ITO, New Delhi V. M/s. Jayshree Gems & Jewellery, Delhi

ITA 3615/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82175 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A. NO.3615 /DEL/2013 ASSESSMENT YEAR : 2009-10 ITO, WARD 19(2), VS. M/S. JAYSHREE GEMS & JEWELLE RY, NEW DELHI POCKET B/32, ASHOK VIHAR, PHASE II, DELHI-110 052 GIR / PAN: AACFJ5119K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIVEK NANGIA, SR. DR RESPONDENT BY : SHRI SURESH GUPTA, CA ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST ORD ER OF LD. CIT(A) DATED 21.03.2013. THE ONLY GROUND TAKEN BY THE REV ENUE IS THE GRIEVANCES WITH THE ACTION OF LD. CIT(A) BY WHICH H E HAD DELETED ADDITION OF RS.2,21,81,483/- WHICH WAS MADE BY A.O. ON ACCOUNT OF DENIAL OF DEDUCTION CLAIMED BY ASSESSEE U/S 10A OF THE I. T. ACT, 1961. 2. AT THE OUTSET, THE LD. A.R. SUBMITTED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDER OF THE TRIB UNAL AND IN THIS RESPECT, OUR ATTENTION WAS INVITED TO LD. CIT(A)S ORDER WHE REIN HE HAS MENTIONED ABOUT THIS FACT. 3. LD. D.R. ON THE OTHER HAND RELIED UPON THE ORDER OF A.O. 4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE A.O. AFTER RELYI NG UPON THE EARLIER YEAR ORDER IN THE CASE OF ASSESSEE ITSELF, HAS DISALLOWE D THE DEDUCTION U/S 10A. THE RELEVANT PART OF THE ASSESSMENT ORDER IS REPROD UCED BELOW: ITA NO.3615/DEL/2013 2 THE ASSESSEE CONTINUES TO BE IN THE BUSINESS OF MA NUFACTURING OF JEWELLERY ON JOB WORK BASIS FROM THE EOU UNIT WHICH WAS APPROVED BY DEVELOPMENT COMMISSIONER GOVT. OF INDIA . THERE IS NO CHANGE IN THE FACTS OF THE CASE FROM THOSE IN AS SESSMENT YEAR 2003-04, 2005-06 AND 2008-09. SINCE THE CLAIM OF D EDUCTION U/S 10A IS DISPUTED BY THE DEPARTMENT IN HIGH COURT IN THE APPEALS FOR ASSESSMENT YEAR 2003-04 AND 2005-06 AND BEFORE ITAT IN APPEALS FOR ASSESSMENT YEAR 2008-09, THE DEDUCTION OF RS.2, 21,81,483/- CLAIMED BY THE ASSESSEE FOR THE REASONS GIVEN IN TH OSE ASSESSMENTS IS DISALLOWED. 5. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS. LD. CIT(A) RELIED UPON EARLIE R ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF, DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 8. DECISION: 8.1 I HAVE CONSIDERED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER WHILE DISALLOWING DEDUCTION U/S 10A, SUBMISSIONS OF THE APPELLANT MADE BEFORE ME AND ORDER OF CIT APPEAL FOR A.Y. 200 8-09 AND THE ORDER OF HON'BLE ITAT, DELHI FOR A.Y. 2003-04 PASSE D ON 25.11.2008 AND FOR A.Y. 2005-06 PASSED ON 19.06.200 9. 8.2 IN THE CASE OF APPELLANT THE DEDUCTION U/S 10A WAS ALSO DISALLOWED IN THE A.Y. 2003-04, A.Y. 2005-06 AND A. Y. 2008-09 AND SINCE AS PER THE ASSESSING OFFICER THERE IS NO CHAN GE IN THE FACTS OF THE CASE, THE ASSESSING OFFICER WAS THE OPINION THA T THE DEDUCTION U/S 10A HAS TO BE DISALLOWED. THIS ISSUE WAS CONSID ERED BY THE LD. CIT (APPEALS) AS WELL AS HON'BLE ITA T AND AFTER CO NSIDERING THE SAME THE DEDUCTION U/S 10A WAS ALLOWED TO THE APPEL LANT IN THE ASSESSMENT YEAR 2003-04. THE SAME WAS FOLLOWED FOR THE A.Y. 2005-06. EVEN IN A.Y. 2008-09, THE LD. CIT(A) HAS A LLOWED DEDUCTION U/S 10A TO THE APPELLANT ON THE BASIS OF THE ORDER OF THE HON'BLE ITAT OR A.Y. 2003-04 DATED 25.11.2008. 8.3 PERUSAL OF THE SCHEDULE NUMBER 9, NOTES ON ACCO UNTS, ANNEXED TO THE BALANCE SHEET AS ON 31.03.2009, SHOWS THE PA RA 2 AND 3 AS UNDER: '2. NATURE OF BUSINESS ITA NO.3615/DEL/2013 3 FIRM IS ENGAGED IN MANUFACTURING GOLD JEWELLERY FR OM GOLD SUPPLIED BY OVERSEAS BUYER 3. VALUE OF PURCHASE AND SALE PURCHASE VALUE STATED IN PROFIT & LOSS ACCOUNT IS V ALUE OF GOLD SUPPLIED BY OVERSEAS BUYER FREE OF COST FOR MAKING OF JEWELLERY FOR EXPORT TO THE SUPPLIER. PURCHASE VALUE HAS BEEN COM PUTED AT PREVAILING CUSTOM GOLD RATE. ACCORDINGLY SALE VALUE OF JEWELLERY HAS BEEN ARRIVED ON THE BASIS OF PREVAILING RATE OF GOLD AT CUSTOMS WITH ADDITION OF MAKING CHARGES. ' 8.4 IT IS SEEN THAT THE PARA 2 AND 3 OF THE SCHEDUL E NUMBER 9, NOTES ON ACCOUNTS, ANNEXED TO THE BALANCE SHEET AS ON 31.03. 2008 ARE EXACTLY SIMILAR. THE ASSESSING OFFICER HAS ALSO STA TED THAT THERE IS NO CHANGE OF THE FACTS OF THE CASE FROM THOSE IN A. Y. 03-04, 05-06 AND 08-09. FURTHER, THERE IS NOTHING ON RECORD TO S HOW ANYTHING TO THE CONTRARY. 8.5 THE HON'BLE ITAT ON PAGE 3 OF THE JUDGMENT FOR A.Y. 2005-06 DATED 19.06.2009 HAS STATED THAT 'FURTHER, IT IS CL EAR THAT GOLD JEWELLERY IS COMMERCIALLY DIFFERENCE FROM GOLD BULL ION AND THE TWO ITEMS ARE TREATED SEPARATELY IN THE COMMERCIAL WORL D. THEREFORE IT IS ALSO CLEAR THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF MANUFACTURING THE EXPORT OF GOLD JEWELLERY. ' SINCE THE FACTS OF THE ASSESSMENT YEAR 2009-10, WHICH IS UNDER CONSIDERATI ON, ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2003-04, THEREFO RE THE RATIO OF THE DECISION OF LD. CIT (APPEALS) AS WELL AS HON'BL E ITAT FOR ASSESSMENT YEAR 2003-04 IS APPLICABLE TO THIS ASSES SMENT YEAR ALSO. IN THE APPEAL ORDER FOR A.Y. 2003-04, THE HON'BLE I TAT HAS HELD THAT THE CASE OF THE ASSESSEE IS CLEARLY A CASE OF MANUFACTURE OF GOLD ORNAMENT AND IT IS NOT A CASE OF ASSEMBLING OR PROCESSES OF IMPORTED COMPONENTS. THE RELEVANT PORTION OF THE HO N'BLE ITAT JUDGMENT FOR A.Y. 2003-04 IS REPRODUCED HEREUNDER:- 'WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE CIT(A) HAS GIVEN A CLEAR FINDING THAT THE ASSES SEE SET UP THE UNDERTAKING AFTER OBTAINING A LICENSE FROM MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA, DATED 18.08.2000 . NEW MACHINERY WAS PURCHASED FOR SETTING UP THE UNIT FOR THE PURPOSE OF MANUFACTURE OF THE JEWELLERY. THE MACHINERY WAS OF LOW VALUE BUT IT WAS NEW MACHINERY. THE ASSERTION OF THE ASSESSEE IN THIS BEHALF ITA NO.3615/DEL/2013 4 COULD NOT BE DISPLACED BY THE ASSESSING OFFICER IN THE REMAND REPORT. SUB-SECTION (2) OF SECTION 10A LAYS DOWN TH REE CONDITIONS FOR GRANT OF DEDUCTION, I.E., -(I) THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE AN ARTICLE OR THING ON OR AF TER 01.04.2001 IN ANY SPECIAL ECONOMIC ZONE; (U) IT IS NOT FORMED BY SPLITTING OR RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE; AND (III) IT IS NOT FORMED BY TRANSFER TO A NEW BUSINESS OF MACHINERY O R PLANT PREVIOUSLY USED FOR ANY PURPOSE. THE FACTS ON RECOR D ARE THAT THE ASSESSEE SET UP THE UNDERTAKING IN THE NOIDA EXPORT PROCESSING ZONE ON THE BASIS OF LICENSE DATED 18.08.2000. HOWE VER, THE DATE OF COMMENCEMENT OF MANUFACTURE IS NOT ASCERTAINABLE FROM THE ORDER. THE FINDING OF THE CIT(A), WHICH COULD NOT B E DISPLACED BEFORE US, IS THAT THE UNDERTAKING WAS SET UP WITH NEW MACHINERY AND, THEREFORE, IT IS NOT FORMED BY SPLIT TING UP OR RECONSTRUCTION OF AN EXISTING BUSINESS OR BY TRANSF ER TO IT THE MACHINERY OR PLANT PREVIOUSLY USED FOR ANY BUSINESS . THEREFORE, THERE IS NOTHING ON RECORD TO SHOW THAT ANY OF THE AFORESAID CONDITIONS IS NOT FULFILLED BY THE ASSESSEE. FURTHE R, IT IS CLEAR THAT GOLD JEWELLERY IS COMMERCIALLY DIFFERENT FROM GOLD BULLION AND THE TWO ITEMS ARE TREATED SEPARATELY IN THE COMMERCIAL WORLD. THEREFORE, IT IS ALSO CLEAR THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GOLD JEWELL ERY. IT HAD CARRIED OUT MANUFACTURING PROCESS IN THE IMMEDIATEL Y PRECEDING YEAR ALSO AS CAN BE SEEN FROM THE ORDER OF THE CIT (APPEALS) WHEN HE MENTIONED THAT THE EXPENSES UNDER THE HEAD 'DESIGNING CHARGES, FABRICATION CHARGES AND FACTORY MAINTENANCE' WERE COMMENSURATE FOR THIS YEAR WHEN COMPARED WITH SIMILAR EXPENSES OF THE LAST YEAR. THUS, IT IS CLEAR THAT A LL THE THREE CONDITIONS ARE SATISFIED IN THE INSTANT CASE. ACCOR DINGLY, IT IS HELD THAT THE CIT (APPEALS) WAS RIGHT IN HOLDING THAT TH E ASSESSEE IS ELIGIBLE TO GET DEDUCTION U/S 10A OF THE ACT. WHILE DOING SO, WE NEED NOT REFER TO BOARD CIRCULAR NO. 495, UNDER WHI CH A LIBERAL INTERPRETATION WAS PLACED ON THE SECTION WHEN IT WA S STATED THAT THERE ARE SEVERAL CASES OF UNITS, SET UP FOR FREE T RADE ZONES, WHICH ONLY ASSEMBLE OR PROCESS IMPORTED COMPONENT FOR EXP ORT, THE BENEFIT TO THE COUNTRY BEING THE VALUE ADDED BY THE SE PROCESSES. AS AN INCENTIVE FOR EARNING FOREIGN EXCHANGE, SECTION 10A HAS BEEN AMENDED WITH EFFECT FROM 01.04.1991, WHEN IT WAS FI RST INTRODUCED, TO CLARIFY THAT UNITS THAT MERELY ASSEMBLE OR PROCE SS GOODS FOR EXPORT WOULD ALSO GET THE BENEFIT OF TAX HOLIDAY. T HE CASE OF THE ASSESSEE IS CLEARLY A CASE OF MANUFACTURE OF GOLD ORNAMENTS AND IT IS NOT A CASE OF ASSEMBLING OR PROCESSING IMPORTED COMPONENT S. THUS, ITA NO.3615/DEL/2013 5 GROUND NOS. 1 AND 3 ARE DISMISSED. ' 'THE NEXT ISSUE TO BE DECIDED IS WHETHER THE ASSESS EE HAD UNDERTAKEN THE EXPORT OF GOLD JEWELLERY ON PRINCIPA L TO PRINCIPAL BASIS OR WHETHER IT WAS A CASE OF THE TRANSACTIONS BETWEEN THE PRINCIPAL AND THE AGENT. THE CASE OF THE ASSESSING OFFICER WAS THAT THE GOLD BULLION WAS IMPORTED FROM THE SJ AND AFTER MANUFACTURING JEWELLERY, IT WAS EXPORTED TO THE SJ, LEADING TO VA LUE ADDITION OF RS.1,50,06,382/-. THEREFORE, THIS WAS A CASE WHERE THE ASSESSEE WAS ACTING AS AN AGENT OF THE SJ. FURTHER, SINCE ON LY A SUM OF RS.1,50,06,382/- WAS REPATRIATED INTO INDIA IN CONV ERTIBLE FOREIGN EXCHANGE, THE DEDUCTION HAS TO BE ALLOWED ON THIS B ASIS BY TAKING EXPORT TURNOVER AT RS.1,50,06,382/- AND NOT RS.19,2 3,80,313/-. IN THIS CONNECTION, THE CIT (APPEAL) EXAMINED THE EXPO RT INVOICES WHICH WERE ALSO FURNISHED TO THE FOREIGN EXCHANGE D EALERS. THE INVOICES SHOWED THE VALUE OF THE GOLD CONSUMED AND THE MAKING CHARGES AND ALSO THE DETAILS OF GOLD BULLION RECEIV ED FROM THE FOREIGN BUYER. ON THE BASIS OF THE EXPORT INVOICES, IT CAN BE SAID THAT INSTEAD OF PAYING THE PURCHASE CONSIDERATION I N CASH BY WAY OF CONVERTIBLE FOREIGN EXCHANGE, THE SAME WAS ADJUSTED AGAINST THE EXPORT INVOICES. NO DIFFERENCE WOULD HAVE BEEN MADE TO THE SITUATION IF THE ASSESSEE HAD PAID FOR THE GOLD BUL LION IN FOREIGN EXCHANGE AND THEREAFTER RECEIVED EXPORT PROCEEDS IN TERMS OF MAKING CHARGES AND THE VALUE OF THE GOLD IN CONVERT IBLE FOREIGN EXCHANGE. THE PROCEDURE ADOPTED BY THE ASSESSEE MER ELY REDUCED THE INCIDENCE OF THE PAYMENT OF IMPORT PROCEEDS SEP ARATELY. TO OUR MIND, THIS PROCEDURE DOES NOT MAKE A DIFFERENCE IN THE SITUATION THAT THE ASSESSEE RECEIVED EXPORT PROCEEDS IN CONVE RTIBLE FOREIGN EXCHANGE AT RS.19,23,80,313/- AND PAID PURCHASE CON SIDERATION IN CONVERTIBLE FOREIGN EXCHANGE AT RS.17, 81,10,505/-. THESE TRANSACTIONS WERE SHOWN TO THE FOREIGN EXCHANGE DEA LERS WHICH MEANS THAT RESERVE BANK OF INDIA GUIDELINES IN THE MATTER PERMIT SUCH AN ADJUSTMENT TO AVOID DUPLICATION OF TRANSACT ION OF REPATRIATION OF MONEY. BESIDES THAT, THERE IS NO EV IDENCE ON RECORD THAT THE ASSESSEE WAS AN AGENT OF THE SJ THEREFORE, IT IS HELD THAT T HE CIT (APPEALS) WAS RIGHT IN HOLDING THAT THE ASSESSEE HAD RECEIVED EXPORT PROCEEDS OF RS.19, 23,80,313/- IN CONVERTIBLE FOREIGN EXCHAN GE BY THE DUE DATE. THUS, GROUND NOS. 2,4,5,6 AND 7 ARE ALSO DISM ISSED. 9. IN VIEW OF ABOVE FINDINGS IT IS HELD THAT APPELL ANT IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE I.T. ACT. ACCORDINGLY , THE ITA NO.3615/DEL/2013 6 DISALLOWANCE OF DEDUCTION U/S 10A AMOUNTING TO RS.2 ,21,81,483/- IS DELETED. 6. FROM THE ABOVE FINDING OF LD. CIT(A), WE FIND TH AT LD. CIT(A) HAS FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL IN THE C ASE OF ASSESSEE ITSELF AND HAS RIGHTLY FOLLOWING THE SAME, ALLOWED THE CLAIM O F THE ASSESSEE. SINCE THERE IS NO CHANGE IN FACTS AND CIRCUMSTANCES OF TH E CASE, AND FOLLOWING OF TRIBUNAL ORDER IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 7. IN VIEW OF ABOVE, APPEAL FILED BY THE REVENUE IS DISMISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DEC., 2014. SD./- SD./- ( A. T. VARKEY ) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05 TH DEC., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER