M/s Lalitha Impex, Vijayawada V. The ACIT, Circle-2(1), Vijayawada

ITA 246/VIZ/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0644 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Depreciation; TDS; Set aside
• Section: 143(3); 142(1); 80HHC; 10B; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.246/VIZAG/2010 ASSESSMENT YEAR : 2005-06 M/S. LAILA IMPEX VIJAYAWADA ACIT, CIRCLE-2(1) VIJAYAWADA (APPELLANT) VS. (RESPONDENT) PAN NO.AAAFL 7824K APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT PASSED U/S 263 OF THE I.T. ACT ON VARIOUS GROUNDS W HICH ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT IS CONTRARY TO THE FACTS O F THE CASE AND ALSO THE LAW APPLICABLE. 2. THE LD. CIT ERRED IN ASSUMING JURISDICTION U/S 263 OF THE IT ACT, 1961 WITHOUT PRIMA FACIE DEMONSTRATING THAT THE ORD ER OF THE ACIT, CIRCLE-2(1), VIJAYAWADA IS ERRONEOUS AND PREJUDICIA L TO THE INTERESTS OF THE REVENUE. 3. THE LD. CIT ERRED IN DIRECTING THE ASSESSING OFFICE R TO CONSIDER FOR DISALLOWANCE THE CLAIM OF EXEMPTION U/S 10B OF THE ACT AMOUNTING TO RS.11,67,88,992/-. 4. THE LD. CIT ERRED IN DIRECTING THE ASSESSING OFFICE R TO VERIFY THE COMPUTATION OF EXEMPTION U/S 10B IN RESPECT OF INSU RANCE AND FREIGHT CHARGES RESULTING IN A POSSIBLE SHORT COMPU TATION OF EXEMPTION U/S 10B AMOUNTING TO RS.9,02,497/-. 5. THE LD. CIT ERRED IN DIRECTING THE ASSESSING OFFICE R TO VERIFY THE ELIGIBILITY OF THE APPELLANT TO CLAIM EXEMPTION U/S 10B VIS--VIS THE APPROVAL IN TERMS OF S. 14 OF THE INDUSTRIES (DEVELO PMENT & REGULATIONS) ACT, 1951. 6. ANY OTHER GROUND URGED AT THE TIME OF HEARING. 2. BRIEF FACTS BORNE OUT FROM THE RECORD ARE THAT T HE A.O. HAS FRAMED THE ASSESSMENT U/S 143(3) DETERMINING THE TOTAL INCOME AT RS.NIL AFTER ALLOWING THE CLAIM OF EXEMPTION U/S 10B OF RS.11,67,88,992/- . ON VERIFICATION OF 2 RECORDS, THE CIT OBSERVED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON TWO C OUNTS :- 1. WHILE COMPLETING THE ASSESSMENT U/S 143(3) THE ASSE SSEES CLAIM OF RS.11,67,88,992/- WAS WRONGLY ALLOWED U/S 10B OF TH E ACT ON THE GROUND THAT ASSESSEE FIRM WAS ISSUED A LICENSE ON 1.3.1995 TO MANUFACTURE THE DRUGS AND EXPORT LICENSE ON 4.9.1995, HENCE, THE FI RST ASSESSMENT YEAR WAS 1996-97 AND PRIOR TO THAT ASSESSEE CLAIMED DEDU CTION U/S 80HHC FROM ASSESSMENT YEAR 1995-96 AS THE EXPORTER BUT NO T AS MANUFACTURER WITHOUT REALIZING THAT THE ASSESSEE STARTED ITS BUS INESS IN 1994 RELEVANT TO THE ASSESSMENT YEAR 1995-96 AND DEDUCTION U/S 10B I S AVAILABLE FOR 10 YEARS I.E. UPTO ASSESSMENT YEAR 2004-05. 2. WHILE COMPUTING THE DEDUCTION U/S 10B OF THE I.T. AC T, THE ASSESSEE HAS DEDUCTED INSURANCE AND FREIGHT CHARGES AMOUNTING TO RS.29,91,635/- FROM THE EXPORT TURNOVER AS WELL AS THE TURNOVER WHEREAS AS PER THE PROVISIONS OF SECTION 10B, THE INSURANCE AND FREIGHT CHARGES A TTRIBUTABLE TO THE DELIVERY OF EXPORTED ARTICLES OUTSIDE INDIA REQUIRE D TO BE DEDUCTED ONLY FROM THE EXPORT TURNOVER AND NOT FROM TOTAL TURNOVE R. THEREFORE, THE INCORRECT CALCULATION OF DEDUCTION U/S 10B WAS ALLO WED BY THE A.O. 3. THE CIT ACCORDINGLY ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AND IN RESPONSE THERETO THE WRITTEN SUBMISSIONS WERE FILED BEFORE THE CIT STATING THEREIN ALL RELEVANT FACTS RELATING TO CLAIM OF DED UCTION U/S 10B OF THE I.T. ACT. FOR THE SAKE OF REFERENCE, WE EXTRACT THE WRI TTEN SUBMISSIONS FILED BY THE ASSESSEES BEFORE THE CIT AS UNDER: A) THAT IT STARTED ITS BUSINESS ACTIVITY DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1995-96 AND THAT THE MANUFACTUR ING ACTIVITY WAS COMMENCED IN THE NEXT PREVIOUS YEAR WHICH IS RELEVA NT TO THE ASSESSMENT YEAR 1996-97; B) THAT THE CRITERION FOR RECKONING THE PERIOD OF LIMI TATION LAID DOWN BY SEC. 10B OF THE ACT WAS THE COMMENCEMENT OF THE MAN UFACTURING ACTIVITY, BUT NOT FOR THE BUSINESS ACTIVITY; C) THAT FOR THE ASSESSMENT YEAR 1995-96, IT GOT THE BE NEFIT OF CLAIM OF DEDUCTION U/S 80HHC OF THE ACT AS A MERCHANT EXPORT ER, BUT NOT AS A MANUFACTURER EXPORTER; AS IS EVIDENCED BY THE RECOR D; 3 D) THAT IT CONVERTED ITS EXISTING DOMESTIC TARIFF AREA (DTA) UNIT INTO 100 PERCENT EXPORT ORIENTED UNIT IN THE YEAR, 2000 AS P ER EXPORT IMPORT POLICY 1997-2002 AND THE ELIGIBILITY PERIOD FOR THE SE CONVERTED UNITS (DTA TO 100% EXPORT ORIENTED UNIT) HAS BEEN CLARIFI ED BY THE CBDT IN ITS CIRCULAR NO.1/2005, DATED 6.1.2005, ACCORDING T O WHICH THE DEDUCTION SHALL BE AVAILABLE ONLY FROM THE YEAR IN WHICH IT HAS GOT APPROVAL AS 100% EOU AND SHALL BE ELIGIBLE ONLY FOR THE UNEXPIRED (REMAINING) PERIOD OF TEN CONSECUTIVE ASSESSMENT YE ARS IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCTION OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AS A DTA UNIT; E) THAT IN VIEW OF GETTING THE BENEFIT OF RELIEF U/S 8 0HHC FOR THE INITIAL ASSESSMENT YEAR, VIZ., A.Y. 1995-96 AS A MERCHANT E XPORTER ONLY; IT SHOULD BE DEEMED TO HAVE OBTAINED THE BENEFIT OF RE LIEF U/S 80HHC AND SEC. 10B (PUT TOGETHER) FOR AND FROM THE ASSESS MENT YEAR 1996- 97; IN THAT IT GOT THE BENEFIT OF 80HHC FROM THE A. Y. 1996-97 TO 2000- 01 AS A MANUFACTURING UNIT AND FROM THE A.Y. 2001-0 2 TO THE A.Y. 2005-06 U/S 10B AS A MANUFACTURING UNIT AS PER THE DETAILS GIVEN AT PAGE 3 OF ITS EXPLANATORY LETTER CITED ABOVE; F) THAT IT GOT LICENSE TO MANUFACTURE AND SALE OF HERB AL EXTRACTS ON 1.3.1995 FROM THE DRUG LICENSING AUTHORITY AND SUBS EQUENTLY THE CONTROLLER OF IMPORTS AND EXPORTS HAS ISSUED LICENS E AS MANUFACTURER EXPORTER ON 4.9.1995; AND PRIOR TO THAT, IT GOT `M ERCHANT EXPORTER LICENSE ONLY AND CONSEQUENT TO THE ISSUANCE OF THE LICENSE AS ABOVE, IT STARTED `MANUFACTURING AND BECAME A `MANUFACTURER EXPORTER AFTER 4.9.1995 AS PER COPIES OF THE ABOVE LICENSES ANNEX ED THEREWITH; G) THAT THERE WAS ALSO NO EXPENDITURE UNDER THE HEAD POWER AND FUEL FOR THE ASSESSMENT YEAR 1995-96; H) THAT THERE WAS NO CLAIM OF DEPRECIATION ON `PLANT A ND MACHINERY SINCE ITS `PLANT AND MACHINERY WAS PUT TO USE IN T HE ASSESSMENT YEAR 1996-97 ONLY; I) THAT FOR THE ASSESSMENT YEAR 1995-96, IT EXPORTED G OODS WORTH RS.18.58 CRORES WITH BATCH NUMBERS ON THE STRENGTH OF 40 INVOICES; AND G.R. COPIES SUBMITTED TO THE RBI FOR THESE 40 IT EMS OF EXPORTS CONTAINED THE NAMES OF THE CONCERN, WHICH MANUFACTU RED THE GOODS AND THE NAME OF THE CONCERN, WHICH MARKETED THE GOO DS AND AS PER COPIES OF THOSE GR COPIES FILED THEREWITH; IT COULD BE NOTICED THAT THE LABELS ATTACHED TO THE INVOICES, SHOWS M/S. LAILA IN TERNATIONAL AS `MANUFACTURER WHILE THE ASSESSEE WAS SHOWN AS MARK ETING CONCERN; J) THAT THE ENTIRE PROCESSING ACTIVITY WAS ENTRUSTED T O M/S. LAILA INTERNATIONAL ON JOB/CONTRACT WORK BASIS AND TAX WAS ALSO DEDUCTED FROM SUCH PAYMENTS MADE TO THE ABOVE CONCERN AND IT WAS REMITTED TO THE GOVT. A/C AS COULD BE EVIDENCED BY THE ORIGINAL CHALLAN ANNEXED TO THE RETURN OF INCOME AND COPIES FILED AGAIN WITH TH E ABOVE REPLY; 4 K) THAT THE JOB WORK RECEIPTS WERE ALSO ADMITTED BY M/ S. LAILA INTERNATIONAL FOR THE ASSESSMENT YEAR 1995-96 AND TH E TDS WAS GIVEN CREDIT IN ITS CASE FOR THE A.Y. 1995-96; THAT IT MA Y BE APPRECIATED THAT THE TDS REMITTANCE MADE ON 24.3.1995 CANNOT BE FABR ICATED NOW, AS AN AFTER THOUGHT, TO CREATE FRESH EVIDENCE; L) THAT IN TERMS OF THE DECISION OF THE HONBLE APEX C OURT IN THE CASE OF COLLECTOR OF CENTRAL EXCISE VS. M/S. M.M. KHAMBATWA LA; IT COULD NOT BE SAID TO BE THE MANUFACTURER BY ITSELF FOR TH E A.Y. 1995-96 GOING BY THE FACT THAT AS IN THE CITED CASE, THE ASSESSEE SUPPLIED RAW MATERIAL, PACKING MATERIAL ETC. TO THE CONTRACTOR, VIZ., M/S. LAILA INTERNATIONAL FOR THE PURPOSE OF MANUFACTURE OF REQU IRED GOODS AND SUCH MANUFACTURED GOODS WERE EXPORTED BY IT WITH TH E RBI APPROVAL; AND IN THESE CIRCUMSTANCES, IT CANNOT BE TREATED AS A DEEMED MANUFACTURER FOR THE A.Y. 1995-96; THUS THE ASSESSEE-FIRM PLEADS THAT IN VIEW OF THE A BOVE FACTUAL AND LEGAL POSITION PREVALENT IN ITS CASE, IT SHOULD BE DEEMED THAT THERE WAS NO MANUFACTURING ACTIVITY CARRIED ON BY IT IN THE INIT IAL ASSESSMENT YEAR VIZ., A.Y. 1995-96 AND THEREBY THE CLAIM MADE BY IT U/S 1 0B OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR 2005-06 SHOULD BE CONSIDER ED TO BE ALLOWABLE AND AS THE CLAIM WAS IN ORDER, IT IS NOT JUSTIFIABL E TO INVOKE THE PROVISIONS OF SEC.263 FOR WITHDRAWAL OF THE RELIEF UNDER SEC.1 0B OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR VIZ. A.Y. 2005-06. IT ACC ORDINGLY SOUGHT FOR DROPPING THE PROCEEDINGS U/S 263 OF THE ACT. 3. BEING NOT CONVINCED WITH THE EXPLANATIONS FURNIS HED BY THE ASSESSEE, THE CIT SET ASIDE THE ORDER OF A.O. AND DIRECTED HI M TO RE-EXAMINE THE ISSUE IN TERMS INDICATED IN HIS ORDER. 4. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT DURING THE COURSE OF ASSESSMENT PR OCEEDINGS PROPER INQUIRIES WERE MADE BY THE ASSESSING OFFICERS WITH REGARD TO THE GENUINENESS OF THE CLAIM RAISED U/S 10B OF THE I.T. ACT. WHATEV ER DOUBTS HAVE ARISEN IN THE MIND OF THE CIT WERE RAISED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY ISSUING QUERIES U/S 142(1) OF THE AC T. THE QUERIES WERE DULY REPLIED BY THE ASSESSEE. THE QUERY RAISED BY THE A .O. AND THE REPLY OF THE ASSESSEES ARE AVAILABLE AT PG.NOS.72 TO 75 AND 81 T O 92 OF THE COMPILATION OF THE ASSESSEES. THROUGH THESE QUERIES, ASSESSEE WAS SPECIFICALLY AS KED TO JUSTIFY ITS CLAIM OF EXEMPTION U/S 10B OF THE I.T. ACT IN THE LIGHT OF THE FACT THAT HE HAS STARTED HIS BUSINESS AND HAD BEEN CLAIM ING DEDUCTION U/S 80HHC SINCE ASSESSMENT YEAR 1995-96. IN RESPONSE THERETO, THE ASSESSEE HAS EXPLAINED THAT FOR THE ASSESSMENT YEAR 1995-96, THE ASSESSEE FIRM EXPORTED 5 GOODS AND AVAILED BENEFIT U/S 80HHC AS TRADER EXPOR TER AND NOT AS MANUFACTURER EXPORTER. THE DEDUCTION U/S 10B CAN O NLY BE GIVEN TO THE 100% MANUFACTURING EXPORT UNITS AND NOT TO THE TRAD E EXPORT UNITS. THE ASSESSEE STARTED ITS MANUFACTURING ACTIVITIES AFTER OBTAINING A MANUFACTURE EXPORTER LICENSE FROM THE ASSESSMENT YEAR 1996-97, AS SUCH THE CLAIM AVAILABLE U/S 10B IS UP TO ASSESSMENT YEAR 2005-06. IN THE ASSESSMENT YEAR 1995-96, THE GOODS WERE MANUFACTURED BY M/S. LAILA INTERNATIONAL, A SISTER CONCERN OF THE ASSESSEES AND EXPORTED BY THE ASSESS EES AND THESE FACTS CAN BE SEEN FROM THE EXPORT DOCUMENTATION. DETAILED RE PLIES WERE FILED BEFORE THE ASSESSING OFFICER AND BEING CONVINCED WITH IT, THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF EXEMPTION U/S 10B OF THE ASSES SEES. THE LD. COUNSEL FOR THE ASSESSEES FURTHER CONTENDED THAT IT IS A SE TTLED POSITION OF LAW THAT ASSESSING OFFICER IS NOT REQUIRED TO DISCUSS EACH A ND EVERY ISSUE OR THE CLAIM RAISED BY THE ASSESSEES ON WHICH HE IS SATISFIED. 5. THE LD. COUNSEL FOR THE ASSESSEES FURTHER INVITE D OUR ATTENTION TO THE DETAILS OF EXPORT PERFORMANCE FOR THE FINANCIAL YEA R 1994-95 RELEVANT TO THE ASSESSMENT YEAR 1995-96, THE INVOICES RAISED AND TH E LABELS AFFIXED IN THE CONSIGNMENT, AVAILABLE AT PG.NO.18 TO 43 OF THE COM PILATION OF THE ASSESSEES. FROM THESE DOCUMENTS IT IS ABUNDANTLY CLEAR THAT DU RING THE ASSESSMENT YEAR 1995-96 WHATEVER CONSIGNMENTS WERE EXPORTED IT WERE MANUFACTURED BY LAILA INTERNATIONAL AND MARKETED BY ASSESSEES. THES E FACTS WERE ABUNDANTLY DESCRIBED ON THE LABELS PASTED ON THE CONSIGNMENT. 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT ASSESSEE GOT THE LICENSE OF MANUFACTURER EXPORTER ONLY ON 4.9.19 95 FROM THE IMPORT TRADE CONTROL AUTHORITIES. THEREFORE WITHOUT HAVING THIS LICENSE, ASSESSEE COULD NOT MANUFACTURE ANY ITEMS FOR ITS EXPORT. THE STATUS O F 100% EXPORT ORIENTED UNIT WAS ALSO CONFERRED TO THE ASSESSEE IN THE YEAR 2000 AND THEREAFTER THE ASSESSEE BECAME ELIGIBLE TO CLAIM DEDUCTION U/S 10B OF THE ACT FOR THE REMAINING PERIOD OF 10 YEARS. SINCE THE ASSESSEE HA S STARTED ITS MANUFACTURING ACTIVITIES IN A.Y. 1996-97, HE WAS EL IGIBLE FOR DEDUCTION U/S 10B UPTO THE ASSESSMENT YEAR 2005-06 WHICH IS THE I MPUGNED ASSESSMENT YEAR. 6 7. SO FAR AS CALCULATION OF DEDUCTION U/S 10B OF TH E ACT IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS RIGHTLY REDUCED THE FREIGHT, TELECOM CHARGES OR THE INSURAN CE CHARGES ATTRIBUTABLE TO THE DELIVERY OF ARTICLES FROM THE EXPORT TURNOVER A ND ALSO FROM THE TOTAL TURNOVER IN VIEW OF THE VARIOUS ORDERS OF THE TRIBU NAL. THE CIT HIMSELF HAS ADMITTED IN HIS ORDER THAT A SIMILAR VIEW WAS TAKEN BY THE CHENNAI SPECIAL BENCH IN THE CASE OF ITO VS. SAK SOFT LTD. REPORTED IN 313 ITR 353 AS SUCH THE CALCULATION ACCEPTED BY THE AO CANNOT BE CALLED TO BE INCORRECT ON THE BASIS OF THE SURMISES OR THE PRESUMPTION OF THE CIT THAT THIS ORDER OF THE TRIBUNAL MAY NOT BE ACCEPTED BY THE REVENUE AUTHORI TIES. IN SUPPORT OF HIS CONTENTIONS THE LD. COUNSEL FOR THE ASSESSEE HAS RE LIED UPON THE FOLLOWING JUDGEMENTS: 1. CIT VS. DEEPAK MITTAL IN THE HIGH COURT OF PUNJAB & HARYANA 37 DTR (P&H)8 2. PPC BUSINESS & PRODUCTS (P) LTD. VS. CHIEF CIT IN T HE HIGH COURT OF DELHI 37 DTR (DEL)11. 3. ITO VS. SAK SOFT LTD. IN ITAT CHENNAI SPECIAL BENCH 313 ITR 353 8. THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEAV Y RELIANCE UPON THE ORDER OF THE CIT. MR. SARKAR, LD. CIT (DR) EMPHATI CALLY ARGUED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE IN HI S ORDER AND CIT HAS RIGHTLY EXAMINED THE CLAIM RAISED UNDER SECTION 10B OF THE ACT AND HAVING NOTICED THE INFIRMITY THEREIN RIGHTLY DIRECTED THE A.O. TO RE-EXAMINE THE CLAIM OF THE ASSESSEES IN TERMS INDICATED IN HIS ORDER. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACE D ON RECORD, WE FIND THAT UNDISPUTEDLY ASSESSEE HAD STARTED ITS BUSINESS OF E XPORT FROM THE ASSESSMENT YEAR 1995-96. IT IS ALSO EVIDENT FROM THE RECORD TH AT IN THE ASSESSMENT YEAR 1995-96, ASSESSEE WAS NOT HAVING ANY MANUFACTURING LICENSE. THIS LICENSE WAS GIVEN TO THE ASSESSEE IN ASSESSMENT YEAR 1996-9 7. A COPY OF THE SAID LICENSE IS PLACED ON RECORD AT PG.NO.63 TO 65 OF TH E COMPILATION OF THE ASSESSEE. THIS LICENSE WAS GIVEN ON 4.9.1995. THE REFORE, THE MANUFACTURING 7 ACTIVITIES COULD ONLY BE COMMENCED AFTER 4.9.1995 A ND PRIOR TO THAT ASSESSEE WAS THE MERCHANT/TRADE EXPORTER ONLY. IT IS ALSO E VIDENT FROM THE RELEVANT PROVISIONS OF THE SECTION 10B OF THE ACT THAT EXEMP TION U/S 10B IS ONLY ELIGIBLE TO THOSE ASSESSEES WHO ARE 100% EXPORT ORI ENTED UNITS INVOLVED IN MANUFACTURED EXPORT ACTIVITIES. THIS EXEMPTION IS AVAILABLE TO THE ASSESSEES ONLY UPTO 10 YEARS. IF THE ASSESSEE HAS AVAILED THE BENEFIT OF DEDUCTION U/S 80HHC IN THE EARLIER YEARS BEFORE IT ATTAINED THE S TATUS OF THE 100% EXPORT ORIENTED UNIT, THE DEDUCTION U/S 10B IS AVAILABLE O NLY FOR THE BALANCE PERIOD OF 10 YEARS. THIS PROPOSITION OF LAW WAS NOT DISPUTED BY THE REVENUE. IN THE EARLIER YEARS ASSESSEE HAS CLAIMED DEDUCTION U/S 80 HHC OF THE ACT. THE SOLE DISPUTE BEFORE US IS WHETHER THE ASSESSEE HAS START ED ITS MANUFACTURING ACTIVITIES IN THE ASSESSMENT YEAR 1995-96. IN THIS REGARD, THE ASSESSING OFFICER HAS RAISED VARIOUS QUERIES DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND THESE QUERIES WERE DULY REPLIED BY THE ASSESSEES BY STATING THAT FOR THE ASSESSMENT YEAR 1995-96, THE FIRM EXPO RTED GOODS AND AVAILED BENEFIT U/S 80HHC AS A TRADER EXPORTER AND NOT AS A MANUFACTURER EXPORTER. IN THAT YEARS GOODS WERE MANUFACTURED BY M/S. LAILA INTERNATIONAL, SISTER CONCERN OF THE ASSESSEES AND WERE EXPORTED BY THE A SSESSEES. IN SUPPORT OF THESE CONTENTIONS ASSESSEE HAS PLACED THE EXPORT DO CUMENTATION WHICH CLEARLY SHOWS THAT THESE GOODS WERE MANUFACTURED BY M/S. LAILA INTERNATIONAL AND ARE MARKETED BY THE ASSESSEE I.E. LAILA IMPEX. THE DETAILED REPLY FILED BY THE ASSESSEE EXPLAINING ALL THESE FACTS IS AVAIL ABLE ON RECORD AT PG.NOS.87 TO 92 OF THE COMPILATION OF THE ASSESSEES. 10. FROM A CAREFUL PERUSAL OF THE VARIOUS QUERIES R AISED BY THE ASSESSING OFFICER, WE FIND THAT THE QUERY WITH REGARD TO THE CLAIM OF EXEMPTION U/S 10B WAS NOT ONLY RAISED ONE TIME, BUT IT WAS REPEATEDLY RAISED BY THE A.O. AND THE ASSESSEE HAS FURNISHED THE DETAILED REPLY TO TH AT QUERY ALONG WITH THE EVIDENCE IN ORDER TO PROVE THAT THE MANUFACTURING A CTIVITIES STARTS FROM ASSESSMENT YEAR 1996-97 AND DEDUCTION U/S 10B IS AV AILABLE FOR THE ASSESSMENT YEAR 2005-06. WE HAVE ALSO CAREFULLY EX AMINED THE EXPORT DOCUMENTATION AVAILABLE AT PG.18 TO 25 OF COMPILATI ON OF THE ASSESSEES AND FROM THESE DOCUMENTS IT IS EVIDENTLY CLEAR THAT THE GOODS WERE MANUFACTURED BY LAILA INTERNATIONAL AND ARE MARKETED BY LAILA IMP EX. NOTHING HAS BEEN 8 BROUGHT BY THE REVENUE DURING THE COURSE OF HEARING OF THE APPEAL TO ESTABLISH THAT IN THE ASSESSMENT YEAR 1995-96, THE ASSESSEE WAS ENGAGED IN MANUFACTURING ACTIVITIES. THE CIT HAS SIMPLY PRESU MED THAT SINCE THE ASSESSEE GOT THE GOODS MANUFACTURED FROM LAILA INTE RNATIONAL, THE ASSESSEE BE CONSIDERED TO BE THE DEEMED MANUFACTURER EVEN IN THE ASSESSMENT YEAR 1995-96. WE DO NOT FIND FORCE IN THIS OBSERVATION OF THE CIT BECAUSE DURING THE ASSESSMENT YEAR 1995-96, ASSESSEE EVEN DID NOT OBTAIN THE MANUFACTURING LICENSE FROM THE EXPORT TRADE CONTROL AUTHORITIES. THEREFORE WITHOUT HAVING A LICENSE FOR MANUFACTURING GOODS, T HE ASSESSEE CANNOT CLAIM TO HAVE A STATUS OF THE MANUFACTURE EXPORTER. THE COPY OF THE LICENSE IN THIS REGARD IS AVAILABLE AT PG. 63 OF THE COMPILATION OF THE ASSESSEES. IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAS ACCEPTED THE C LAIM OF THE ASSESSEES WITHOUT MAKING NECESSARY VERIFICATION. IN THIS CAS E A DETAILED EVIDENCE WERE FILED BEFORE THE ASSESSING OFFICER IN RESPONSE TO V ARIOUS QUERIES RAISED IN THIS REGARD AND IT APPEARS THAT AFTER HAVING EXAMINED AL L THESE DOCUMENTS, THE ASSESSING OFFICER WAS CONVINCED WITH THE CLAIM OF T HE ASSESSEES RAISED U/S 10B OF THE ACT. IT IS ALSO A SETTLED POSITION OF L AW THAT THE ASSESSING OFFICER IS NOT REQUIRED TO DISCUSS EACH AND EVERY ISSUE IN THE ASSESSMENT ORDER IF HE IS SATISFIED WITH THE CLAIM OF THE ASSESSEES. THE REQ UIREMENT OF LAW IS ONLY TO EXAMINE WHETHER THE ASSESSING OFFICER HAS APPLIED H IS MIND OR NOT BEFORE ALLOWING THE CLAIM OF THE ASSESSEES. IF HE HAS DULY APPLIED HIS MIND AND PROPERLY EXAMINED THE CLAIM OF THE ASSESSEES, THE A SSESSMENT ORDER PASSED BY THE A.O. CANNOT BE REVISED U/S 263 OF THE ACT BY THE CIT AND THE CIT CANNOT THRUST HIS VIEWS UPON THE A.O. 11. SO FAR AS OTHER ISSUES REGARDING EXCLUSION OF T HE FREIGHT CHARGES OR INSURANCE CHARGES FROM THE EXPORT TURNOVER AND FROM TOTAL TURNOVER IS CONCERNED, WE FIND THAT CIT HIMSELF HAS ADMITTED TH AT THIS EXCLUSION WAS DONE IN ACCORDANCE WITH THE ORDER OF THE SPECIAL BE NCH OF TRIBUNAL CHENNAI IN THE CASE OF ITO VS. SAK SOFT LTD. (SUPRA). HE HAS DISALLOWED THE CLAIM OF THE ASSESSEES ON THE PREMISE THAT IT IS NOT CLEAR WHETH ER THE DECISION OF THE TRIBUNAL WAS ACCEPTED BY THE DEPARTMENT. IT IS TOT ALLY IRRELEVANT WHETHER THE DEPARTMENT ACCEPTS THE ORDER OF THE TRIBUNAL OR NOT . THE RELEVANT FACTOR IS THAT WHETHER THE ORDER PASSED BY THE TRIBUNAL IS UP SET OR REVERSED BY THE 9 APPELLATE AUTHORITIES. IF IT IS NOT REVERSED IT HOL DS THE FIELD AND THE REVENUE AUTHORITIES ARE BOUND TO FOLLOW THE ORDER OF THE TR IBUNAL AND IF THE ASSESSING OFFICER DECIDES THE ISSUE IN THE LIGHT OF THE RATIO LAID DOWN BY THE TRIBUNAL HIS ORDER CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE ONLY FOR THE SAKE THAT HE HAS FOLLOWED THE ORDER OF THE TRIBUNAL WHICH WAS NOT ACCEPTED BY THE DEPARTMENT. 12. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND C IRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT ASSESSING OFF ICER HAS ADJUDICATED BOTH THE ISSUES AFTER APPLYING HIS MIND AND AFTER MAKING A DUE VERIFICATION OF THE FACTS. THEREFORE HIS ORDER CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE THEREFORE, SET ASI DE THE ORDER OF THE CIT. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 29.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 29 TH JUNE, 2010 COPY TO 1 M/S. LAILA IMPEX, 40-15-14, BRINDAVAN COLONY, LABB IPET, VIJAYAWADA-10. 2 ACIT, CIRCLE-2(1), VIJAYAWADA 3 THE CIT, VIJAYAWADA 4 THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM