Granite Mart Limited, Bangalore V. ITO, Bangalore

ITA 354/BANG/2012

• Counselvise Citation: 35421114 RSA 2012
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Deemed export
• Section: 143(3); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 354 /BANG/20 1 2 (ASSESSMENT YEAR : 2007-08) M/S. GRANITE MART LIMITED, 41-D, KIADB INDL. AREA, HOSKOTE, BANGALORE. PAN AABCG 8488L VS. INCOME TAX OFFICER, WARD 11(2), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI PADAMCHAND KHINCHA. RESPONDENT BY : SHRI A. SUNDAR RAJAN. DATE OF HEARING : 31.10.2012. DATE OF PRONOUNCEMENT : 9.11.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DT.10.01.2012 FOR ASSESSMENT YEAR 2008-09. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE COMPANY (HEREINAFTER REFERRED TO A S THE ASSESSEE), ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GRANITE SLABS AND MONUMENTS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 30.09.2008 DE CLARING TOTAL INCOME OF RS.3,35,997 AFTER CLAIMING DEDUCTION OFRS.7,39,37,292 UNDER SEC TION 10 B OF THE INCOME TAX ACT, 1961 2 ITA NO.354/BANG/12 (HEREIN AFTER REFERRED TO AS 'THE ACT'). THE RETURN WAS PROCESSED UNDER SECTION 143(1) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSMENT WAS COMPLETED BY AN ORDER UNDER SECTION 143(3) OF THE ACT DT.28.10.2010 WHEREIN THE INCOME OF THE ASSESSE E WAS DETERMINED AT RS.96,48,263. IN THE ORDER OF ASSESSMENT, THE ASSESSING OFFICER DETERMINED THE ELIGIBLE DEDUCTION UNDER SECTION 10 B OF THE ACT AT RS.1,08,31,895 AS AGAINST RS.7,39,39,292 CLAIMED BY THE ASSESSEE. 2.2 AGGRIEVED BY THE ORDERS OF LEARNED CIT(APPEALS) DT.10.1.2012, THE ASSESSEE IS NOW IN APPEAL BEFORE US. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PAS SING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED CIT (APPEALS) HAS ALS O ERRED IMPARTIALLY CONFIRMING THE SAME. THE ORDERS PASSED BEING BAD I N LAW AND ARE LIABLE TO BE QUASHED. 2. IN ANY CASE AND WITHOUT PREJUDICE, THE ASSESSIN G OFFICER HAD ERRED IN REDUCING THE DEDUCTION UNDER SECTION 10B OF THE IT ACT, 1961 FROM RS. 2,01,44,161 TO RS. 1,08,31,895 BY DENYING DEDUCTION UNDER SECTION 10B OF THE IT ACT, ON THIRD PARTY SALES AND INTER-UNIT TRANSFE RS / SALES. 3. THE AUTHORITIES BELOW ASSESSING OFFICER HAS NO T PROPERLY APPRECIATED THE LAW RELATING TO THE DEDUCTION / EXEMPTION UNDER SEC TION 10B OF THE IT ACT, AND ALSO HAVE NOT PROPERLY APPLIED AND APPRECIATED THE INTENT BEHIND THE PROVISIONS OF THE LAW. 4. THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECI ATING THAT : I) THE DEDUCTION IS GIVEN TO ENCOURAGE EXPORTS AND THAT THE PROVISIONS ARE TO BE LIBERALLY CONSTRUED; II) THE DEDUCTION IS AVAILABLE TO A ELIGIBLE UNDERT AKING FOR EXPORTS WHICH NEED NOT NECESSARILY MEAN EXPORT OUT OF INDIA. III) THAT THE SCHEME IN PURSUANCE OF WHICH SECTION 10A / 10B WERE INTRODUCED IN THE ACT, CONSIDER SALE OF GOODS FROM ONE ELIGIBLE U NIT TO ANOTHER ELIGIBLE UNIT AS EXPORT; 3 ITA NO.354/BANG/12 IV) THE EXIM POLICY ADMINISTERED BY MINISTRY OF COM MERCE CONSIDERS SUCH TRADE AS EXPORT TRADE AND SUCH CLARIFICATION OF ONE WING OF GOVERNMENT IS BINDING ON THE OTHER WING OF THE GOVERNMENT. 5. THE APPELLANT IS ENTITLED FOR DEDUCTION / EXEMP TION U/ 10B OF IT ACT, ON THE INTER UNIT TRANSFERS AND THIRD PARTY EXPORTS AND TH E SAME IS TO BE ALLOWED TO THE APPELLANT AS CLAIMED AND THE DENIAL OF THE DEDU CTION / EXEMPTION AS DONE BY AUTHORITIES BELOW BEING ERRONEOUS BEING NOT IN ACC ORDANCE WITH LAW IS TO BE QUASHED. 6. THE APPELLANT ALSO DENIES LIABILITY TO PAY I NTEREST. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO BE DELETED. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS A DDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE APPELLANT BE ALLO WED THE DEDUCTION UNDER SECTION 10B OF IT ACT, 1961 ON ITS ENTIRE TURNOVER INCLUDING THE THIRD PARTY EXPORTS AND INTER UNIT TRANSFERS AND INTEREST LEVIE D BE DELETED. 4.0 THE GROUNDS RAISED AT S.NOS.1, 6 AND 7, BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 5.1 IN THE GROUNDS RAISED IN S.NOS. 2 TO 5 , THE ASSESSEE CHALLENGES THE ASSESSING OFFICERS ACTION IN REDUCING THE DEDUCTION UNDER SE CTION 10 B OF THE ACT TO RS.1,08,31,395 BY DENYING DEDUCTION UNDER SECTION 10 B ON THIRD PA RTY SALES AND INTER-UNIT TRANSFERS/SALES. THE LEARNED COUNSEL FOR THE ASSES SEE ARGUED THAT THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECIATING THAT THE DEDUCTION U NDER SECTION 10 B IS GIVEN TO ENCOURAGE EXPORTS AND THAT THE PROVISIONS ARE TO BE LIBERALLY CONSTRUED; THAT THE DEDUCTION IS AVAILABLE TO UNDERTAKING FOR EXPORTS WHICH NEED NOT NECESSARILY MEAN OUT OF INDIA; THAT THE SCHEME OF DEDUCTION UNDER SECTION 10B ENVISAGES THAT SALE OF GOODS FROM ONE ELIGIBLE UNIT TO ANOTHER ELIGIBLE UNIT AS EXPORTS AS PER TH E EXIM POLICY AS ADMINISTERED BY THE MINISTRY OF COMMERCE, GOVT. OF INDIA CONSIDERS SUCH TRADE AS EXPORT AND THEREFORE THIS IS 4 ITA NO.354/BANG/12 BINDING ON THE OTHER WINGS OF THE GOVT. OF INDIA. THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, FAIRLY CONCEDED THAT THIS ISSUE RAISED IN GROUNDS OF APPEAL AT S.NOS.2 TO 5 ARE SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISI ON OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2005-06 AND 2006-07 IN ITA NOS. 22 & 763/BANG/2010 DT.17.9.2010. 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD. 5.3 BOTH SIDES HAVE BEEN HEARD AND WE HAVE CAREF ULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD AND THE JUDICIAL DECISION CITED. WE FIND THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL WHICH HAD CONSIDERED THIS VERY ISSUE THAT IS RAISED IN THIS APPEAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2005-06 & 2006-07 WHILE A DJUDICATING ON THE ELIGIBLE DEDUCTION UNDER SECTION 10 B OF THE ACT. IN ITS OR DER IN ITA NOS.22 & 763/BANG/2010 DT.17.9.2010, THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DISCUSSED THIS ISSUE AT PARAS 8 TO 12 THEREOF WHICH ARE EXTRACTED AND REPRODUCED HEREU NDER : 8. NEXT, WE WILL CONSIDER THE GROUND RAISED BY THE ASSESSEE IN RESPECT OF THE CLAIM OF EXEMPTION MADE U/S 10B ON THE SALES MADE T O OTHER EXPORT ORIENTED UNITS. THIS ISSUE WAS ALSO CONSIDERED BY THE ITAT A BENC H IN THE CASE MENTIONED ABOVE I.E TATA ELXSI LTD., VS. ACIT, 115 TTJ 423. AFTER E XAMINING THE SCHEME OF SECTION U/S 10A WHICH IS IN PARI PASSU TO SEC. 10B, THE TRIBUNAL HELD THAT SUCH DEEMED EXPORT IS ENTITLED ONLY FOR THE BENEFITS OF DUTY DR AW BACK AND EXEMPTION FROM BASIC EXCISE DUTY. SUCH DEEMED EXPORTS DO NOT GET ENTITLE D FOR THE DEDUCTION U/S 10A. AS THE ABOVE JUDGMENT SQUARELY APPLIES TO THE PRESENT CASE, WE HOLD THAT THE ASSESSEE COMPANY IS NOT ENTITLED FOR DEDUCTION U/S 10B IN RE SPECT OF SALES MADE TO OTHER EXPORT UNITS. THIS GROUND OF THE ASSESSEE IS REJECT ED. 9. THE THIRD ISSUE TO BE CONSIDERED IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B IN RESPECT OF THE SALES MADE THRO UGH THIRD PARTIES. IT IS THE CASE OF THE ASSESSEE THAT THESE THIRD PARTIES ARE EXPORT HO USES AND THEY HAVE EXPORTED ALL SUCH GOODS SOLD BY THE ASSESSEE TO THEM FOR THE PUR POSE OF SUCH EXPORT AND AS 5 ITA NO.354/BANG/12 SUCH THEY ARE ENTITLED FOR DEDUCTION U/S 10B. IT IS VERY INTERESTING TO NOTE AS STATED ABOVE THAT EVEN A DEEMED SALE MADE TO ANOTHER EXPOR T UNIT IS HELD TO BE NOT ENTITLED FOR DEDUCTION U/S 10A IN THE CASE ALREADY RELIED ON US IN TATA ELXSI LTD VS. ACIT. THEREFORE, THE ANSWER TO THIS GROUND IS READILY AVA ILABLE IN THAT JUDGMENT ITSELF. BY FOLLOWING THE RATIO OF THE ABOVE JUDGMENT, WE COME TO THE CONCLUSION THAT THE ASSESSEE CANNOT CLAIM THE DEDUCTION U/S 10B IN RESP ECT OF THE SO CALLED EXPORTS MADE THROUGH THIRD PARTIES/EXPORT HOUSES. 10. WITHOUT PREJUDICE TO THE ABOVE LEGAL CONCLUS ION, WE ALSO FIND THAT THE ASSESSEE HAS NOT EXPLAINED THE FACTUAL BACKGROUND I N A CONSISTENT MANNER, WHICH WOULD AT LEAST PROMPT THE ASSESSING OFFICER TO EXAM INE WHETHER THE ASSESSEE IS ENTITLED FOR SUCH BENEFIT AT ALL. WE HAVE GONE THRO UGH THE DETAILED ASSESSMENT ORDER PASSED IN THIS CASE. THE ASSESSING OFFICER HAS LIST ED THE NAMES OF 398 PARTIES WHO ARE ACCORDING TO THE ASSESSEE EXPORT HOUSES AND TO WHOM THE ASSESSEE HAD MADE SALES FOR THE PURPOSE OF EXPORTING THE GOODS OUT OF INDIA. THE TOTAL OF SUCH SALES COMES TO RS.18,92,92,177/-. THE ASSESSING OFFICER H AS GIVEN THE DATE OF THE TRANSACTION, NAME OF THE PARTY AND INVOICE VALUE IN INDIAN RUPEE. THE ASSESSEE HAS MADE A GENERAL SUBMISSION THAT IN ALL THESE CASES, THE EXPORT HOUSES HAVE NOT CLAIMED THE BENEFIT OF SEC. 10B AND FOR ALL PRACTIC AL PURPOSE THEY HAVE DISCLAIMED THAT BENEFIT. WHEN WE SPECIFICALLY ASKED FOR, WHETH ER ALL THESE EXPORT HOUSES HAVE FILED DISCLAIMER CERTIFICATES WITH THE ASSESSEE COM PANY, THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE FAIRLY CONCED ED THAT SUCH DISCLAIMER CERTIFICATES WOULD BE AVAILABLE IN CERTAIN CASES AN D NOT IN RESPECT OF ALL 398 CASES. THERE IS NO DOUBT ON THE PROPOSITION THAT TWO PARTI ES AT A TIME CANNOT CLAIM THE DEDUCTION U/S 10B ON THE SAME AMOUNT OF TURNOVER. I N THE PRESENT CASE, IT IS STATED THAT ALL THESE 398 PERSONS HAVE EXPORTED GOODS ON T HE BASIS OF THE GOODS SUPPLIED BY THE ASSESSEE. IN ORDER TO CONSIDER THE ELIGIBILI TY OF THE ASSESSEE COMPANY FOR THE BENEFIT OF DEDUCTION U/S 10B, IT IS VERY MUCH NECES SARY FOR THE ASSESSING OFFICER TO SATISFY HIMSELF THAT THE 398 EXPORTERS HAVE NOT MAD E ANY SUCH CLAIM IN THEIR HANDS AND IF THE BENEFIT IS ALLOWED TO THE ASSESSEE THERE WOULD NOT BE ANY CASE OF DUPLICATION. THE ASSESSEE HAS FAILED IN THIS VERY B ASIC TEST. APART FROM THE ABOVE, THERE ARE NO COMPILED AND COMPARABLE DETAILS WITH R EFERENCE TO THE TRANSACTIONS OF THESE 398 PARTIES, SO AS TO MAKE A FINDING THAT ALL THESE 398 PARTIES HAVE RELIGIOUSLY FOLLOWED THE RULES AND PROCEDURES OF EXPORTS AND TH E TRANSACTIONS HAVE ESTABLISHED A CLEAR AND SPEAKING NEXUS WITH THE SALES MADE BY T HE ASSESSEE TO THOSE PARTIES. 11. THEREFORE, IT IS VERY DIFFICULT FOR US TO DIGEST THAT ALL THE 398 PARTIES ARE EXPORT HOUSES THAT THEY HAVE EXPORTED THOSE GOODS EARMARKE D AND SOLD BY THE ASSESSEE COMPANY AND THEY HAVE NOT CLAIMED THE BENEFIT OF SE C. 10B AND FOR THAT MATTER, THEY HAVE NOT CLAIMED ANY OTHER BENEFITS ENTITLED FOR EX PORTERS. WHEN ALL THESE ESSENTIAL FACTUAL MATTERS ARE UNEXPLAINED, IT IS IMPOSSIBLE T O CONSIDER THE CONTENTION OF THE ASSESSEE FOR EXEMPTION U/S 10B, EVEN FOR THE SAKE O F AN ACADEMIC DISCUSSION. 12. THEREFORE, THIS CONTENTION OF THE ASSESSEE REGARDING EXEMPTION U/S 10B VIS-- VIS EXPORT THROUGH EXPORT HOUSE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE IN ITA NOS.22 & 773/BANG/2010 ( SUPRA), WE HOLD THAT THE ASSESSEE IS 6 ITA NO.354/BANG/12 NOT ENTITLED FOR DEDUCTION UNDER SECTION 10 B OF TH E ACT IN RESPECT OF SALES MADE TO OTHER EXPORT UNITS AND SO CALLED EXPORTS MADE THROUGH THI RD PARTIES / EXPORT HOUSES. IT IS ORDERED ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEE'S APPEAL IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOV., 2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE