ROSY JEWELLERY EXPORTS P. LTD, MUMBAI V. ITO 8(3)(3),

ITA 3814/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1743 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-06-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P PEERYA
• Assessee Lawyers: K S CHOKSHI
• Keywords: Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI R.S.PADVEKAR, JM ITA NO.3814/MUM/2009 : ASST.YEAR 2000-2001 M/S.ROSY JEWELLERY EXPORTS PVT. LTD. G-18, G & J COMPLEX II, SEEPZ ANDHERI (EAST), MUMBAI 400 096. PA NO.AAACR2039M. VS. THE INCOME TAX OFFICER WARD 8(3)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.S.CHOKSHI RESPONDENT BY : SHRI P.PEERYA O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 6.3.2009 IN RELATION TO THE ASSESSMENT YEAR 2000-2001. 2. FIRST GROUND IS AGAINST THE REDUCTION IN THE AMO UNT OF DEDUCTION U/S.10A BY REDUCING A SUM OF RS.6,02,550 TOWARDS FREIGHT RECE IPTS FROM THE EXPORT TURNOVER. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE FILED RETURN AT NIL INCOME BY CLAIMING EXEMPTION U/S.10A FOR RS.43,83,8 33. THE ASSESSING OFFICER NOTED THAT THE SALES OF RS.6,18,50,485 INCLUDED A S UM OF RS.6,02,550 TOWARDS FREIGHT, INSURANCE, CLEARING CHARGES ETC. HE TOOK I NTO ACCOUNT THE MANDATE OF EXPLANATION 2(IV) TO SECTION 10A DEFINING EXPORT TURNOVER AS NOT I NCLUDING FREIGHT, INSURANCE ETC. ON BEING SHOW CAUSED THE AS SESSEE, VIDE ITS LETTER DATED 22.10.2007, STATED THAT THE FREIGHT AND INSURANCE WAS PART AND PARCEL OF THE COST OF GOODS AND COULD NOT BE SEPARATED FROM EXPORT TURNOV ER. THE ASSESSING OFFICER, RELYING ON THE MANDATE OF EXPLANATION 2(IV) TO SECTION 10A AS REPRODUCED IN THE ASSESSMENT ORDER, CAME TO THE CONCLUSION THAT THE S AID AMOUNT OF RS.6,02,550 COULD ITA NO.3814/MUM/2009 M/S.ROSY JEWELLERY EXPORTS PRIVATE LIMITED. 2 NOT FORM PART OF `EXPORT TURNOVER ELIGIBLE FOR DED UCTION U/S.10A. HE RECALCULATED DEDUCTION U/S.10A ON PAGE 4 OF THE ASSESSMENT ORDER BY ADOPTING THE AMOUNT OF TOTAL TURNOVER AT RS.6.18 CRORE AND EXPORT TURNOVER AT RS.5.86 CRORE BEING THE AMOUNT OF TOTAL TURNOVER AS REDUCED BY FREIGHT AND INSURANCE AMOUNTING TO RS.6.02 LAKHS AND UNREALIZED EXPORT AMOUNTING TO RS.26.36 L AKHS. THEREAFTER `PROFITS OF THE BUSINESS WERE CALCULATED AND THE AMOUNT OF DEDUCTI ON WAS COMPUTED BY MULTIPLYING SUCH `PROFIT OF THE BUSINESS WITH `EX PORT TURNOVER AS DIVIDED BY THE AMOUNT OF `TOTAL TURNOVER. THIS RESULTED INTO LOWE RING THE AMOUNT OF EXEMPTION U/S.10A. THE LEARNED CIT(A) ECHOED THE ASSESSMENT O RDER ON THE QUESTION OF EXCLUSION OF THE AMOUNT OF FREIGHT, INSURANCE ETC. FROM `EXPORT TURNOVER AGAIN BY RELYING ON THE DEFINITION OF EXPORT TURNOVER AVAILA BLE AS PER EXPLANATION 2(IV) TO SECTION 10A. 3. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE C ONTENDED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN EXCLUDING THE AMOUNT OF FREIGHT ETC. FROM THE FIGURE OF `EXPORT TURNOVER, BEING THE NOMENCLATURE IN THE F ORMULA FOR ALLOWING EXEMPTION U/S.10A WITHOUT GIVING CORRESPONDING EFFECT TO THE FIGURE OF `TOTAL TURNOVER, BEING THE DENOMINATOR. IT WAS ARGUED THAT IF THE AMOUNT OF FREIGHT AND INSURANCE ETC. WAS TO BE REDUCED FROM THE FIGURE OF `EXPORT TURNOVER THEN EQUAL AMOUNT OUGHT TO HAVE BEEN REDUCED FROM THE FIGURE OF `TOTAL TURNOVER A S THE ASSESSEE WAS ENGAGED ONLY IN THE EXPORT OF GOODS. IT WAS ARGUED THAT THE RES ULTANT NET EFFECT ON THE AMOUNT OF BENEFIT U/S 10A WOULD HAVE REMAINED NEUTRAL, AS AG AINST THE AUTHORITIES BELOW REDUCING THE AMOUNT OF FREIGHT ETC. ONLY FROM THE E XPORT TURNOVER AND NOT GIVING EFFECT TO THE AMOUNT OF TOTAL TURNOVER. IN THE O PPOSITION THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE IMPUGNED ORDER. ITA NO.3814/MUM/2009 M/S.ROSY JEWELLERY EXPORTS PRIVATE LIMITED. 3 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ASSESSMENT YEAR UNDER CONSI DERATION IS 2000-2001. IT WILL BE RELEVANT TO NOTE THAT THE PROVISIONS OF SECTION 10A AS PREVAILING IN ASSESSMENT YEAR 2000-2001 PROVIDED FOR DEDUCTION IN RESPECT O F PROFIT AND GAIN DERIVED BY THE ASSESSEE FROM AN INDUSTRIAL UNDERTAKING TO WHICH TH IS SECTION APPLIES. SUB-SECTION (2) LISTS OUT CERTAIN CONDITIONS TO BE FULFILLED BY INDUSTRIAL UNDERTAKING IN ORDER TO BE ELIGIBLE FOR EXEMPTION. SUB-SECTION (3) STATES T HAT THE PROFITS AND GAINS REFERRED TO IN SUB-SECTION (1) SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF ANY 10 CONSECUTIVE ASSESSMENT YEARS BEGI NNING WITH ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE INDUSTRI AL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLE OR THINGS. SUB-SECTI ON (4) PROVIDES THAT IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE OF THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE LAST OF THE RELEVANT ASSESSMENT YEARS, THE EFFECT TO CERTAIN SECTIONS WILL BE GIVEN AS PRO VIDED THEREIN. ACCORDINGLY THERE ARE (8) SUB-SECTIONS OF SECTION 10A AND THEREAFTER EXPLANATION IS PROVIDED WHICH EXPLAINS THE MEANING OF FREE TRADE ZONE, RELEVAN T ASSESSMENT YEAR, MANUFACTURE, ELECTRONIC HARDWARE TECHNOLOGY PARK , SOFTWARE TECHNOLOGY PARK, PRODUCTS. 5. SECTION 10A, AS EXISTING UP TO A.Y. 2000-01, W AS SUBSTITUTED BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001 PROVIDI NG FOR THE DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS ETC. SUB-SECTION (2) OF THE SUBSTITUTED SEC TION STIPULATES CERTAIN CONDITIONS TO BE FULFILLED SO AS TO QUALIFY FOR DEDUCTION. SUB-SE CTION (3) PROVIDES THAT THIS SECTION APPLIES TO UNDERTAKING IF THE SALE PROCEEDS OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE ETC. ARE RECEIVED IN OR BROUGHT INTO INDIA . SUB-SECTION (4) GIVES MEANING TO THE EXPRESSION `PROFITS DERIVED FROM EXPORT OF ARTI CLES OR THINGS OR COMPUTER ITA NO.3814/MUM/2009 M/S.ROSY JEWELLERY EXPORTS PRIVATE LIMITED. 4 SOFTWARE AS USED IN SUB-SECTION (1) TO MEAN THE A MOUNT WHICH BEARS TO THE `PROFITS OF THE BUSINESS OF THE UNDERTAKING THE SAME PROPO RTION AS `EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS BEARS TO THE `TO TAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THERE ARE TWO EXPLANATIONS AFTER SUB-SECTION (9). CLAUSES (I) AND (II) OF THE EXPLANATION (2) GIVES MEANING TO COMPUTER SOFTWARE, CONVERTIBLE FOREIGN EXCHANGE. CLAUSE (IV) OF EXPLANATION (2) DEFINES EXPORT TURNOVER TO MEAN THE CONSIDERATION IN RESPECT OF EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN OR BROUGHT INTO INDIA BY THE A SSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3), BUT DO ES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS . THUS IT CAN BE SEEN THAT THE DEDUCTION U /S.10A, AS SUBSTITUTED BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001, IS ON LY IN RESPECT OF PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFT WARE. THE MECHANISM FOR WORKING OUT THE AMOUNT OF DEDUCTION HAS BEEN ENSHRI NED IN SUB-SECTION (4). IN ORDER TO GIVE EFFECT TO SUCH MECHANISM, WE NEED TO REFER INTER ALIA TO EXPORT TURNOVER AS DEFINED IN EXPLANATION (2)(IV). THE SUBSTITUTED PROVISION IS APPLICABLE ONLY WITH EFFECT FROM 1.4.2001 I.E. ASSESSMENT YEAR COMMENCING FROM 2001-2002 ONWARDS. IN THE EARLIER ASSESSMENT YEARS I.E. 2000- 2001 OR PRIOR TO THAT THE EXEMPTION WAS AVAILABLE IN RESPECT OF PROFIT AND GA IN DERIVED BY THE ASSESSEE FROM AN INDUSTRIAL UNDERTAKING TO WHICH THIS SECTION APP LIES. THERE WAS NO PROVISION REGARDING THE COMPUTATION OF PROFITS DERIVED FROM E XPORT OF ARTICLES BY MULTIPLYING EXPORT TURNOVER WITH THE PROFITS OF THE BUSINESS AN D THEN DIVIDING IT WITH TOTAL TURNOVER. SUCH EXEMPTION IN THE PRE-AMENDMENT PERIO D WAS AVAILABLE ONLY QUA THE PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKI NG TO WHICH THIS SECTION APPLIES. 6. THE ASSESSING OFFICER HAS PRESSED INTO SERVICE S ECTION 10A AS SUBSTITUTED WITH EFFECT FROM 1.4.2001 TO ASSESSMENT YEAR 2000-2 001 FOR WORKING OUT THE ITA NO.3814/MUM/2009 M/S.ROSY JEWELLERY EXPORTS PRIVATE LIMITED. 5 AMOUNT OF RELIEF. OBVIOUSLY THE SUBSTITUTED SECTIO N 10A IS NOT APPLICABLE IN ASSESSMENT YEAR 2000-2001. RESULTANTLY THERE WAS NO QUESTION OF COMPUTING PROFITS AND GAINS OF BUSINESS AND THEN CALCULATING THE AMOU NT OF DEDUCTION U/S.10A BY CONSIDERING EXPLANATION (2)(IV) . THE ENTIRE EXERCISE DONE BY THE ASSESSING OFFICER HAS RESULTED INTO FUTILITY. THE LEARNED CIT(A) TOO, FOLLOWED THE SUIT WITHOUT CONSIDERING THE ASSESSMENT YEAR UNDER CONSIDERATION . HE ALSO MECHANICALLY UPHELD THE ASSESSMENT ORDER ON THIS POINT. THE SAME POSITI ON IS CONTINUING BEFORE US. THE LEARNED A.R. HAS AGAIN ARGUED FOR THE REDUCTION OF THE AMOUNT OF FREIGHT, INSURANCE ETC. FROM THE AMOUNT OF TOTAL TURNOVER BEING THE DE NOMINATOR IN THE FORMULA WHICH IS APPLICABLE ONLY FOR AND FROM ASSESSMENT YEAR 200 1-2002. IN THE GIVEN CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT IT WILL BE JUST AND FAIR IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTO RED TO THE FILE OF A.O. WE ORDER ACCORDINGLY AND DIRECT HIM TO RE-COMPUTE THE AMOUNT OF EXEMPTION U/S.10A AS PER THE RELEVANT PROVISION, AFTER ALLOWING A REASONABL E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. GROUND NO.2 IS AS UNDER:- 2(A) THE LEARNED INCOME TAX OFFICER HAS ERRED IN A SSESSING INCOME FROM INTEREST OF RS.141296/- AS OTHER SOURCES. TH E SAME BE ASSESSED AS INCOME FROM BUSINESS. (B) THE LEARNED INCOME TAX OFFICER HAS ERRED IN RE DUCING RS.141296/- OF INTEREST FROM PROFITS OF THE BUSINESS FOR DEDUCT ION U/S.10A OF INCOME TAX ACT. SAME BE NOT REDUCED AND ALLOWED. (C) WITHOUT PREJUDICE TO (A) & (B) ABOVE, THE LEAR NED INCOME TAX OFFICER HAS ERRED IN NOT ALLOWING NETTING OFF INTER EST OF RS.1573018/-. THE SAME BE ALLOWED. ITA NO.3814/MUM/2009 M/S.ROSY JEWELLERY EXPORTS PRIVATE LIMITED. 6 8. IT IS NOTED THAT THE SUBSTANCE OF THIS GROUND IS AGAIN THE COMPUTATION OF DEDUCTION U/S.10A. SINCE THE ASSESSING OFFICER HAS APPLIED IRRELEVANT PROVISION FOR ALLOWING EXEMPTION U/S.10A AND WE HAVE RESTORED THE MATTER TO HIS FILE, THE SUBJECT MATTER OF THIS GROUND, BEING PART AND PARCEL OF THE ELIGIBLE AMOUNT OF EXEMPTION U/S.10A, SHOULD ALSO BE CONSIDERED BY THE A.O. IN T HE FRESH ROUND AS PER THE CORRECT LAW. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS SCORE ALSO. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- ( R.S.PADVEKAR ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 11 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XXIX, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.