ITO, Ward - 1(3), Kolkata, Kolkata V. M/s. Midas DFS Pvt. Ltd., Howrah

ITA 30/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70395 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APURBA KR DAS SRDR
• Keywords: Competent authority
• Section: 143(3); 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, R.S. SYAL, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 30 / KOL / 2012 ASSESSMENT YEAR:2008-09 INCOME TAX OFFICER, WARD-1(3), ROOM NO.K 11A, 4 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQARE, KOLKATA 700 069 V/S . M/S MIDAS DFS PVT. LTD., 103241, FORESHORE ROAD, SHIBPUR, HOWRAH - 711102 [ PAN NO. AAPCM 0353G ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI APURBA KR. DAS, SR-DR /BY RESPONDENT SHRI SUBHASH AGARWAL, AR /DATE OF HEARING 11-11-2013 /DATE OF PRONOUNCEMENT 13-11-2013 / // / O R D E R PER R.S. SYAL, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY COMMISSIONER OF INCOME-TAX (APPEALS) (CIT(A) FOR SH ORT) ON 17-10-2011 IN RELATION TO THE ASSESSMENT YEAR (AY) 2008-09. 2. THE ONLY GROUND IS AGAINST THE ALLOWING OF THE B ENEFIT UNDER SECTION 10AA OF THE INCOME-TAX ACT, 1961(HEREINAFTER REFERR ED TO AS THE ACT;). BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF TOBACCO PRODUCTS AND TRADIN G OF ALL TYPES OF FMCG ITA NO.30KOL2012 A.Y 2008-09 ITO WD-1(3), KOL V. M/S. MIDAS DFS PVT. LTD. PAGE 2 PRODUCTS, ALCOHOLIC AND NON-ALCOHOLIC BEVERAGES. E XEMPTION U/S 10AA WAS CLAIMED IN RESPECT OF THE PROFIT FROM THE ELIGIBLE BUSINESS OF TRADING. ON BEING CALLED UPON TO EXPLAIN THE JUSTIFICATION FOR THE EX EMPTION, THE ASSESSEE STATED THAT LETTER OF PERMISSION / APPROVAL WAS ISSUED BY THE DEVELOPMENT COMMISSIONER OF FALTA SPECIAL ECONOMIC ZONE (SEZ FO R SHORT) ON 25-04-2005 ALLOWING TRADING OF SPECIFIED LIQUOR, CIGARETTES, FMCG PRODUCT TO THE ERSTWHILE PARTNERSHIP FIRM, WHICH WAS SUCCEEDED BY THE PRESEN T ASSESSEE, A PRIVATE LIMITED COMPANY. THIS LETTER OF APPROVAL WAS FURTH ER AMENDED VIDE LETTER DATED 05-08-2005 PERMITTING TRADING ACTIVITY OF `AL L ITEMS EXCEPT PROHIBITED ITEMS. THE ASSESSING OFFICER NOTICED THAT THE LETT ER OF THE DEVELOPMENT COMMISSIONER ALLOWING TRANSFER OF THE ORIGINAL LOA FROM THE ERSTWHILE FIRM TO THE PRESENT CORPORATE ASSESSEE WAS GIVEN FOR SETTIN G UP OF A TRADING UNIT AT FALTA SEZ FOR LIQUOR, CIGARATTES, FMCG PRODUCT. SIN CE THE ASSESSEE WAS NOT ENGAGED IN ANY MANUFACTURING ACTIVITY IN THE SEZ, T HE AO OPINED THAT THE BENEFIT OF SECTION 10AA OF THE ACT WAS NOT PERMISSI BLE. THE ASSESSEE CONTENDED THAT THERE CAN BE NO BAR ON UNDERTAKING T RADING ACTIVITY IN VIEW OF THE PROVISIONS OF SECTION 10AA OF THE ACT PERMITTIN G PROVIDING OF `ANY SERVICES AND THE DEFINITION OF SERVICES AS PER THE SEZ ACT A LSO