Tulip Granites Pvt. Ltd., Hyderabad V. ACIT, Hyderabad

ITA 239/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3358 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS; V SRINIVAS
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Deemed export; Competent authority
• Section: 80HHC; 10B; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.238/H/2009 ASSESSMENT YEAR :2006-07 ITA NO.239/H/2009 ASSESSMENT YEAR :2007-08 M/S TULIP GRANITES (P) LTD., HYDERABAD ( PAN AABCT 7314 E) VS THE ACIT, CIRCLE 2(3), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI V. SRINIVAS & SMT.NIVEDIT A BISWAS ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE DI RECTED AGAINST THE COMMON ORDER PASSED BY THE CIT(A) III, HYDERABAD D ATED 15.1.2009 AND PERTAINS TO THE ASSESSMENT YEARS 2006-07 & 2007-08. SINCE COMMON ISSUES ARE INVOLVED IN THESE TWO APPEALS, THEY ARE CLUBBED , HEARD AND DISPOSED OFF TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE RAISED THE FOLLOWING COMMON GROU NDS IN ITS APPEALS: 2. THE CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN RESTRICTING THE RELIEF U/S 10B TO THE PR OFIT RELATABLE TO DIRECT EXPORTS IN RESPECT OF DIRECT SALES EFFECTED. THE CIT(A) OUGHT TO HAVE SEEN THAT THE THIRD PARTY EXPORT IS A LSO AN EXPORT SALE MADE BY THE ASSESSEE HEREIN THROUGH THE AGENT IN INDIA AND THE AGENT GAVE A CERTIFICATE OF DISCLAIMER OF ALL T HE ELIGIBLE DEDUCTIONS IN RESPECT OF SUCH EXPORTS. THE CIT(A) O UGHT TO HAVE SEEN THAT THE ENTIRE SALE IS ONLY AN EXPORT SALE AN D IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT AS THE ASSESSEE IS AN 100% EOU. 3. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS NOT APPROVED AS 100% EOU AS PER THE PROVISIONS OF SECTION 10B. THE CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE HEREIN IS AN 1 00% EOU REGISTERED FOR ALL PURPOSES INCLUDING THE PROVISION S OF SECTION 10B AND THEREFORE THE CIT(A) OUGHT NOT TO HAVE HELD THA T THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. ITA NOS.238 & 239/H/2009 M/S TULIP GRANITES (P) LTD., HYDERABAD 4. THE CIT(A) ERRED IN ENHANCING THE INCOME BY WIT HDRAWING THE EXEMPTION ALLOWED BY THE ASSESSING OFFICER U/S 10B. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURE AND SALE OF GRANITE SLABS. IT I S REGISTERED AS 100% EOU AND COMMENCED ITS BUSINESS ACTIVITY ON 8 TH FEBRUARY, 2005. DURING THE ASSESSMENT YEAR 2006-07, THE TOTAL SALES MADE BY TH E ASSESSEE AGGREGATED TO RS.19,43,59,318/- OUT OF WHICH DIRECT EXPORT WAS TO THE EXTENT OF RS.23,68,601/- ONLY. THE BALANCE SALE WAS MADE TO THE THIRD PARTIES LOCALLY, WHO IN TURN EXPORTED THE GOODS. AFTER DEDUCTING TH E EXPENDITURE INCURRED, THE PROFIT WAS SHOWN AT RS.1,31,18,075/-. THE ASSE SSEE CLAIMED THE DEDUCTION U/S 10B FOR AN AMOUNT OF RS.1,08,48,538/- AFTER ADJUSTING THE ACCUMULATED LOSSES OF RS.54,08,542/. FOR THE ASSES SMENT YEAR 2007-08, THE ASSESSEE SHOWN TOTAL TURNOVER OF RS.27,68,76,36 2/- OUT OF WHICH DIRECT EXPORT WAS ONLY RS.68,70,319/- AND THE REST WAS MAD E TO THE THIRD PARTIES LOCALLY, WHO IN TURN EXPORTED IT ABROAD. THE TOTAL PROFITS WAS COMPUTED AT RS.1,94,40,737/- WHICH WAS CLAIMED EXEMPT U/S 10B O F THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD RE CEIVED CONVERTIBLE FOREIGN EXCHANGE ONLY IN RESPECT OF DIRECT EXPORTS MADE AND NOT IN RESPECT OF THIRD PARTIES EXPORT. HE THEREFORE, ALLOWED THE DEDUCTIO N U/S 10B IN RESPECT OF DIRECT EXPORTS ONLY. NO SUCH DEDUCTION WAS ALLOWED IN RESPECT OF SALES MADE TO THIRD PARTIES FROM WHOM THE PROCEEDS WERE RECEIV ED IN INDIAN CURRENCY. 4. ON APPEAL THE CIT(A) OBSERVED THAT THE GOODS WERE SOLD TO M/S TRV GLOBAL TRADING, CHENNAI. AS PER THE DETAILS GI VEN IN THE RELEVANT SALE INVOICES, INSTEAD OF THE GOODS DELIVERED AT THE BUY ERS PREMISES IN CHENNAI, THE SAME WERE DELIVERED AT CHENNAI PORT FROM WHERE THE SAME WERE EXPORTED TO AUSTRALIA. THE TERMS OF DELIVERY AND PAYMENT AR E MENTIONED AS EX- FACTORY. THE TERMS AND CONDITIONS MENTIONED IN TH E PURCHASE ORDER ISSUED BY M/S TRV GLOBAL TRADING ALSO SHOWS THAT THE PRICE WAS DETERMINED AS EX-FACTORY. THE DISCLAIMER CERTIFICATE STATES TH AT M/S TRV GLOBAL TRADING, CHENNAI WOULD NOT CLAIM ANY DUTY DRAW BACK AND ANY EXPORT BENEFITS UNDER EXIM POLICY 1997-2002 INCLUDING EXPORT PERFORMANCE CERTIFICATE. THE BILL ITA NOS.238 & 239/H/2009 M/S TULIP GRANITES (P) LTD., HYDERABAD OF LADING SHOWS M/S TRV GLOBAL TRADING, CHENNAI AS THE SHIPPER WHILE, CONSIGNEE IS MENTIONED AS M/S WK MARBLE & GRANITES P LTD., AUSTRALIA. THE SHIPPING BILL FOR EXPORT ISSUED BY CHENNAI CUSTOMS HOUSE (SEA CARGO) CHENNAI ALSO MENTIONED THE NAME OF TRV GLOBAL TRADI NG AS THE EXPORTER. IT IS EVIDENT FROM THESE EVIDENCES THAT THE EXPORTS WERE MADE BY TRV GLOBAL TRADING WHICH RECEIVED THE SALE PROCEEDS INTO CONVE RTIBLE FOREIGN EXCHANGE. THE PROCEEDS FOR SALE MADE TO TRV GLOBAL TRADING WA S RECEIVED BY THE ASSESSEE IN INDIAN CURRENCY. FOR CLAIMING THE DEDU CTION U/S 10B, IT IS MANDATORY THAT THE SALE PROCEEDS SHOULD BE RECEIVED INTO INDIAN IN CONVERTIBLE FOREIGN EXCHANGE BY THE ASSESSEE ONLY. THE RELEVANT STIPULATION PROVIDED IN SUB SECTION (3) OF SECTION 10B IS REPRO DUCED HEREUNDER: (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF T HE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSE SSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SI X MONTHS BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHI N A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR, WI THIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. 5. THE CIT(A) FURTHER OBSERVED THAT THERE IS NO CO NCEPT OF DEEMED EXPORT IN THE PROVISIONS OF SECTION 10B OF THE ACT. THE C ONCEPT OF THIRD PARTY EXPORT WAS SPECIFICALLY PROVIDED BY THE LEGISLATURE IN SEC.80HHC OF THE ACT. SUB SECTION (1A) OF 80HHC TAKES CARE OF SUCH SITUAT ION WHERE THE ASSESSEE, BEING A SUPPORTING MANUFACTURER, SOLD THE GOODS TO ANY EXPORT HOUSE OR TRADING HOUSE IN RESPECT OF WHICH A DISCLAIMER CERT IFICATE WAS ISSUED BY SUCH HOUSES. THE ABSENCE