DCIT, Jaipur V. NATURAL SLATE AND SAND STONES EXPORTS PVT. LTD., Jaipur

ITA 244/JPR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3560 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHERI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80HHC; 10B; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ IN ITA NO. 244/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE DY. COMMISSIONER OF INCOME - TAX, CIRCLE-3, JAIPUR. CUKE VS. M/S. NATURAL SLATE AND SAND STONES EXPORTS PVT. LTD., 104, NICE & NATURAL HOUSE, MAHADEV NAGAR, GANDHI PATH, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/TAN NO. AAACN 4159 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHERI (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE (NOTICE RETURNED) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.05.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10.05.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20 TH JANUARY, 2017 OF LD. CIT (A)-1, JAIPUR FOR THE ASSESSMENT Y EAR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 10,83,781/- MADE U/S 10B. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN APPLYING JUDGMENT OF H ONBLE APEX COURT IN THE CASE OF M/S. YOKOGAWA INDIA LTD. 2 ITA NO. 244/JP/2017 M/S. NATURAL SLATE AND SAND STONES EXPORTS P. LTD. 2. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE DESP ITE VARIOUS NOTICES ISSUED THROUGH RPAD. IT TRANSPIRED FROM THE RECORD THAT T HE NOTICES ISSUED TO THE ASSESSEE HAVE BEEN RECEIVED BACK WITH THE POSTAL REMARKS THA T THE ADDRESSEE HAVE LEFT. ACCORDINGLY, WE PROPOSE TO HEAR AND DISPOSE OFF THE DEPARTMENTS APPEAL EX PARTE. 3. WE HAVE HEARD THE LD. D/R AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY DISPUTE IN THIS CASE IS REGARDING CLAIM OF DEDUCTION UNDER SECTION 10B PRIOR TO SETTING OFF OF LOSSES OF NON EOU UNITS AGAINST THE PROFITS OF EOU UNITS. THE ASSESSEE IS A COMPANY DERIVING INCOME FROM MANU FACTURING AND EXPORT OF SAND STONES AND SLATE PRODUCTS. THE ASSESSEE IS MAINTAI NING REGULAR BOOKS OF ACCOUNTS AND THE TAX AUDIT REPORT UNDER SECTION 44AB OF THE IT ACT CONTAINING QUANTITATIVE DETAILS WAS FILED ALONG WITH RETURN OF INCOME. THE ASSESSEE IS HAVING 2 EOU UNITS AND 2 NON EOU UNITS. THE PROFIT & LOSS ACCOUNT FOR EOU AND NON EOU UNITS WERE PREPARED BY THE ASSESSEE SEPARATELY. THE ASSESSEE C LAIMED DEDUCTION UNDER SECTION 10B IN RESPECT OF THE PROFITS OF EOU UNITS. HOWEVER , THE AO DISALLOWED THE CLAIM OF THE ASSESSEE DUE TO THE REASON THAT THE LOSS FROM N ON EOU UNITS WAS TO BE SET OFF FIRST AGAINST THE PROFITS OF EOU UNITS. ON APPEAL, THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., 391 ITR 274 (SC). THE LD. D/R HAS HEAVILY RELIED UPON THE ORDER OF THE AO. HOWEVER, WE FIND THAT TH E ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS COVERED BY THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. (SUPRA) WHEREIN THE HON BLE SUPREME COURT HELD IN PARA 12 TO 18 AS UNDER :- 3 ITA NO. 244/JP/2017 M/S. NATURAL SLATE AND SAND STONES EXPORTS P. LTD. 12. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED AND TH E PROVISIONS OF SECTION 10A AS IT STOOD PRIOR TO THE AMENDMENT MADE BY FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001; THE AMENDED SECTION 10A THEREAFTER AND ALSO THE AMENDMENT MADE BY FINANCE ACT, 2003 WITH RETROSPECT IVE EFFECT FROM 1.4.2001. 13. THE RETENTION OF SECTION 10A IN CHAPTER III OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGE STIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDED BY THE UN-AMENDED SECTION. THE TR UE AND CORRECT PURPORT AND EFFECT OF THE AMENDED SECTION WILL HAVE TO BE C ONSTRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN CHAPTER III. THE INTRODUCTION OF THE WORD 'DEDUCTION' IN SECTION 10A BY THE AMENDMENT, IN THE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF TH E SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION 10A AS ALREADY DISCUSSED, I T HAS TO BE UNDERSTOOD THAT THE SECTION EMBODIES A CLEAR ENUNCIATION OF THE LEG ISLATIVE DECISION TO ALTER ITS NATURE FROM ONE PROVIDING FOR EXEMPTION TO ONE PROV IDING FOR DEDUCTIONS. 14. THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS 'EXEMPT ION' AND 'DEDUCTION', THOUGH BROADLY MAY APPEAR TO BE THE SAME I.E. IMMUN ITY FROM TAXATION, THE PRACTICAL EFFECT OF IT IN THE LIGHT OF THE SPECIFIC PROVISIONS CONTAINED IN DIFFERENT PARTS OF THE ACT WOULD BE WHOLLY DIFFEREN T. THE ABOVE IMPLICATIONS CANNOT BE MORE OBVIOUS THAN FROM THE CASE OF CIVIL APPEAL NOS. 8563/2013, 8564/2013 AND CIVIL APPEAL ARISING OUT OF SLP(C) NO . 18157/2015, WHICH HAVE BEEN FILED BY LOSS MAKING ELIGIBLE UNITS AND/OR BY NON-ELIGIBLE ASSESSEES SEEKING THE BENEFIT OF ADJUSTMENT OF LOSSES AGAINST PROFITS MADE BY ELIGIBLE UNITS. 15. SUB-SECTION 4 OF SECTION 10A WHICH PROVIDES FOR PR O RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARIS ING OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE AMENDMENT . PROFITS OF AN ELIGIBLE UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENT ER INTO THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS' IN CHAPTER IV AND DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SECTION 6 OF SECTION 10A, AS AMENDED BY THE FINANCE ACT OF 2003, GRANTING THE BE NEFIT OF ADJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION ETC. COMMENCING FROM THE YEAR 2001-02 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIR TUALLY WORKS AS A DEDUCTION WHICH HAS TO BE WORKED OUT AT A FUTURE POINT OF TIM E, NAMELY, AFTER THE EXPIRY OF PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERE NCE TO DEDUCTION UNDER SECTION 10A IN CHAPTER VI OF THE ACT CAN BE UNDERST AND BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPETITION OF WHAT HAS ALREADY BEEN PROVIDED IN SECTION 10A. THE PROVISION S OF SECTIONS 80HHC AND 80HHE OF THE ACT PROVIDING FOR SOMEWHAT SIMILAR DED UCTIONS WOULD BE WHOLLY IRRELEVANT AND REDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF OPERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE SAID PROVISIONS OF THE ACT I.E. SECTION 80HHC AND 8 0HHE, DESPITE THE AMENDMENT OF SECTION 10A, IN OUR VIEW, INDICATES TH AT SOME ADDITIONAL BENEFITS TO ELIGIBLE SECTION 10A UNITS, NOT CONTEMP LATED BY SECTIONS 80HHC AND 80HHE, WAS INTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE 4 ITA NO. 244/JP/2017 M/S. NATURAL SLATE AND SAND STONES EXPORTS P. LTD. UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND T HAT THE STAGES FOR WORKING OUT THE DEDUCTIONS UNDER SECTION 10A AND 80HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT. THIS IS THE NEXT ASPECT OF THE CASE WHICH WE WOULD NOW LIKE TO TURN TO. 16. FROM A READING OF THE RELEVANT PROVISIONS OF SECTI ON 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED THEREI N IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKING S OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DATED 9.8.2000 WHICH STATES IN PAR AGRAPH 15.6 THAT, 'THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPEC IFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF TH E ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVISION.' 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIR ST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AN D THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDI ATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOUL D BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THERE FORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FR OM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTA L INCOME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORE SAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL I NCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AN D THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTI ON, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAN D DISPOSED OF ACCORDINGLY. 5 ITA NO. 244/JP/2017 M/S. NATURAL SLATE AND SAND STONES EXPORTS P. LTD. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF LD. CIT (A). THE SAME IS UPHELD. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/05/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 10/05/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT, CIRCLE-3, JAIPUR. 2. THE RESPONDENT M/S. NATURAL SLATE AND SAND STON ES EXPORTS PVT. LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 244/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 6 ITA NO. 244/JP/2017 M/S. NATURAL SLATE AND SAND STONES EXPORTS P. LTD.