ENCOMPASSING `TRADING. NOT CONVINCED, THE AO HELD THAT THE DEFINITION OF TERM, SERVICE IN THE SEZ ACT WAS NOT RELEVANT FOR THE PURPOSES OF THE ACT..H E ALSO NOTICED THAT SECTION 10AA (4)(III) OF THE ACT PROVIDES THAT THE EXEMPTIO N WILL BE AVAILABLE TO THE ASSESSEE ONLY IF IT IS NOT FORMED BY THE TRANSFER T O A NEW BUSINESS MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. HE OBSERV ED THAT THE ASSESSEE WAS A NEWLY INCORPORATED COMPANY WHICH TOOK OVER ALL TH E ASSETS AND LIABILITIES OF THE ERSTWHILE PARTNERSHIP FIRM AND IN THIS PROCESS THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 10AA(4) (III) OF THE ACT INAS MUCH AS IT WAS USING THE SAME SPACE WHICH WAS ALLOWED TO THE PARTNERSHIP FIR M. HE, THEREFORE DENIED THE BENEFIT OF SECTION 10AA OF THE ACT. THE LD. CIT (A) GOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND RESTORED THE BENEFIT OF SECTION 10AA OF THE ACT. THE REVENUE IS IN APPEAL AGAINST THE GRANTING OF RE LIEF UNDER THE SAID SECTION. ITA NO.30KOL2012 A.Y 2008-09 ITO WD-1(3), KOL V. M/S. MIDAS DFS PVT. LTD. PAGE 3 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST OBJECTION OF THE ASSESSING OFF ICER WAS THAT THE BENEFIT OF SECTION 10AA OF THE ACT IS LOST WHEN THE ASSESSEE I S ENGAGED SOLELY IN `TRADING ACTIVITIES. IT HAS BEEN NOTICED ABOVE THA T SECTION 10AA (1) ALLOWS BENEFITS, INTER ALIA, FOR THE PROVISIONS OF ANY `SERVICES BY AN ELIGIBL E ENTERPRISE. OBVIOUSLY, THE ERSTWHILE PARTNERSHIP FI RM I.E., M/S. MIDAS INTERNATIONAL WAS PERMITTED TO DO `TRADING BY THE COMPETENT AUTHORITY. THE FIRM GOT CONVERTED INTO ASSESSEE-COMPANY AND CONTIN UED THE SAME BUSINESS WITH PRIOR PERMISSION FROM THE COMPETENT AUTHORITY UNDER THE SEZ ACT. THE DEFINITION OF `SERVICES UNDER THE SEZ ACT INCLUD ES `TRADING ACTIVITY. IN THAT VIEW OF THE MATTER, IT BECOMES MANIFEST THAT THE TR ADING ACTIVITY HAS BEEN PERMITTED BY THE COMPETENT AUTHORITY UNDER THE SEZ ACT. AS SUCH, THERE CAN BE NO QUESTION OF DENIAL OF EXEMPTION U/S. 10AA OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD A COPY OF AN ORDER PASSED BY THE JAIPUR BENCH IN DCIT V. GOENKA DIAMOND & JEWELLERS LTD. IT APPEAL NO. 509 (JP) OF 2011 2012-(050)-SOT 0307 TJAI IN WHICH IT HAS BEEN HELD THAT TRADING OF THE ELIGIBLE GOODS ENTITLES THE ASSESSEE TO THE BENEFIT OF SECTION 10AA OF THE ACT. SIMILARLY, THE COPY OF ANOTHER ORD ER PASSED BY MUMBAI BENCH IN M/S GITANJALI EXPORTS CORPORTION LIMITED V. ADCIT IN ITA NO.6947 & 6948/MUM/2011 DATED 08-05-2013 HAS ALSO BEEN PLACED ON RECORD IN WHICH THE VIEW EXPRESSED BY THE JAIPUR BENCH HAS BEEN REI TERATED. NO CONTRARY PRECEDENT HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. DR. IN VIEW OF THE TWO TRIBUNALS ORDERS AVAILABLE ON THE POINT ALLOWING EX EMPTION U/S. 10AA OF THE ACT IN RESPECT OF `TRADING ACTIVITIES, WE ARE OF T HE CONSIDERED OPINION THAT NO EXCEPTION CAN BE TAKEN TO THE VIEW EXPRESSED BY THE LD. CIT(A) IN GRANTING THE EXEMPTION. 4. THE SECOND OBJECTION OF THE ASSESSING OFFICER WA S AGAINST THE NON- FULFILLMENT OF REQUISITE CONDITION AS PER SECTION 1 0AA(4)(III) OF THE ACT WHICH PROVIDES THAT THE UNDERTAKING SHOULD NOT BE FORMED BY TRANSFER OF MACHINERY OR PLANT TO A NEW BUSINESS WHICH WAS PREVIOUSLY US ED FOR ANY PURPOSE. ITA NO.30KOL2012 A.Y 2008-09 ITO WD-1(3), KOL V. M/S. MIDAS DFS PVT. LTD. PAGE 4 SUFFICE TO SAY, THAT THE ASSESSSEE-COMPANY IS SUCC ESSOR OF THE PARTNERSHIP FIRM WHICH WAS ORIGINALLY APPROVED BY THE COMPETENT AUTHORITY UNDER THE SEZ ACT TO DO THIS BUSINESS. THE SAID FIRM CLAIMED EXEM PTION U/S. 10AA OF THE ACT FOR TWO YEARS BEFORE THE PARTNERSHIP FIRM GOT CONVE RTED INTO ASSESSEE- COMPANY. IT HAS BEEN BROUGHT TO OUR NOTICE THAT THE ASSESSMENT OF THE FIRM WAS COMPLETED U/S. 143(3) OF THE ACT IN WHICH BENEF IT OF EXEMPTION UNDER THIS PROVISIONS WAS ALLOWED. THE GRANTING OF SUCH EXEMPT ION IN EARLIER YEARS IMPLIES THAT THE AO GOT SATISFIED WITH THE REQUISIT E CONDITIONS AS PER SECTION 10AA(4). SINCE THE ASSESSEE-COMPANY IS NOTHING BUT THE CONVERSION OF THE ERSTWHILE FIRM, WE FAIL TO APPRECIATE AS TO HOW IT CAN BE SAID AT THIS STAGE THAT THE CONDITION REQUIRED UNDER CLAUSE (III) IS NOT S ATISFIED. THAT APART, SINCE THE ASSESSEE IS A TRADING COMPANY NOT HAVING ANY MACHIN ERY OR PLANT, THERE CANNOT BE ANY QUESTION OF VIOLATION OF THIS PROVISI ONS. THE REFERENCE BY THE ASSESSING OFFICER TO CERTAIN PIECE OF LAND FOR DENI AL OF EXEMPTION IS NOT APPROPRIATE INASMUCH AS THE BUSINESS WAS CARRIED ON THIS LEASEED LAND WHICH IS NOT A FIXED ASSET OF THE ASSESSEE-COMPANY IN ITS OWN RIGHT. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPIN ION THAT THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING EXEMPTION U/S.10AA OF THE ACT . 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (GEORGE MATHAN) (R.S. SAYAL) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 13/11/2013 + + + + ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. 0 / CONCERNED CIT 4. 0- / CIT (A) ITA NO.30KOL2012 A.Y 2008-09 ITO WD-1(3), KOL V. M/S. MIDAS DFS PVT. LTD. PAGE 5 5. + , , / DR, ITAT, KOLKATA 6. 8 / GUARD FILE. BY ORDER/ , /TRUE COPY / , STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 11/11 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO. 3) DATE OF TYPING & DRAFT ORDER PLACED BEFORE MEMBE R 11/11 4) DATE OF CORRECTION 12/11 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 12/11 7) ORDER UPLOADED ON 1311 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 13/11 10) ORDER SEND TO HEAD CLARK *