The ITO, Ward-6(3), Surat V. M/s. Raj Technologies, Surat

ITA 2523/AHD/2011

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1929 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: P M JAGASHETH
• Keywords: Services rendered outside India; Deemed export
• Section: 10AA; 10B

Judgement Text

ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 1 OF 10 INCOM TAX APPELLATE TRIBUNAL SURAT-BENCH-SURAT BEFORE SHRI C .M. GARG, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER ITA NO.1920/AHD/2010/SRT & ITA NO.2523/AHD/2011/SRT ASSESSMENT YEAR: 2007-08 & 2008-09 INCOME TAX OFFICER , WARD 6(3), SURAT. V S . M/S. RAJ T TECHNOLOGIES 6/2035, BHOJABHAI NI SHERI, MAHIDHARPURA, SURAT. PAN: AAIFR 4256M APPELLANT /RESPONDENT /ASSESSEE BY SHRI P. M. JAGASHETH, CA /REVENUE BY SHRI O. P. MEENA. SR. D.R. / DATE OF HEARING: 08.02.2018 /PRONOUNCEMENT DATE 1 5 . 03 .2018 ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE TWO SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT (IN SHORT THE CIT (A)) DATED 10.02.2010 & 28.06.2011 PERTAINING TO ASSESSMENT YEAR 2007-08 AND 2008-09 RESPECTIVELY, WHICH IN TURN HAS ARISEN FROM THE SEPARATE ORDER DATED 31.12.2009 AND 30.12.2010 RESPECTIVELY PASSED BY THE ITO WARD 6(2)SURAT (IN SHORT THE AO) UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. BOTH THE APPEALS IN I.T.A. NO. 1920/AHD/2010 & 2523/AHD/2011 WERE HERD TOGETHER AND COMMON ORDER BEING PASSED IN RESPECT OF BOTH ASSESSMENT YEARS FOR THE SAKE OF BREVITY AND CONVENIENCE. 3. GROUND NO. 1& 2 TAKEN FOR BOTH ASSESSMENT YEARS ON SOLITARY ISSUE WHICH STATES THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A)-IV, SURAT HAS ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 2 OF 10 ERRED IN DELETING THE ADDITION OF RS.1,30,45,076/- FOR A.Y. 2007-08 AND RS.37,06,786/- FOR A.Y. 2008-09 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CLAIM OF DEDUCTION UNDER SECTION 10AA AND HENCE, THE CIT (A)-IV OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME ON 31.10.2007 FOR A.Y. 2007-08 AND ON 28.09.2008 FOR A.Y. 2008-09 DECLARING TOTAL INCOME OF RS.5,968/- AND RS.28,000/- RESPECTIVELY AND CLAIMED DEDUCTION OF RS.1,30,47,424/- IN A.Y. 2007-08 AND 37,06,786 IN A.Y. 2008-09 UNDER SECTION 10AA. THE ASSESSEE-FIRM IS LOCATED IN SURAT SEZ AND HAS STARTED ITS PRODUCTION AFTER 01.04.2006, AND OBTAINED CERTIFICATE TO OPERATE UNDER SEZ AND DOING ACTIVITY OF MANUFACTURING OF LASER PROCESSING MACHINE IN ITS OWN UNIT. THE ASSESSEE-FIRM HAS CLAIMED DEDUCTION BEING THE PROFITS OF CONCERN SITUATED AND OPERATING UNDER THE SURAT SPECIAL ECONOMIC ZONE. THE AO NOTED THAT THE ASSESSEE HAS SOLD THE STOCK OF FURNISHED GOODS TO VARIOUS LOCAL UNITS, HENCE, NOT MADE DIRECT EXPORTS. THEREFORE, THE PROFIT EARNED AND CLAIMED AS EXPORT PROFIT IS PRIMA- FACIE IS INCORRECT. THE ASSESSEE MADE SALES TO ANOTHER EPCG LICENSE HOLDER AND EOU UNITS AND TREATED THIS AS EXPORT TURNOVER UNDER SECTION 10AA OF THE ACT. IT WAS CONTENDED THAT THE SALE OF GOODS BY ONE EOU UNIT TO ANOTHER WAS DEEMED AS EXPORT AND