OF SIMILAR PROVISIONS IN SECTI ON 10B SHOWS THE LEGISLATIVE INTENT IN NOT PROVIDING THE BENEFIT OF SUCH DEDUCTION TO THE SUPPORTING MANUFACTURERS LIKE THE ASSESSEE. DEDUCT ION U/S 10B IS ALLOWABLE TO 100% EOU WHICH FULFILS ALL THE CONDITI ONS LAID DOWN IN THE SAID SECTION. SINCE THE ASSESSEE HAS NOT FULFILLED THE CONDITION OF ITSELF RECEIVING THE SALE PROCEEDS INTO CONVERTIBLE FOREIGN EXCHANGE , THE DEDUCTION U/S 10B IS NOT ALLOWABLE IN RESPECT OF SUCH SALES. ITA NOS.238 & 239/H/2009 M/S TULIP GRANITES (P) LTD., HYDERABAD 6. FURTHER, THE ASSESSEE HAS ALSO RAISED GROUNDS BEFORE THE CIT(A) THAT THE ASSESSEE IS 100 EOU DEFINED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10B OF THE IT ACT. THIS PLEA WAS REJECTED BY THE CIT(A) BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE O F INFOTECH ENTERPRISES LTD. VS. JCIT (85 ITD 325). AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. THE LEARNED AUTHORIZED REPR ESENTATIVE PLACED THE SAME ARGUMENT WHAT HE HAS MADE BEFORE THE CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE HAS ALSO DREW OUR ATTENT ION TO THE COPIES OF THE INVOICES FOR SALE OF GRANITE AND ALSO DISCLAIMER CE RTIFICATE ISSUED BY VARIOUS PARTIES THAT THEY HAVE NOT CLAIMED DEDUCTION U/S 1 0B OF THE IT ACT ON IMPUGNED EXPORTS. WE HAVE CAREFULLY GONE THROUGH T HE PAPER BOOK SUBMITTED BY THE ASSESSEE. AFTER GOING THROUGH THE DOCUMENTS CITED BEFORE US, WE ARE NOT CONVINCED ABOUT THE CLAIM OF THE ASS ESSEE THE MAIN CONTENTION OF THE ASSESSEE COUNSEL BEFORE US IS THA T EVEN THE DEEMED EXPORT, THOUGH THE GOODS IS NEITHER EXPORTED BY THE ASSESS EE NOR THE PAYMENT FOR SUCH SUPPLIES RECEIVED IN CONVERTIBLE FOREIGN EXCHA NGE, THE ASSESSEE IS ELIGIBLE FOR BENEFITS U/S 10B OF THE IT ACT. WE H AVE GONE THROUGH THE ENTIRE DOCUMENTS FILED BY THE ASSESSEE BEFORE US, WE ARE N OT CONVINCED ABOUT THE CLAIM OF THE ASSESSEE. FIRST OF ALL, THE WORD EXP ORT IS NOT DEFINED IN SECTION 10B OF THE IT AC OR UNDER SECTION 2 OF THE IT ACT. THEN, WE HAVE TO RELY ON ONLY THE PROVISIONS U/S 80HHC WHEREIN AS EXPLANATIO N TO SUB SECTION (4C) OF 80HHC OF THE UT ACT 1961, THE WORD EXPORT AND THE EXPORT TURNOVER WHICH HAS BEEN DEFINED AS FOLLOWS: EXPLANATION TO SECTION 80HHC (4C): A) CONVERTIBLE FOREIGN EXCHANGE MEANS FOREIGN EXCHAN GE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF INDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF THE FOREIGN EXCHANGE R EGULATION ACT, 1973 (46 OF 1973), AND ANY RULES MADE THERE UNDER. ITA NOS.238 & 239/H/2009 M/S TULIP GRANITES (P) LTD., HYDERABAD (AA) EXPORT OUT OF INDIA SHALL NOT INCLUDE ANY TRANSAC TION BY WAY OF SALE OR OTHERWISE, IN A SHOP, EMPORIUM OR ANY OTHER EST ABLISHMENT SITUATED IN INDIA, NOT INVOLVING CLEARANCE AT ANY C USTOMS STATION AS DEFINED IN THE CUSTOMS ACT, 1962 (52 OF 1962). (B) EXPORT TURNOVER MEANS THE SALE PROCEEDS, (RECEIVED IN, OR BROUGHT INTO, INDIA) BY ASSESSEE IN CONVERTIBLE FOREIGN EXC HANGE (IN ACCORDANCE WITH CLAUSE (A) OF SUB SECTION (2) OF ANY GOODS OR MERCHANDISE TO WHICH THIS SECTION APPLIES AND WHICH ARE EXPORTED OUT OF INDIA, BUT DOES NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TR ANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATION AS DEFINED I N THE CUSTOMS ACT, 1962 (52 OF 1962). 8. IN OUR OPINION, IN VIEW OF THE ABOVE PROVISION S OF THE IT ACT, DEEMED EXPORT IS NOT RECOGNIZED BY THE PROVISIONS O F THE IT ACT. EVEN OTHERWISE, AS SEEN FROM THE FACTS OF THE CASE, IT I S AN ADMITTED FACT THAT THE ASSESSEE IS NOT THE EXPORTER OF THE GOODS. THE ASS ESSEE DELIVERED THE GOODS TO THE BUYER IN INDIA ONLY. THEREFORE, IT IS NOT THE CASE THAT THE ASSESSEE HAD SOLD THE GOODS TO OTHER EOU AGAINST RELEVANT DE CLARATION IN FORM CT 3, SO AS TO CONSIDER THE TRANSACTION AS AN EXPORT. IN VIEW OF THIS FACT, WE DO NOT FIND ANY MERIT IN THE CONTENTION THAT THERE WAS A CASE OF SALE FROM ONE EOU TO ANOTHER. THEREFORE, FOR THE MERE FACT THAT THERE WAS MOVEMENT OF GOODS FROM ONE PLACE TO ANOTHER WITH IN INDIA, IT CANNOT BE TAKEN TO CONSIDER THAT THERE WAS AN EXPORT. IN ORDER TO CL AIM DEDUCTION U/S 10B, IT MUST BE PROVED BY THE ASSESSEE THAT SUCH SALE TRANS ACTION MUST INVOLVE CLEARANCE AT ANY CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT. OTHERWISE, THERE WAS POSSIBILITY THAT GOODS AFTER THE PURCHASE MAY NOT BE EXPORTED AT ALL AND YET THE BENEFIT MAY BE CLAIMED. SINCE IN T HE PRESENT CASE, THE TRANSACTION INVOLVES NO CLEARANCE AT THE CUSTOMS ST ATION, IT CANNOT BE TREATED AS EXPORT OUT OF INDIA. IN THE PRESENT CAS E THERE IS NO EVIDENCE TO SHOW THAT THE GOODS MOVED OUT OF INDIA SO AS TO FAL L WITHIN THE DEFINITION OF EXPORTS. FURTHER, DELIVERING OF THE GOODS TO LOCA L PERSON CANNOT BE CONSIDERED AS EXPORT. IN OUR OPINION, THE CIT(A) CONSIDERED THE ALL RELEVANT FACTS OF THE CASE AND NOT CONSIDERED ANY IRRELEVANT MATERIAL AND THE ITA NOS.238 & 239/H/2009 M/S TULIP GRANITES (P) LTD., HYDERABAD CONCLUSION ARRIVED BY HIM IS NOT PERVERSE AND IS BA SED ON THE FACTS OF THE CASE. THE ORDER OF THE CIT(A) NEED NOT BE SCRUTINI ZED WORD BY WORD MERELY TO FIND OUT WHETHER ALL THE FACTS HAVE BEEN SET OUT BY HIM IN DETAIL OR NOT. THE READING OF THE CIT(A) SHOWS THAT HE HAS TAKEN I NTO ACCOUNT THE RELEVANT FACTS OF THE CASE AND CAME TO RIGHT CONCLUSION. WE CANNOT FIND ANY INFIRMITY IN HIS ORDER. THUS, THE GROUND RAISED BY THE ASSESS EE IS REJECTED. 9. SINCE WE HAVE HELD THAT THERE WAS NO VALID EXP ORT OPERATIONS IN THIS CASE, THE OTHER GROUNDS RAISED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT BOTH THE APPEALS FILED BY THE A SSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N: 21.4. 2011 SD/- SD/- G.C. GUPTA CHANDRA POOJA RI VICE PRESIDENT ACCOUNTANT MEMBE R DATED THE 21 ST APRIL, 2011 COPY FORWARDED TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.103, H.NO.3-6- 542/4, INDIRADEVI NILAYAM, ST.NO.7, HIMAYATNAGAR, HYDERABAD-29. 2. THE ACIT, CIRCLE 2(3), HYDERABAD 3. THE CIT(A) III, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP