERIFIED AND AL LOWED IN VIEW OF THE SECTION 57(III) OF THE ACT. 12. GROUND NO. 3 IS IN RESPECT OF INTER-UNIT TRANSF ER. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE ASSESSEE HAD NOT CONSIDERED INTER-UNIT TRA NSFER AS A PART OF TOTAL TURNOVER. FOLLOWING HIS DECISION IN AY 2002-0 3 IN ASSESSEE'S CASE, THE AO HELD THAT SUCH INTER-UNIT TRANSFERS AR E TO BE CONSIDERED AS A PART OF TOTAL TURNOVER IN DETERMINING THE EXTE NT OF PROFITS ELIGIBLE FOR DEDUCTION U/S 10A. THE CIT(A) ALSO UPHELD THE A CTION OF THE AO FOLLOWING HIS DECISION IN AY 2002-03. AGGRIEVED, TH E ASSESEE IS IN APPEAL BEFORE US. 14. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BEL OW, WE FIND THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW T HAT WHETHER THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL OR NOT IN AY 2002-03. WE, THEREFORE, RESTORE THE ISSUE TO THE FILE OF THE AO TO CONSIDER THE ISSUE BASED ON THE OUTCOME OF THE ORDER OF THE TRIBUNAL I N AY 2002-03 AND IN CASE THE ASSSSEE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) IN AY 2002-03, THE ORDER OF THE CIT(A) BECOMES FINAL. THUS, THIS GROUND OF APPEAL IS ALLOW ED FOR STATISTICAL PURPOSES. ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 14 15. GROUND NO. 4 IS RELATING TO DEDUCTION U/S 14A O F THE ACT. 16. THE AO NOTICED THAT THE ASSESSEE HAD TOTAL FUND S AVAILABLE INCLUDING LOAN FUNDS WERE RS. 55.59 CRORES AS ON 31 /03/2003, WHICH INCLUDED LOAN FUNDS OF RS. 24.34 CRORES. HE FURTHER NOTICED THAT ON THE OTHER HAND INVESTMENTS AND LOANS AND ADVANCES W ERE RS. 10.96 CRORES AND THE TOTAL INTEREST PAID WAS RS. 1,90,72, 728/-. APPLYING THE PROPORTION OF TOTAL FUNDS TO THE AMOUNT OF INVESTME NTS AND LOANS AND ADVANCES, THE AO WORKED OUT THE DISALLOWANCE OF INT EREST U/S 14A OF THE ACT, TO RS. 37,26,026/- ON THE GROUND THAT THE INTEREST ATTRIBUTABLE TO THE LOAND AND ADVANCES GIVEN WITHOU T INTEREST OUT OF BORROWED FUNDS. ON APPEAL, BEFORE THE CIT(A) THE AS SESSEE FILED ITS WRITTEN SUBMISSION VIDE LETTER DATED 12/12/06, WHIC H WAS EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGE 20. AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) FOLLOWING T HE DETAILS REASONS DISCUSSED IN AY 2002-03 IN ASSESSEE'S CASE, CONFIRM ED THE ACTION OF THE AO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE A SSESSEE IS IN APPEAL BEFORE US. 17. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT & ANRS., 328 ITR 81 AND SUBMITTED THAT THE AO MAY KINDLY BE DIRECTED TO RECOMPUTE THE DISALLOWANCE AFTER TAKING INTO ACCOUN T OF THE FACTS OF THE CASE. THE LEARNED DR ON THE OTHER HAND, HAS NOT CONTROVERTED THE AFORESAID SUBMISSION OF THE ASSESSEE NOR BROUGHT AN Y CONTRARY DECISION AGAINST THE AFORESAID DECISION. 18. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD, WE FIND THAT SIMILAR ISSUE ARO SE BEFORE THE TRIBUNAL IN ASSESSEE'S CASE FOR AY 2002-03, WHEREIN THE TRIBUNAL ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 15 FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD., VS. DCIT, 328 ITR 81, RESTORED THE ISSUE TO THE FILE OF THE AO TO RECOMPU TE THE DISALLOWANCE U/S 14A. RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH IDENTICAL DIRECTIONS. TH US, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2295/MUM/07- BY THE REVENUE 20. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 10A OF THE ACT ON ACCOUNT OF SALES TAX REFUND AFTER VERIFYING THAT THE ITEM OF I NCOME REPRESENTS SALES TAX REFUND OF 10A UNIT. 21. THE AO HELD THAT THE ASSESSEE FAILED TO ESTABLI SH THAT THE SALES TAX REFUND BELONGS TO SEZ UNITS AND, THEREFORE THE AO DID NOT ALLOW DEDUCTION OF THE SALES TAX REFUND U/S 10 A APPLYIN G THE ANALOGY IN AY 2002-03 IN ASSESSEE'S CASE. ON APPEAL, THE CIT(A) D IRECTED THE AO TO VERIFY THE FACT AND IF IT IS FOUND THAT THE ABOVE I TEM OF INCOME EMERGING FROM 10A UNIT, THEN DEDUCTION U/S 10A IS A LLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 22. BEFORE US, THE ASSESSEE SUBMITTED THAT THE ISSU E IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2002-03. THE LEARNED DR, ON THE OTHER HAND, AGREED WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. 23. AFTER HEARING THE PARTIES AND PERUSING THE RECO RD, WE FIND THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2002-03 (SUPRA) FOLLOWING ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 16 THE DECISION IN EARLIER YEAR IN ASSESSEE'S OWN CASE VIDE ITA NO. 6325/MUM/05 RESTORED THE ISSUE TO THE FILE OF THE A O WITH A DIRECTION TO EXAMINE AND DECIDE THE ISSUE IN THE LIGHT OF OBS ERVATIONS IN THE SAID APPEAL. SINCE THE ISSUE IS IDENTICAL IN THE YE AR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN EARLIER YEARS IN ASSESSEE'S OWN CASE, WE RESTORE TH E ISSUE TO THE FILE OF THE AO TO DECIDE THE ISSUE WITH IDENTICAL DIRECTION AS MADE BY THE TRIBUNAL IN EARLIER YEARS (SUPRA). THUS, THIS GROU ND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 24. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 10A OF THE ACT, AFTER VERIFYING ALTERNATE CLAIM OF THE ASSESSEE THAT DISALLOWANCE O F DEDUCTION U/S 14A HAS BEEN MADE OUT OF INTEREST CLAIM OF 10A WITH OUT APPRECIATING THE FACTS OF THE CASE. 25. BEFORE THE CIT(A), THE CONTENTION OF THE ASSESS EE IS THAT THE DISALLOWANCE OF RS. 37,26,026/- MADE BY THE AO U/S 14A OF THE ACT, HAD NOT BEEN TAKEN INTO CONSIDERATION WHILE COMPUTI NG INCOME ELIGIBLE FOR DEDUCTION U/S 10A. HE, THEREFORE, SUBM ITTED THAT THE INCOME ELIGIBLE FOR DEDUCTION U/S 10A AS COMPUTED B Y THE AO OF RS. 3,29,17,549/- OUGHT TO HAVE BEEN ENHANCED BY THE AF ORESAID DISALLOWANCE OF RS. 37,26,026/- AND THEREAFTER THE DEDUCTION U/S 10A NEEDS TO BE COMPUTED. WHILE CONFIRMING THE SAID DIS ALLOWANCE MADE BY THE AO U/S 14A, THE CIT(A) AFTER TAKING INTO CON SIDERATION THE SAID ALTERNATE SUBMISSION OF THE ASSESSEE, THE CIT(A) DIRECTED THE AO TO VERIFY THE CLAIM OF ASSESSEE AND IF IT IS FOUND THA T DISALLOWANCE U/S 14A HAS BEEN MADE OUT OF INTEREST CLAIM OF 10A UNIT THEN DEDUCTION U/S 10A MAY BE ALLOWED AND CONSEQUENTLY AFTER VERIF ICATION AS PER LAW. ITA NOS. 2257 & 2295/MUM/07 M/S TARA JEWELS EXPORTS PVT. LTD. 17 26. AFTER HEARING THE PARTIES AND PERUSING THE RECO RD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT(A) AND, THEREFORE THE SAME IS HEREBY UPHELD. AC CORDINGLY, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 27. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 28. TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 16 TH MARCH, 2012. SD/- SD/- (P.M. JAGTAP) (V. DU RGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED:16 TH MARCH, 2012 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.
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