THEREFORE, THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 10AA OF THE ACT. THIS CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO WHO HAS OPINED THAT EXPORT TURNOVER WAS DEFINED IN THE INCOME TAX ACT,1961 AND THIS DID NOT INCLUDE SALES TO EPCG AND EOU UNITS. HE CONCLUDED THAT THE THERE WAS NO EXPORT OUT OF INDIA AND NO CONVERTIBLE FOREIGN EXCHANGE HAD BEEN RECEIVED. THE ASSESSING OFFICER, ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 3 OF 10 THEREFORE, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM UNDER SECTION 10AA OF THE ACT. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT (A). IT WAS CONTENDED THAT THE SUPPLY OF GOODS TO EOU LICENSE HOLDERS UNDER THE EPCG WAS DEEMED EXPORT AND THE ASSESSEE WAS THEREFORE, ELIGIBLE FOR EXEMPTION UNDER SECTION 10AA. THE CIT (A) RELYING ON THE DECISIONS IN THE CASE OF ITO V. ANITA SYNTHETICS PVT. LTD. [2006] 100 TTJ (AHD) 227 OBSERVED THAT THEN ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE CIT (A) OBSERVED THAT IT IS AN ADMITTED POSITION THE PRODUCTION COMMENCED AFTER 01.04.2006 AND THE UNIT IS LOCATED IN SURAT SEZ. THE ONLY POINT OF DISPUTE IS THAT WHETHER SALE TO EOU AND EPCG UNITS WOULD QUALIFY AS EXPORTS FOR THE PURPOSE OF SECTION 10AA. THE CIT (A) ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. 6. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. DR SUBMITTED THAT AS PER EXPLANATION 1 (I) TO SECTION 10AA(10) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT EXPORT BY THE UNDERTAKING, BEING THE UNIT OF ARTICLES OR THINGS OR SERVICES RECEIVED IN OR BROUGHT INTO, INDIA BY THE ASSESSEE BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUT SIDE INDIA OR EXPENSES, IF ANY INCURRED IN FOREIGN EXCHANGE IN RENDERING SERVICES (INCLUDING COMPUTER SOFTWARE ) OUTSIDE INDIA. THE EXPORT IS DEFINED UNDER EXPLANATION 1(II) TO SECTION 10AA AS EXPORT IN RELATION TO THE SPECIAL ECONOMIC ZONE MEANS BY TAKING GOODS OR PROVIDING SERVICE OUTSIDE INDIA FROM A SPECIAL ECONOMIC ZONE BY LAND, SEA, AIR OR BY ANY OTHER MODE WHETHER PHYSICAL OR OTHERWISE. THIS CONDITION IS NOT SATISFIED BY THE ASSESSEE AS THERE IS NO DIRECT EXPORT AND NO FOREIGN EXCHANGE REMITTANCE HAS BEEN RECEIVED BY THE ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT EXPORT OUT OF INDIA SHALL NOT INCLUDE ANY TRANSACTION BY WAY OF SALES OR ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 4 OF 10 OTHERWISE, IN A SHOP, EMPORIUM OR ANY OTHER ESTABLISHMENT SITUATED IN INDIA, NOT INVOLVING CLEARANCE AT ANY CUSTOMS STATION AS DEFINED IN THE CUSTOMS. IT WAS FURTHER SUBMITTED THAT EXPORT TURNOVER MEANS THE SALE PROCEEDS RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE BUT DOES NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TRANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOM STATION AS DEFINED IN THE CUSTOM ACT. SINCE THE ASSESSEE HAS NOT EXPORTED ANY ARTICLES OR THINGS OUT SIDE INDIA AND NOT RECEIVED CONVERTIBLE FOREIGN EXCHANGE, HENCE, DOES NOT FULFILL THE CONDITIONS OF SECTION 10AA OF THE ACT. THEREFORE, FINDINGS OF THE CIT (A) BE SET-ASIDE AND THAT OF THE AO BE RESTORED. 7. ON THE OTHER HAND, THE LD. AR FOR THE ASSESSEE, SUBMITTED THAT THE AO DISALLOWED THE CLAIM AS THE EXPORTS WERE NOT DIRECT AND THE ASSESSEE HAS NOT BROUGHT CONVERTIBLE FOREIGN EXCHANGE IN INDIA. THE LD. AR SUBMITTED THAT NEITHER THE DEFINITION OF EXPORT TURNOVER NOR EXPORT UNDER SECTION 10AA OF THE ACT LAYS DOWN THE CONDITION OF DIRECT EXPORTS. HE FURTHER SUBMITTED THAT THE ASSESSEE EXPORTED THE GOODS AND RECEIVED THE CONSIDERATION IN INDIA, WHICH HAS NOT BEEN DISPUTED BY THE AO. HE REFERRED THE DEFINITION OF EXPORT TURNOVER AS DEFINED IN CLAUSE (I) TO EXPLANATION 1 TO SECTION 10AA AND SUBMITTED THAT SAID DEFINITION DOES NOT SAY THAT CONSIDERATION SHOULD BE RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE AS MENTIONED IN EXPLANATION (3) TO SECTION 10B OF THE ACT. THEREFORE, THE SECTION 10AA IS ITSELF A CODE IN ITSELF AND DEFINITION GIVEN THEREUNDER WOULD APPLY TO THAT SECTION AND NOT THE DEFINITION AS GIVEN IN OTHER SECTION. HE FURTHER REFERRED EXPLANATION 1(II) TO SECTION 10AA WHICH LAID DOWN THAT EXPORT IN RELATION TO SEZ MEANS TAKING GOODS OR PROVIDING SERVICE OUT OF INDIA FROM A SEZ BY LAND, SEA, AIR OR BY ANY OTHER MODE WHETHER PHYSICAL OF OTHERWISE. HE SUBMITTED THAT IF THE LEGISLATURE INTENDED TO EXEMPT ONLY DIRECT EXPORT OUT OF INDIA, THEN IT SHOULD HAVE ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 5 OF 10 SPECIFIED SO AS DONE IN SECTION 10AB OF THE ACT, WHICH GRANTS DEDUCTION ONLY TO EXPORT OUT OF INDIA AND DEFINES THE SAME SPECIFICALLY IN EXPLANATION (D) BY EXCLUDING THE TRANSACTION NOT INVOLVING CUSTOM CLEARANCE. HE FURTHER SUBMITTED THAT SECTION 10AA DOES NOT SPECIFY THAT SAME UNIT SHOULD EXPORT. THEREFORE, SINCE THE ASSESSEE HAS FULFILLED THE CONDITIONS LAID DOWN IN SECTION 10AA AND IS THEREFORE, ELIGIBLE FOR DEDUCTION. THE LD. AR ALSO PLACED RELIANCE IN THE CASE OF M/S. GOKUL OVERSEAS V. ACIT-CIRCLE, PATAN [I.T.A. NO. 1028/AHD/2013 DTD. 30.08.2016] OF AHMEDABAD TRIBUNAL WHEREIN ON IDENTICAL FACTS AS THAT OF THE ASSESSEE, THE TRIBUNAL HAS HELD THAT SECTION 10AA DOES NOT PROVIDE FOR EXPORT OF OWN GOODS OR BRINGING IN FOREIGN CURRENCY OF THE GOODS EXPORTED. THE LD. AR FURTHER PLACED RELIANCE ON DECISION OF CO-ORDINATE BENCH OF CALCUTTA TRIBUNAL IN THE CASE OF M/S. EPIC EXPORTS V. ACIT- CIRCLE 32 [ I.T.A. NO. 410/(KOL)/2011 A.Y. 07-08 DTD. 11.11.2011] AND M/S. EPIC EXPORTS V. ACIT CIRCLE-32 [I.T.A. NO. 1415/KOL/2011/A.Y. 08-09 DTD. 13.03.2014]. THE LD. AR ALSO RELIED ON THE DECISION IN THE CASE OF ITO V. ANITA SYNTHETICS PVT. LTD. [2006] 100 TTJ (AHD) 227 AS RELIED ON BY THE ASSESSEE CIT (A) IN SUPPORT OF HIS CONTENTIONS. THE LD. AR ALSO TOOK US THROUGH FOREIGN TRADE POLICY AND CUSTOM MANUAL IN SUPPORT OF DEFINITION OF EXPORT AND GOODS EXPORTED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS EXPORTED GOODS THROUGH EOU SITUATED FROM SURAT SEZ IS NOT IN DISPUTE. THE CONSIDERATION RECEIVED IN INDIA ON ACCOUNT OF EXPORT SALES IS ALSO NOT IN DISPUTE. THE CONTROVERSY IS ON ACCOUNT OF THE FACTS THAT THE ASSESSEE HAS NOT MADE DIRECT EXPORTS. SECTION 10AA PROVIDES FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR SERVICES FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 6 OF 10 PREVIOUS YEAR IN WHICH THE UNIT BEGINS MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR PROVIDES SERVICE, AS THE CASE MAY BE. IT ALSO PROVIDES 50% OF PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS THEREAFTER. AS PER EXPLANATION 1 (I) TO SECTION 10AA(10) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF BY THE UNDERTAKING, BEING THE UNIT OF ARTICLES OR THINGS OR SERVICES RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE, BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUT SIDE INDIA OR EXPENSES, IF ANY INCURRED IN FOREIGN EXCHANGE IN RENDERING SERVICES (INCLUDING COMPUTER SOFTWARE) OUTSIDE INDIA. THE PERUSAL OF ABOVE DEFINITION OF EXPORT TURNOVER SHOWS THAT BRINGING OF FOREIGN CURRENCY ON SALE OF GOODS HAS NOT BEEN STIPULATED IN EXPORT TURNOVER THOUGH AS PER PROVISIONS OF SECTION 10A, WHICH IS IN RESPECT OF SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED UNDERTAKING IN FREE TRADE ZONE. EXPLANATION 2(IV) THE EXPORT TURNOVER SPECIFIES THE CONDITION OF BRINGING INTO INDIA CONVERTIBLE FOREIGN EXCHANGE. SIMILARLY, WE FIND THAT EXPORT TURNOVER IN SECTION 10B (WHICH IS SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED HUNDRED PERCENT EXPORT ORIENTED UNDERTAKING) AND IN SECTION 10BA (WHICH IS SPECIAL PROVISION IN RESPECT OF EXPORT OF CERTAIN ARTICLES OR THINGS) STIPULATES THE BRINGING INTO INDIA BY THE ASSESSEE OF CONVERTIBLE FOREIGN EXCHANGE. THEREFORE, IT WOULD BE SUFFICE IF THE ASSESSEE HAS EXPORTED GOODS OUTSIDE INDIA. THIS VIEW IS FURTHER SUPPORTED BY THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. GOKUL OVERSEAS V. ACIT-CIRCLE, PATAN [I.T.A. NO. 1028/AHD/2013 DTD. 30.08.2016] OF AHMEDABAD TRIBUNAL WHEREIN ON IDENTICAL FACTS AS THAT OF THE ASSESSEE. IN THIS CASE THE TRIBUNAL HAS HELD THAT SECTION 10AA DOES NOT PROVIDE FOR EXPORT OF OWN GOODS OR BRINGING IN FOREIGN CURRENCY OF THE GOODS EXPORTED.THE RELEVANT EXTRACT OF FINDING AS GIVEN BY THE CO-ORDINATE BENCH IN ABOVE CASE IS REPRODUCED AS UNDER: ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 7 OF 10 4. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US. 4.1 BEFORE US, LD.AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT LD.CIT(A) CONFIRMED THE DISALLOWANCE FOR THE REASON THAT THE EXPORTS WERE NOT DIRECT EXPORTS WHERE THE ASSESSEE BRINGS IN CONVERTIBLE FOREIGN EXCHANGE. HE SUBMITTED THAT NEITHER THE DEFINITION OF EXPORT TURNOVER NOR EXPORT U/S.10AA OF THE ACT LAYS DOWN THE CONDITION OF DIRECT EXPORTS. HE FURTHER SUBMITTED THAT ASSESSEE HAVING EXPORTED THE GOODS IS NOT DISPUTED BY AO NOR THE RECEIPT OF CONSIDERATION IN INDIA HAS BEEN DISPUTED. THEREFORE, SINCE THE ASSESSEE HAS FULFILLED THE CONDITIONS OF EXPORTING AND RECEIVING THE CONSIDERATION IN INDIA IT HAS FULFILLED THE CONDITIONS LAID DOWN U/S.10AA OF THE ACT AND IS THEREFORE ELIGIBLE FOR DEDUCTION. HE FURTHER SUBMITTED THAT IF THE LEGISLATURE INTENDED TO EXEMPT ONLY DIRECT EXPORTS, IT WOULD HAVE SPECIFIED SO AS WAS DONE IN SECTION 10BA OF THE ACT WHICH GRANTS A DEDUCTION ONLY FOR EXPORTS OUT OF INDIA AND DEFINES THE SAME SPECIFICALLY IN EXPLANATION(D) BY EXCLUDING THE TRANSACTIONS NOT INVOLVING CUSTOMS CLEARANCE. HE FURTHER SUBMITTED THAT SECTION 10AA OF THE ACT DOES NOT SPECIFY THAT THE SAME UNITS SHOULD EXPORT. HE SUBMITTED THAT LD.CIT(A) CONFIRMED THE DISALLOWANCE BY RELYING ON THE DECISION OF HONBLE KERALA HIGH COURT RENDERED IN THE CASE OF CIT VS. ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P) LTD. REPORTED IN (2011) 245 CTR 465. HE SUBMITTED THAT LD.CIT(A) HAS WRONGLY RELIED ON THE AFORESAID DECISION BECAUSE THE DECISION RELIED UPON BY LD.CIT(A) DEALT WITH SECTION 10AA AND THAT THE DEFINITION OF EXPORT TURNOVER ARE NOT SIMILAR IN SECTION 10A AND SECTION 10AA. HE FURTHER SUBMITTED THAT LD.CIT(A) HAS ALSO DISMISSED THE APPEAL ON THE GROUND THAT THE ASSESSEE DID NOT BRING IN CONVERTIBLE FOREIGN EXCHANGE. HE SUBMITTED THAT THE CONDITION OF BRINGING IN CONVERTIBLE FOREIGN EXCHANGE EXISTS IN THE DEFINITION OF EXPORT TURNOVER U/S.10A AND 10B SPECIFICALLY MAKES THESE SECTION APPLICABLE IF A SALE PROCEEDS ARE BROUGHT ARE BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE BUT THERE IS NO EQUIVALENT SUB-SECTION IN 10AA OF THE ACT AND THEREFORE THE RECEIPT OF CONVERTIBLE FOREIGN EXCHANGE IS NOT A NECESSARY CONDITION FOR CLAIMING DEDUCTION U/S.10AA OF THE ACT. HE THEREFORE SUBMITTED THAT FOR RECEIPTS TO BE CONSIDERED AS EXPORT TURNOVER U/S.10AA OF THE ACT, THE ONLY CONDITIONS ARE THAT THE GOODS OR SERVICES ARE ULTIMATELY EXPORTED AND THAT THE CONSIDERATION FOR EXPORT SALES IS RECEIVED IN INDIA. IN THE CASE OF THE ASSESSEE IN ALL THREE CASES, WHERE THE AO HAS DENIED THE CLAIM OF DEDUCTION U/S.10AA OF THE ACT, THE GOODS HAVE LEFT INDIA AND THE CONSIDERATION WAS RECEIVED IN INDIA AND THEREFORE THE CONDITIONS FOR EXPORT TURNOVER WERE FULFILLED. IN HIS WRITTEN SUBMISSIONS, HE ALSO PLACED IN A TABULAR FORM THE VARIOUS DEFINITIONS OF EXPORT TURNOVER U/S.10AA, 10A, 10B & 10BA WHICH IS REPRODUCED HEREUNDER:- S.10AA S.10A S.10B S.10BA EXPLANATION 1(I) EXPLANATION 2(IV) EXPLANATION 2(III) EXPLANATION (C) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING, BEING THE UNIT OF ARTICLES OR THINGS OR SERVICES RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB- SECTION (3), BUT DOES NOT INCLUDE FREIGHT, EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB- SECTION (3), BUT DOES NOT INCLUDE FREIGHT, EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ELIGIBLE ARTICLES OR THINGS RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE IN ACCORDANCE WITH SUB- SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 8 OF 10 DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN RENDERING OF SERVICES (INCLUDING COMPUTER SOFTWARE) OUTSIDE INDIA; EXPLANATION 1(II) EXPORT IN RELATION TO THE SPECIAL ECONOMIC ZONES MEANS TAKING GOODS OR PROVIDING SERVICES OUT OF INDIA FROM A SPECIAL ECONOMIC ZONE BY LAND, SEA AIR, OR BY ANY OTHER MODE, WHETHER PHYSICAL OR OTHERWISE; TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA; TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA; CHARGES OR INSURAN CE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDIA; EXPLANATION (D) EXPORT OUT OF INDIA SHALL NOT INCLUDE ANY TRANSACTION BY WAY OF SALE OR OTHERWISE, IN A SHOP, EMPORIUM OR ANY OTHER ESTABLISHMENT SITUATE IN INDIA, NOT INVOLVING CLEARANCE OF ANY CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT, 1962 (52 OF 1962). TERM EXPORT NOT DEFINED. TERM EXPORT NOT DEFINED. 4.2. HE THEREFORE SUBMITTED THAT THE ASSESSEE BE ALLOWED DEDUCTION ON THE EXPORT SALE AS SUPPORT MANUFACTURER, SALES TO EXPORT ORIENTED UNITS AND SALES IN SEZ. 4.3 THE LD.SR.DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WHETHER THE EXPORT SALES AS SUPPORTING MANUFACTURER, SALES TO EOU S AND SEZS ARE ELIGIBLE FOR DEDUCTION U/S.10AA OF THE ACT. SECTION 10AA OF THE ACT PROVIDES FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR FROM SERVICES FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNIT BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR PROVIDES SERVICES, AS THE CASE MAY BE. IT ALSO PROVIDES FOR 50% OF PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS THEREAFTER. AS PER CLAUSE (7) THE PROFITS DERIVED FROM THE EXPORT OF ARTICLE OR THINGS OR SERVICES SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, BEING THE UNIT, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR SERVICES BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. AS PER EXPLANATION 1(1) TO S. 10AA, EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE ASSESSEE BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN RENDERING OF SERVICES OUTSIDE INDIA. IN OUR UNDERSTANDING, ON READING OF SUB SECTION 7 ALONG WITH THE EXPLANATION 1, THE DEDUCTION U/S.10AA, APART FROM FULFILLING OF THE OTHER REQUIRED CONDITIONS STIPULATED, THE DEDUCTION OF PROFITS FROM EXPORTS U/S 10AA WILL BE IN THE RATIO OF EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE UNDERTAKING IN FREE TRADE ZONE, EXPLANATION 2(IV) THE EXPORT TURNOVER SPECIFIES THE CONDITION OF BRINGING INTO INDIA CONVERTIBLE FOREIGN EXCHANGE. SIMILARLY WE FIND THAT EXPORT TURNOVER IN S. 10B (WHICH IS SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED HUNDRED PERCENT EXPORT ORIENTED ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 9 OF 10 UNDERTAKING) AND IN S.10BA (WHICH IS SPECIAL PROVISION IN RESPECT OF EXPORT OF CERTAIN ARTICLES OR THINGS) STIPULATES THE BRINGING INTO INDIA BY THE ASSESSEE OF CONVERTIBLE FOREIGN EXCHANGE. 5.1 IN THE PRESENT CASE, THE GOODS HAVE LEFT INDIA AND CONSIDERATION ON SALE OF SUCH GOODS HAVING BEING RECEIVED IN INDIA IS NOT IN DISPUTE AND IN SUCH A SITUATION WE ARE OF THE VIEW THAT DENIAL OF DEDUCTION U/S 10AA OF THE ACT DOES NOT PROVIDE FOR EXPORT OF OWN GOODS OR BRINGING IN OF FOREIGN CURRENCY OF THE GOODS EXPORTED. WE FURTHER FIND THAT LD CIT(A) HAS RELIED ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF ELECTRONICS CONTROL AND DISCHARGE SYSTEMS PVT. LTD. 245 CTR 465 IN COMING TO THE CONCLUSION THAT ONLY DIRECT EXPORTS WHERE THE ASSESSEE BRINGS FOREIGN CONVERTIBLE EXCHANGE INTO INDIA QUALIFIES FOR BEING ELIGIBLE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10AA OF THE ACT. WE FIND THAT HONBLE KERALA HIGH COURT IN THE AFORESAID CASE WAS DEALING WITH THE PROVISION OF S. 10A AND NOT WITH RESPECT TO S.10AA AND IN VIEW OF THE DIFFERENCE IN THE DEFINITION OF EXPORT TURNOVER IN BOTH THE SECTIONS, WE ARE OF THE VIEW THAT THE AFORESAID DECISION OF HONBLE KERALA HIGH COURT CANNOT BE RELIED BY THE REVENUE AUTHORITIES FOR DENYING THE DEDUCTION TO ASSESSEE. BEFORE US, REVENUE HAS NOT PLACED ANY OTHER DIRECT DECISION WHERE THE ISSUE RELATED TO PROVISIONS OF S.10AA IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE SET ASIDE THE ORDER OF LD CIT(A) AND THUS ALLOW THE GROUND OF ASSESSEE. 9. THE ABOVE FINDING AS GIVEN IS ABOVE ARE MUTATIS MUTANDIS APPLY TO FACTS OF PRESENT CASE. HENCE, FOLLOWING THE SAME, WE FIND THAT THE GOODS HAVE LEFT INDIA AND CONSIDERATION ON SALE OF SUCH GOODS HAVING BEING RECEIVED IN INDIA IS NOT IN DISPUTE AND IN SUCH A SITUATION WE ARE OF THE VIEW THAT CLAIM FOR DEDUCTION U/S.10AA OF THE ACT DOES NOT PROVIDE FOR EXPORT OF OWN GOODS OR BRINGING IN OF FOREIGN CURRENCY OF THE GOODS EXPORTED BY THE ASSESSEE HIMSELF. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.10AA OF THE ACT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). FURTHER, RELIANCE IS PLACED ON DECISION OF CO-ORDINATE BENCH OF CALCUTTA TRIBUNAL IN THE CASE OF M/S. EPIC EXPORTS V. ACIT- CIRCLE 32 [ I.T.A. NO. 410/(KOL)/2011 A.Y. 07-08 DTD. 11.11.2011] AND M/S. EPIC EXPORTS V. ACIT CIRCLE-32 [I.T.A. NO. 1415/KOL/2011/A.Y. 08-09 DTD. 13.03.2014] AND IN THE CASE OF ITO V. ANITA SYNTHETICS PVT. LTD. [2006] 100 TTJ (AHD) 227 AS RELIED ON BY THE ASSESSEE CIT (A) IN SUPPORT OF HIS CONTENTIONS. THE LD. DR HAS ALSO NOT BROUGHT ANY DECISION ON THE ISSUE WHICH FAVOURS THE REVENUE. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT WHERE SECTION 10AA OF THE ACT DOES NOT PROVIDE FOR EXPORT OF GOODS OF ITS OWN OR BRINGING IN FOREIGN CURRENCY OF THE GOODS EXPORTED IN CONVERTIBLE FOREIGN EXCHANGE. ITO 6(3) V. RAJ TECHNOLOGIES /I.T.A. NO.1920 & 2523 /AHD/2010 & 11/A.Y.07-08 & 08-09 PAGE 10 OF 10 THEN, DENIAL FOR DEDUCTION UNDER SECTION 10AA BY THE AO IS NOT JUSTIFIED. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A), ACCORDINGLY SAME IS UPHELD. ITA NO. 2523/AHD/2011 FOR A.Y. 2008-09: 10. THE FACTS FOR ASSESSMENT YEAR 2008-09 ARE IDENTICAL , HENCE, OUR FINDINGS GIVEN IN RESPECT OF ASSESSMENT YEAR 2007-08 IN THE CASE OF THE ASSESSEE WOULD MUTATIS MUTANDIS APPLY TO ASSESSMENT YEAR 2008-09. ACCORDINGLY, APPEAL OF REVENUE IN ITA NO.2523/AHD/2011 FOR ASSESSMENT YEAR 2008-09 IS FOR THE ABOVE REASONING IS ALSO DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2018 SD/- SD/- (C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 15 TH MARCH, 2018/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT