DCIT, New Delhi V. M/s. Art & Craft Valley, New Delhi

ITA 3782/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52796 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARGDR
• Assessee Lawyers: V S CHAUHAN; P K RASTOGI ARS
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENC H BEFORE SHRI I.P. BANSAL, JM & SHRI A.N. PAHUJA, AM ITA NO.3782/DEL/2011 WITH CO NO.321/DEL/2011 ASSESSMENT YEAR:2007-08 D.C.I.T., CIRCLE 30(1),ROOM NO.106, DRUM SHAPED BUILDING, NEW DELHI V/S V/S V/S V/S. M/S ART & CRAFT VALLEY, 272, GARHIYA STREET, MATIA MAHAL, JAMA MASZID, DELHI-6 [PAN:AAGFA 4438 G] (APPELLANT) (RESPONDENT) ASSESSEE BY S/SHRI V.S. CHAUHAN AND P.K. RASTOGI, ARS. REVENUE BY SHRI ROHIT GARG,DR DATE OF HEARING 05-10-2011 DATE OF PRONOUNCEMENT 07-10-2011 O R D E R O R D E R O R D E R O R D E R A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA: A.N.PAHUJA:- -- - THIS APPEAL FILED ON 05.08.2011 BY THE REVENUE AND CORRESPONDING CROSS-OBJECTION [CO] FILED ON 14.09.20 11 BY THE ASSESSEE AGAINST AN ORDER DATED 31.05.2011 OF THE LEARNED CIT(A )-XXV, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.3782/D/2011[REVENUE] I.T.A. NO.3782/D/2011[REVENUE] I.T.A. NO.3782/D/2011[REVENUE] I.T.A. NO.3782/D/2011[REVENUE] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A)-XXV, NEW DELHI ERRED IN ALLOWING DEDUCTION U/ S 10B OF THE INCOME-TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT DY. DEVELOPMENT COMMISSIONER, NOIDA (SEZ) IN ITS LETTER DATED 03.12.2010 HAS CATEGORICALLY MENTIONED THAT THE ASSESSEE HAS NOT APPLIED FOR EXTENSION PERIOD OF VALIDITY OF LOP (LETTER OF PERMISSION) WHICH EXPIRED O N 06.07.2006 AND IT HAS BEEN TREATED AS CANCELLED AND THEREFORE, EXEMPTION OF 10B WAS DENIED. C.O. NO.309/D/2011[ASSESSEE] C.O. NO.309/D/2011[ASSESSEE] C.O. NO.309/D/2011[ASSESSEE] C.O. NO.309/D/2011[ASSESSEE] ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-XXV, NEW DELHI ALLOWED THE DEDUCTION U/S 10B O F THE INCOME-TAX ACT, 1961. THE RESPONDENT HAS FOLLOWED ITA N O.3782 /DEL./2011 & CO NO.321/DEL./2011 2 ALL THE REQUIREMENT AS MENTIONED IN THE SECTION 10B OF THE INCOME-TAX ACT, 1961. 1. THE RESPONDENT HAS GOT LOP (LETTER OF PERMISSION) DA TED 07.07.2006 WHICH WAS VALID TILL 06.07.2009 (COPY ENCLOSED). WHEN THE INCOME TAX DEPARTMENT HAVE ENQUIRED FROM NSPZ (NOIDA SPECIAL ECONOMIC ZONE) THE Y HAVE MENTIONED IN ITS LETTER DATED 03.12.2010 THE LOP WAS ISSUED ON 07.07.2006 WAS VALID TILL 06.07.2006. THERE WAS TYPING ERROR IN THE ABOVE LETTER, WHICH WAS ISSUED ON 07.07.2006 FOR A PERIOD OF THREE YEARS AND WAS VALID TILL 06.07.2009 INSTEAD OF 06.07.2006. WE HAVE MENTIONED IN OUR LETTER DATED 09.12.2010 ON PARA 3 AND 14.12.2010 ON PARA 3 SUBMITTED TO THE ASSESSING OFFICER . 2. THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 14 3(3) DATED 31.12.2009 AND IN THE GROUND OF APPEAL INCOME TA X DEPARTMENT MENTIONING THE LETTER WHICH WAS ISSUED ON 03.12.2010 AFTER PASSING THE ASSESSMENT ORDER DATED 31.12.2009. HOWEVER, THE LOP WAS VALID UPTO 06.07.2009 FROM 07.07.2006 SO THE FINANCIAL YEAR 2006-07 IS UNDER THE VALIDITY OF THE ABOVE LETTER. IN FACT THE ABOVE LETTER DATE D 03.12.2010 FROM NSEZ, NOIDA WAS ISSUED ONE YEAR AFTE R PASSING THE ORDER BY THE ASSESSING OFFICER. 3. THE RESPONDENT HAS WRITTEN A LETTER TO THE DEVELOPMENT COMMISSIONER OF NSEZ ON 09.12.2010 REGARDING FURNISHING WRONG INFORMATION TO INCOME TAX DEPARTMENT (COPY OF LETTER ENCLOSED) THEN MR. A.K. SINGH, ASSISTAN T DEVELOPMENT COMMISSIONER, NSEZ, NOIDA HAS WRITTEN A LETTER TO RESPONDENT DATED 14.12.2010 MENTIONING THAT I AM DIRECTED TO REFER TO YOUR LETTER DATED 09.12.2010 ON THE ABOVE MENTIONED SUBJECT AND TO SAY THAT DUE TO TYPING ERROR, THE VALIDITY OF LOP WAS MENTIONED AS 06.07.2006 INSTEAD OF 06.07.2009 IN THIS OFFICE LETTER DATED 03.12.2010 ADDRESSED TO ASSISTANT COMMISSIONER, INCOME TAX DEPARTMENT. IT IS ONCE AGAIN CLARIFIED THAT/ THE LOP ISSUED TO THE UNIT WAS VALID UPTO 06.07.2009 (COPY ENCLOSED) AS PER ABOVE LETTER IT IS CLEAR THAT LOP (LETTER OF PERMISSION) WAS VALID FOR THREE YEARS AND ASSESSMENT YEAR 2007-08 RESPONDENT WAS ENTITLED TO GET DEDUCTION AND RELIEF U/S 10B OF THE INCOME-TAX ACT, 1961. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETU RN DECLARING NIL INCOME FILED ON 31 ST OCTOBER, 2007 BY THE ASSESSEE, MANUFACTURING AND ITA N O.3782 /DEL./2011 & CO NO.321/DEL./2011 3 EXPORTING SILVER, BRASS & STEEL WARES AND REVISED ON 15.11.2007,DECLARING INCOME OF RS.4,37,806/-, AFTER BEING PROCESSED U/S 1 43(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS SEL ECTED FOR SCRUTINY WITH THE SERVICE OF NOTICE U/S 143(2) OF THE ACT ISSUED ON 2 1 ST JULY, 2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF TH E ACT. AS A RESULT OF INQUIRIES BY THE AO, A SHOW CAUSE NOTICE WAS ISSUE D TO THE ASSESSEE, INVITING THEIR ATTENTION TO LETTERS DATED 28.10.2009, 18.11. 2009 AND 16.12.2009 OF ASSISTANT DEVELOPMENT COMMISSIONER, NOID A, SEZ, AS TO WHY THEIR CLAIM FOR DEDUCTION U/S 10B OF THE ACT BE NOT DENI ED. IN RESPONSE, THE ASSESSEE REPLIED THAT THEY WERE REGISTERED AS 100% EOU VIDE LETTER DATED 7 TH JULY, 2006 OF THE NOIDA SPECIAL ECONOMIC ZONE. SINC E THE SAID REGISTRATION WAS VALID DURING THE YEAR UNDER CONSIDERATION, RELYIN G UPON CIRCULAR NO. 1/2005 DATED 6 TH JANUARY, 2005 OF THE CBDT, THE ASSESSEE CONTENDED THAT THEY WERE ENTITLED TO THE EXEMPTION U/S 10B OF THE ACT. H OWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT IN TERMS OF CBDT CIRCULAR NO.2/2009 DATED 09.03.2009 APPROVAL OF THE DEVELOPMENT COMMISSIONER HAS TO BE RATIFIED BY THE BOARD OF APPROV AL FOR EOU SCHEME. THE AO FURTHER OBSERVED THAT SINCE ITS INCEPTION IN 2001 THE ASSESSEE WAS PRODUCING THE PRODUCTS IN ITS MORADABAD FACTORY AND DEL HI OFFICE WAS ONLY FOR SALES AND MARKETING. THOUGH THE ASSESSEE CLAIMED TO H AVE TRANSFERRED ITS BUSINESS TO NOIDA UNIT, THE AO POINTED OUT THAT ONLY TURN O VER FROM MORADABAD UNIT WAS TRANSFERRED TO NOIDA. UNIT. THE WOR KERS WERE BASED IN MORADABAD UNIT, WHERE NO SALES WERE TAKING PLACE. TH E MANUFACTURING AND TRADING ACCOUNT FOR THE PERIOD 01.07.2006 TO 31.03.2007 REVEALED THAT THE ASSESSEE DEBITED A SUM OF `35,74,227.70 ON ACCOUNT OF JOB WORK CHARGES IN THE MORADABAD FACTORY. SINCE BUYERS WERE MORE OR LES S THE SAMEAS IN THE PRECEDING YEAR, THE AO WAS OF THE OPINION THAT THE NOIDA UNIT WAS FORMED FROM TRANSFER OF BUSINESS ALREADY IN EXISTENCE AT MORA DABAD. IN THESE CIRCUMSTANCES, SINCE THE ASSESSEE DID NOT FULFILL THE C ONDITIONS STIPULATED U/S 10B OF THE ACT AND FAILED TO ESTABLISH THAT A NEW UNIT WAS IN EXISTENCE FROM 01.07.2006,THE AO DENIED DEDUCTION U/S 10B OF THE ACT. ITA N O.3782 /DEL./2011 & CO NO.321/DEL./2011 4 3. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM OF ASSESSEE IN THE FOLLOWING TERMS:- 3.8. I HAVE CONSIDERED THE ADDITION OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS RECEIV ED ALL THE NECESSARY PERMISSION APPROVAL FROM THE DEVELOPMEN T COMMISSIONER OF SEZ, NOIDA AND HAS MAINTAINED THE NEC ESSARY BOOKS OF ACCOUNTS WHICH ARE AUDITED ULS 44AB AND ULS 10B(5). IT IS APPARENT FROM THE ORDER OF THE AO THAT THE AO HAS NOT F OUND ANY SPECIFIC WRONG DOING ON THE PART OF THE ASSESSEE TO DENY THE DEDUCTION ULS LOB. IT IS ALSO APPARENT THAT THE ASSESSEE HAS FOLLOWED INSTRUCTIONS AND GUIDELINES OF THE CBDT CIRC ULARS AND THE DEVELOPMENT COMMISSIONER OF SEZ, NOIDA. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, I AM OF THE VIEW THAT THE ASSESSING OF FICER IS NOT JUSTIFIED TO DISALLOW THE BENEFICIAL PROVISIONS OF DEDUCTION U/S 10B AND ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTE D TO ALLOW THE CLAIM OF THE ASSESSEE AND AS SUCH THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED. 4. THE REVENUE IS IN NOW APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED THE OR DER OF THE A.O. ON THE OTHER HAND, THE LEARNED AR ON BEHALF OF THE ASSESSEE W HILE INVITING OUR ATTENTION TO CIRCULAR NO.68 DATED 14 TH MAY, 2009 OF THE EXPORT PROMOTION COUNCIL FOR EOUS AND SEZS CONTENDED THAT THAT APPROVAL GRANTED BY DEVELOPMENT COMMISSIONER UNDER DELEGATED POWERS OF BO ARD OF APPROVAL, IS VALID FOR GRANTING THE EXEMPTION U/S 10B OF THE ACT. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE F ACTS OF THE CASE. THE ONLY ISSUE RAISED IN THE GROUND BEFORE US BY THE REVENUE IS THAT DEPUTY DEVELOPMENT COMMISSIONER, NOIDA (SEZ) IN THEIR LETTER DATED 3 RD DECEMBER, 2010 MENTIONED THAT THE ASSESSEE DID NOT APPLY FOR EXTENSION OF VALIDITY OF LETTER OF PERMISSION, WHICH EXPIRED ON 06. 07.2006. HOWEVER, A MERE GLANCE AT THE LETTER DATED 07.07.2006 ISSUED BY NOI DA (SEZ) PLACED ON PAGE 4 AND 5 OF THE PAPER BOOK, REVEALS THAT APPROVAL WAS FOR THREE YEARS. SUBSEQUENTLY, VIDE LETTER DATED 14 TH DECEMBER, 2010 IT WAS CLARIFIED BY THE ASSTT. DEVELOPMENT COMMISSIONER, NOIDA, SEZ THAT APPROV AL WAS VALID UPTO 6 TH JULY, 2009 AND NOT 6 TH JULY,2006 AS MENTIONED IN THEIR EARLIER LETTER ADDRESSED TO THE AO. IN THE LIGHT OF THESE UNDISPUTED FA CTS, ESPECIALLY WHEN ITA N O.3782 /DEL./2011 & CO NO.321/DEL./2011 5 THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CO NTROVERTING THE AFORESAID FINDINGS OF THE LEARNED CIT(A), WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND RAISED BY THE REVENUE IS DISMISSED . SINCE GROUND RAISED IN THE CROSS OBJECTION IS MERELY SUPPORTIVE, ACCORDINGLY ,CROSS OBJECTION BECOMES INFRUCTUOUS. 6. IN RESULT, BOTH THE APPEAL OF THE REVENUE AND THE COR RESPONDING CO BY THE ASSESSEE, ARE DISMISSED. SD/- SD/- (I.P. BANSAL) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. D.C.I.T., CIRCLE-30(1), ROOM NO.106, DRUM SHAPED BUILDING, NEW DELHI. 2. M/S ART & CRAFT VALLEY, 272, GARHIYA STREET, MAT IA MAHAL, JAMA MASJID, DELHI-06 3. CIT(A)-XXV, NEW DELHI 4. CIT CONCERNED. 5. DR, ITAT,A BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY/ // /ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT