Severn Glocon India Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2770/CHNY/2014

• Counselvise Citation: 277021714 RSA 2014
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: T BANUSEKAR
• Section: 10B; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2816/MDS/2014 ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI - 600 034. V. M/S SEVERN GLOCON (INDIA) PVT. LTD., F-96 & 97, SIPCOT INDUSTRIAL ESTATE, IRUNGATTUKOTTAI, CHENNAI 602 117. PAN : AAHCS 9495 H (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NO.2770/MDS/2014 ( )( / ASSESSMENT YEAR : 2010-11 M/S SEVERN GLOCON (INDIA) PVT. LTD., F-96 & 97, SIPCOT INDUSTRIAL ESTATE, IRUNGATTUKOTTAI, CHENNAI 602 117. V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) // REVENUE BY : SH. JOE SEBASTIAN, CIT (01 /ASSESSEE BY : SH. T. BANUSEKAR, CA 2 3 1% / DATE OF HEARING : 26.05.2015 4') 3 1% / DATE OF PRONOUNCEMENT : 19.06.2015 2 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH, REVENUE AND ASSESSEE, FILED THE APPEALS AGA INST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS)-VI, CHENNAI, DATED 29.08.2014. THEREFORE, WE HEARD BOT H THE APPEALS TOGETHER AND DISPOSING THE SAME BY THIS COMMON ORDE R. 2. LETS FIRST TAKE REVENUES APPEAL IN I.T.A. NO. 2816/MDS/2014. THE ONLY GROUND RAISED BY THE REVEN UE IS WITH REGARD TO EXCLUSION OF EXPENSES FROM THE EXPORT TUR NOVER AND TOTAL TURNOVER. 3. SH. JOE SEBASTIAN, THE LD. DEPARTMENTAL REPRESEN TATIVE, SUBMITTED THAT THE ASSESSING OFFICER EXCLUDED THE E XPENSES FROM EXPORT TURNOVER. HOWEVER, THE SAME WERE NOT EXCLUD ED FROM THE TOTAL TURNOVER. THE CIT(APPEALS) DIRECTED THE ASSE SSING OFFICER TO EXCLUDE THE EXPENSES FROM TOTAL TURNOVER ALSO. ACC ORDING TO THE LD. D.R., EXPORT TURNOVER IS ONLY IN RESPECT OF THE EXP ORT OF THE GOODS, THEREFORE, WHAT WAS EXCLUDED FROM THE EXPORT TURNOV ER NEED NOT BE EXCLUDED FROM THE TOTAL TURNOVER. 4. ON THE CONTRARY, SH. T. BANUSEKAR, THE LD. REPRE SENTATIVE FOR THE ASSESSEE, SUBMITTED THAT EXPORT TURNOVER AND TO TAL TURNOVER 3 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 SHOULD BE OF THE SAME FACTOR. WHAT WAS EXCLUDED FR OM THE EXPORT TURNOVER HAS ALSO TO BE EXCLUDED FROM THE TOTAL TUR NOVER IN VIEW OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN I TO V. SAK SOFT LTD. (2009) 30 SOT 55. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTL Y ARGUED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, BOTH EXPORT TU RNOVER AND TOTAL TURNOVER SHALL BE OF THE SAME FACTOR. WHAT WAS EXC LUDED FROM THE EXPORT TURNOVER CANNOT FORM PART OF TOTAL TURNOVER. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT( APPEALS) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO EXCLUDE T HE EXPENSES FROM TOTAL TURNOVER ALSO. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 6. NOW COMING TO ASSESSEES APPEAL IN I.T.A. NO.2770/MDS/2014, THE FIRST ISSUE ARISES FOR CONSID ERATION IS WITH REGARD TO DEDUCTION UNDER SECTION 10B OF THE INCOME -TAX ACT, 1961 (IN SHORT 'THE ACT'). 7. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS 100% EXPORT ORIENTED UNIT ELIGIBLE FOR EXEMPTION UNDER SECTION 10B OF THE ACT. THE ASSESS ING OFFICER 4 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT INTER MINISTERIAL COMMITTEE CONSTITUTED BY THE GOVERNMENT OF INDIA UNDER SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULAT ION) ACT, 1951 DOES NOT APPROVE THE ASSESSEE. REFERRING TO THE OR DER OF THE DEVELOPMENT COMMISSIONER, MEPZ SPECIAL ECONOMIC ZON E, THE LD. REPRESENTATIVE SUBMITTED THAT THE DEVELOPMENT C OMMISSIONER HAS GRANTED THE APPROVAL. THIS WAS SUBSEQUENTLY RA TIFIED BY THE BOARD IN ITS SECOND MEETING HELD ON 25.03.2011. TH E APPROVAL GRANTED BY THE BOARD WAS COMMUNICATED TO THE ASSESS EE BY THE DEVELOPMENT COMMISSIONER, A COPY OF WHICH IS AVAILA BLE AT PAGE 8 OF THE PAPER-BOOK. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, IT MAY NOT BE CORRECT TO SAY THAT THE BOARDS APPROVAL WAS NOT OBTAINED. EVEN OTHERWISE, ACCORDING TO THE LD. REP RESENTATIVE, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10 A OF THE ACT. REFERRING TO THE INSTRUCTION OF THE CBDT, A COPY OF WHICH IS AVAILABLE AT PAGE 11 OF THE PAPER-BOOK, THE LD. REP RESENTATIVE SUBMITTED THAT THE APPROVAL GRANTED BY THE DEVELOPM ENT COMMISSIONER WOULD BE A VALID APPROVAL ONCE IT IS A PPROVED BY THE BOARD OF APPROVAL FOR EOU SCHEME. THEREFORE, ACCOR DING TO THE LD. REPRESENTATIVE, THE CIT(APPEALS) IS NOT JUSTIFI ED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. THE LD. REPRESENTA TIVE FURTHER SUBMITTED THAT EVEN OTHERWISE THE ASSESSEE IS ELIGI BLE FOR EXEMPTION 5 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 UNDER SECTION 10A OF THE ACT. THEREFORE, THE ISSUE REQUIRES TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 8. ON THE CONTRARY, SH. JOE SEBASTIAN, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT EXPLANATION 2(IV) TO SECTION 10B OF THE ACT CLEARLY SAYS THAT 100% EXPORT ORIENTED UNIT MEANS AN UNDERTAKING WHICH IS APPROVED BY THE BOARD APPOINTE D BY THE GOVERNMENT OF INDIA UNDER SECTION 14 OF THE INDUSTR IES (DEVELOPMENT & REGULATION) ACT, 1951. THEREFORE, T HE BOARD NOMINATED BY GOVERNMENT OF INDIA UNDER THE PROVISIO NS OF SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT , 1951 HAS TO APPROVE THE UNIT FOR THE PURPOSE OF CLAIMING DEDUCT ION UNDER SECTION 10B OF THE ACT. IN THIS CASE, IT IS NOBODY S CASE THAT THE BOARD CONSTITUTED BY GOVERNMENT OF INDIA HAS ACCORD ED, UNDER EXPLANATION 2(IV) TO SECTION 10B OF THE ACT, APPROV AL TO THE ASSESSEE AS 100% EXPORT ORIENTED UNIT. IN THIS CAS E, THE ASSESSEE WAS APPROVED BY DEVELOPMENT COMMISSIONER OF THE SPE CIAL ECONOMIC ZONE. NO MATERIAL IS AVAILABLE ON THE REC ORD TO SHOW THAT THE ASSESSEE WAS APPROVED BY THE BOARD CONSTITUTED BY GOVERNMENT OF INDIA. ACCORDING TO THE LD. REPRESEN TATIVE, THE APPROVAL GRANTED BY THE DEVELOPMENT COMMISSIONER WA S SUBSEQUENTLY RATIFIED BY THE BOARD NOMINATED BY MIN ISTRY OF 6 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 COMMERCE. IT IS NOT KNOWN WHETHER THE BOARD OF APP ROVAL NOMINATED BY MINISTRY OF COMMERCE WAS APPOINTED UND ER SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT , 1951. INCOME-TAX ACT, BEING A SPECIAL ENACTMENT, THE APPR OVAL HAS TO BE ACCORDED ONLY BY THE BOARD NOMINATED BY THE GOVERNM ENT UNDER SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULAT ION) ACT, 1951. THE LETTER OF THE SPECIAL ECONOMIC ZONE DOES NOT SA Y ANYTHING ABOUT THE CONSTITUTION OF COMMITTEE UNDER THE INDUS TRIES (DEVELOPMENT & REGULATION) ACT, 1951. THEREFORE, A CCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED TH E ADDITION. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE IS ALS O NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 10A OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. EXPLANATI ON 2(IV) TO SECTION 10B CLEARLY SAYS THAT APPROVAL BY THE BOARD APPOINTED BY GOVERNMENT OF INDIA UNDER SECTION 14 OF THE INDUSTR IES (DEVELOPMENT & REGULATION) ACT, 1951 IS AN ESSENTIA L CONDITION. IN THIS CASE, THOUGH THE ASSESSEE CLAIMS THAT THE APPR OVAL INITIALLY GRANTED BY DEVELOPMENT COMMISSIONER, SPECIAL ECONOM IC ZONE WAS RATIFIED BY THE BOARD, IT IS NOT CLEAR FROM THE MATERIAL AVAILABLE ON RECORD WHETHER RATIFICATION WAS ACCORDED BY THE BOARD 7 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 CONSTITUTED BY GOVERNMENT OF INDIA UNDER SECTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951. I N THE ABSENCE OF ANY MATERIAL TO SHOW THAT WHETHER THE APPROVAL WAS ACCORDED BY THE BOARD CONSTITUTED UNDER INDUSTRIES (DEVELOPMENT & R EGULATION) ACT, 1951, THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT THE MATTER NEEDS TO BE RE-EXAMINED. MOREOVER, SECTION 10A ALS O GIVES EXEMPTION TO 100% EXPORT ORIENTED UNIT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT OF THE PROVIS IONS OF SECTION 10A OF THE ACT, IN CASE THE ASSESSEE IS NOT ELIGIBLE UN DER SECTION 10B OF THE ACT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTH ORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE ISSUE AFRESH AND FIND OUT WHETHER THE BOARD CONSTIT UTED BY GOVERNMENT OF INDIA UNDER SECTION 14 OF THE INDUSTR IES (DEVELOPMENT & REGULATION) ACT, 1951 HAS APPROVED T HE ASSESSEE AS 100% EXPORT ORIENTED UNIT. IN CASE SUCH APPROVA L WAS NOT GRANTED, THE ASSESSING OFFICER SHALL ALSO EXAMINE T HE CLAIM OF THE ASSESSEE UNDER SECTION 10A OF THE ACT ON MERIT, IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 8 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 10. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DETERMINATION OF ELIGIBLE EXPORT TURNOVER. 11. DURING THE COURSE OF HEARING, THE LD. REPRESENT ATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSIN G THIS GROUND. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO DETERMINATION OF ELIGIBLE EXPORT TURNOVER IS DISMIS SED. 12. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXC LUSION OF FOREIGN TRAVEL EXPENSES, 50% OF TELEPHONE CHARGES A ND COMMUNICATION EXPENSES, FREIGHT OUTWARD AND COMMISS ION EXPENSES FROM THE EXPORT TURNOVER. 13. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE PARTLY, DELETING THE DISALLOWANCE MADE UNDER SECTIO N 40(A)(IA) OF THE ACT. HOWEVER, THE CIT(APPEALS) UPHELD THE EXCL USION OF FOREIGN TRAVEL EXPENSES, 50% OF TELEPHONE CHARGES AND COMMU NICATION EXPENSES, FREIGHT OUTWARD AND COMMISSION EXPENSES F ROM THE EXPORT TURNOVER. THE COMMISSIONER ALSO DIRECTED TH E ASSESSING OFFICER TO EXCLUDE THE SAME FROM TOTAL TURNOVER ALS O. REFERRING TO EXPLANATION 2(IV) TO SECTION 10A OF THE ACT, THE LD . REPRESENTATIVE SUBMITTED THAT EXPORT TURNOVER DOES NOT INCLUDE FRE IGHT, 9 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES, ETC. THESE FACTS ARE NOT APPRECIA TED BY THE COMMISSIONER AS WELL AS THE ASSESSING OFFICER. ACC ORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS NOW FILED COPI ES OF LEDGER EXTRACT TO SHOW THAT THE COMMISSION EXPENSES AND OT HER EXPENSES WERE NOT PAID OUTSIDE INDIA, HENCE, IT WAS NOT INCU RRED IN FOREIGN EXCHANGE. THE LOWER AUTHORITIES HAD NO OCCASION TO EXAMINE THE LEDGER EXTRACT. THEREFORE, THE LD. REPRESENTATIVE SUBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSE SSING OFFICER. 14. ON THE CONTRARY, SH. JOE SEBASTIAN, THE LD. D.R . SUBMITTED THAT THE COMMISSIONER DIRECTED THE ASSESSING OFFICE R TO EXCLUDE THE TELEPHONE CHARGES, FOREIGN TRAVEL EXPENSES, COMMISS ION EXPENSES, ETC. FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSEE MAY NOT HAVE ANY GRIEVANCE AT ALL. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHT LY SUBMITTED BY THE LD. REPRESENTATIVE, THE COMMISSIONER UPHELD THE EXCLUSION OF FOREIGN TRAVEL EXPENSES, COMMISSION CHARGES, COMMUN ICATION EXPENSES, ETC. FROM THE EXPORT TURNOVER AND ALSO DI RECTED THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM TOTAL TU RNOVER. WHILE 10 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 DECIDING THE APPEAL OF THE REVENUE, THIS TRIBUNAL F OUND THAT IN VIEW OF THE DECISION OF SPECIAL BENCH IN SAK SOFT LTD. ( SUPRA), THE EXPENSES WHICH WERE EXCLUDED FROM THE EXPORT TURNOV ER ARE ALSO TO BE EXCLUDED FROM TOTAL TURNOVER. SINCE THE CIT(APP EALS) EXCLUDED THE COMMUNICATION CHARGES, FOREIGN TRAVEL EXPENSES, COMMISSION CHARGES, ETC. FROM EXPORT TURNOVER, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE SAME ARE ALSO TO BE EXCLUDED FROM TOTAL TURNOVER. IN OTHER WORDS, THE ITEMS WHICH WERE EXCLUDED FROM THE EXPORT TURNOVER HAVE ALSO TO BE EXCLUDED FROM TOTAL TURNOV ER. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED ON 19 TH JUNE, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 19 TH JUNE, 2015. KRI. 11 I.T.A. NO. 2816/MDS/14 I.T.A. NO.2770/MDS/14 3 -178 98)1 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 2 :1 () /CIT(A)-VI, CHENNAI-34 4. 2 :1 /CIT-VI, CHENNAI 5. 8; -1 /DR 6. ( < /GF.