The ACIT, Circle-2,, JAMNAGAR V. M/s. Harsh International, JAMNAGAR

ITA 409/RJT/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5913 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 31-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI
• Assessee Lawyers: P M MAHARISHI CA
• Keywords: Deemed export; Competent authority
• Section: 143(3); 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 1079/RJT/2010 / ASSESSMENT YEAR : 2007-08 INCOME-TAX OFFICER, WARD-2(1), JAMNAGAR ( / APPELLANT) M/S. HARSH INTERNATIONAL, PLOT NO.633, GIDC, PHASE-II, DARED, JAMNAGAR PAN : AADFH 1518 B / RESPONDENT ITA NO. 409/RJT/2013 / ASSESSMENT YEAR : 2006-07 ACIT CIRCLE-2 JAMNAGAR ( / APPELLANT) M/S. HARSH INTERNATIONAL, PLOT NO.633, GIDC, PHASE-II, DARED, JAMNAGAR PAN : AADFH 1518 B / RESPONDENT ! '# / REVENUE BY DR. J. B. JHAVERI, DR $% ! '# / ASSESSEE BY SHRI P. M. MAHARISHI, CA ' & ' % ( / DATE OF HEARING 01.01.2014 ) %( / DATE OF PRONOUNCEMENT 03.01.2014 / ORDER .. , / T. K. SHARMA, J. M.: THESE TWO APPEALS BY THE REVENUE ARE AGAINST TWO SEPARATE ORDERS OF LD. CIT( A), JAMNAGAR DATED 28.05.2010 AND DATED 06.08.2013 FOR THE ASSESSMENT YEAR 2007-0 8 AND 2006-07 RESPECTIVELY. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A FIRM, ENGAGED IN MANUFACTURING OF BRASS PARTS, ELECTRICAL PARTS AND ITS EXPORTS. THE ISSUE INVOLVED IN BOTH THE ASSESSMENT YEARS IS COMMON, THEREFORE FOR THE SAKE OF CONVENIE NCE, WE TAKE THE ASSESSMENT YEAR 2007-08 AS THE LEAD CASE. FOR THE ASSESSMENT YEAR 2 007-08, THE ASSESSEE FILED THE RETURN OF INCOME ON 15.11.2007 DECLARING TOTAL INCO ME AT RS.96000/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S 143(3) OF THE INC OME-TAX ACT ON 09.12.2009, WHEREIN HE HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUC TION U/S 10B OF THE ACT IN RESPECT OF SALES WORTH RS.45,01,945/- MADE TO ANOTHER E.O.U. W HEREIN THE SALE CONSIDERATION IS NOT RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE. ON APPEAL, IN THE IMPUGNED ORDER, LD. CIT(A) HELD THAT THE ASSESSEE I S ENTITLED TO DEDUCTION U/S 10B ON 1079-RJT-2010 & 409-RJT-2013 - HARSH INTERNATIONAL 2 SUM OF RS.45,01,945/- WHICH WAS RECEIVED FROM THE E EFC ACCOUNT OF THE PURCHASER AND THIS AMOUNTS TO RECEIPT OF SALE CONSIDERATION IN CO NVERTIBLE FOREIGN EXCHANGE AS THIS AMOUNT WAS RECEIVED IN FOREIGN CURRENCY. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL ON THE FO LLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE ASSESSEE FIRM IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT I N RESPECT OF SALES WORTH RS.45,01,945/- MADE TO ANOTHER E.O.U. WHEREIN THE S ALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXC HANGE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THE FACT THAT THE SALES MADE BY THE ASSESSEE TO ANOTHER E.O.U. HA D NEVER CROSSED THE INDIAN TERRITORY IN THE SAME SHAPE AND FORM AND THAT THE T ERM DEEMED EXPORT IS ALIEN TO THE INCOME-TAX LAW AND THAT THE DEEMING PROVISIO NS OF ONE STATUTE CANNOT BE APPLIED TO ANOTHER STATUTE AS IT LEADS TO ABSURD IN TERPRETATION NOT INTENDED BY THE LEGISLATURE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, ALT ER OR WITHDRAW ANY GROUNDS OF APPEAL. 3. IN THE ASSESSMENT YEAR 2006-07, ON IDENTICAL FAC TS THE ASSESSING OFFICER DISALLOWED EXEMPTION U/S 10B OF RS.33,07,719/-. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) IN PARAGRAPH NO. 5.6 OBSERVED THAT THE A SSESSEE HAS SOLD GOODS TO 100% EXPORT ORIENTED UNITS (EOU). HOWEVER, THE ASSESSEE HAS RECEIVED SALE PROCEEDS PARTLY IN INDIAN RUPEES AND BALANCE IN FOREIGN CONVERTIBLE EXCHANGE. HE ACCORDINGLY HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10B WITH RESPECT TO SALE PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE ONLY; AND IN RESPECT O F SALE PROCEEDS RECEIVED IN INDIAN RUPEES, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U /S 10B EVEN IF THE SALE IS TREATED AS DEEMED EXPORT. AGGRIEVED WITH HIS ORDER, THE REVEN UE IS IN APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS:- THE CIT(A) ERRED IN LAW AND IN FACTS IN ALLOWING F URTHER DEDUCTION OF RS.20,91,604/- U/S 10B OF THE ACT. 4. WE HAVE HEARD BOTH SIDES. DURING THE COURSE OF H EARING, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT THE CONTROVERSY INVOL VED IN THE APPEAL IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION DATED 28.0 9.2012 OF ITAT RAJKOT BENCH IN THE 1079-RJT-2010 & 409-RJT-2013 - HARSH INTERNATIONAL 3 CASE OF ITO V. MONARCH OVERSEAS IN ITA NO.253/RJT/2 011 FOR THE ASSESSMENT YEAR 2007-08. THE RELEVANT DISCUSSION IS CONTAINED IN P ARAGRAPHS NO. 6 AND 7 WHICH ARE REPRODUCED HEREUNDER:- 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CO NSIDERED THEIR SUBMISSIONS. IT IS CLEAR ON PLAIN READING OF SUB-SE CTION (3) OF SECTION 10B THAT SECTION 10B APPLIES TO THE UNDERTAKING IF THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTE SOFTWARE EXPORTED OUT OF INDIA ARE RECEIV ED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WI THIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR, WITHIN SUCH F URTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. IT IS QUITE APP ARENT THAT TWO CONDITIONS ARE STIPULATED BY SUB-SECTION (3) FOR AVAILING THE RELI EF UNDER SECTION 10B. FIRST CONDITION IS THAT THE ARTICLES OR THINGS OR COMPUTE R SOFTWARE MUST BE EXPORTED OUT OF INDIA WHILE THE SECOND CONDITION IS THAT TH E SALE PROCEEDS THEREOF MUST BE RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE STIPULATED PERIOD. BOTH THE AFORESAID CONDITIONS ARE CUMULATIVE AND THEREFORE B OTH OF THEM HAVE TO BE SATISFIED TOGETHER. MERE RECEIPT OF CONVERTIBLE FOR EIGN EXCHANGE IS NOT SUFFICIENT UNLESS THE ASSESSEE ALSO ESTABLISHES THAT THE CONVE RTIBLE FOREIGN EXCHANGE SO RECEIVED REPRESENTS SALE PROCEEDS OF ARTICLES OR TH INGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA. PLAIN AND SIMPLE MEANING O F THE TERM EXPORTED OUT OF INDIA AS USED IN SECTION 10B(3) WOULD ENTAIL THE T RANSFER OF GOODS OUT OF THE TERRITORY OF INDIA AND THEREFORE THE GOODS MUST PHY SICALLY MOVE OUT OF INDIA. IN OUR CONSIDERED VIEW, THE ASSESSEE NEEDS TO SATISFY FIRSTLY THAT IT HAS EXPORTED SPECIFIED GOODS OUT OF INDIA AND THEREAFTER IT HAS ALSO TO SATISFY THAT THE SALE PROCEEDS THEREOF HAVE BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE STIPULATED PERIOD. THE AFORESAID POSITION IS WELL B ROUGHT OUT ON PLAIN READING OF SUB-SECTION (3) OF SECTION 10B AND THEREFORE DOES N OT REQUIRE ANY AUTHORITY TO SUPPORT IT. HOWEVER, THE JUDGMENT DATED 26.4.2011 O F THE HONBLE ANDHRA PRADESH HIGH COURT IN M/S SWAYAM CONSULTANCY PRIVAT E LTD. V. ITO, TAX APPEAL NO.62 OF 2011 AND OF THE HONBLE DELHI HIGH COURT I NDIA DEL (P) LTD VS. CIT (2012) 250 CTR (DEL) 344 ARE QUITE APPOSITE. 7. AS EVIDENT FROM THE AFORESAID DISCUSSION, RELIEF U/S 10B IS NOT AVAILABLE UNLESS THE GOODS OF SPECIFIED NATURE ARE SHOWN TO H AVE BEEN EXPORTED BY THE ASSESSEE OUT OF INDIA AND THE SALE PROCEEDS THEREOF HAVE BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE SPECIFIED P ERIOD. THE ASSESSEE, APART FROM PLEADING THAT THE GOODS HAVE BEEN SOLD TO 100% E.O.U., HAS PLACED NO MATERIAL ON RECORD TO ESTABLISH THAT THE GOODS OF S PECIFIED NATURE HAVE REALLY BEEN EXPORTED OUT OF INDIA BY HIM. THE ASSESSEE DOE S NOT THEREFORE SATISFY THE PRIMARY CONDITION OF HAVING EXPORTED SPECIFIED GOOD S OUT OF INDIA AND IS THEREFORE NOT ENTITLED TO RELIEF U/S 10B ON THE SOL E BASIS THAT IT HAS SOLD GOODS OF SPECIFIED NATURE TO 100% EOU OR RECEIVED THEIR SALE PROCEEDS IN CONVERTIBLE FOREIGN EXCHANGE. IN THIS VIEW OF THE MATTER, THE O RDER OF THE CIT(A) DESERVES TO BE REVERSED AND IS ACCORDINGLY REVERSED. RESULTANTL Y, THE ORDER OF THE ASSESSING OFFICER IN THIS BEHALF IS RESTORED. APPEAL FILED BY THE DEPARTMENT IS ALLOWED. BEFORE US, BOTH SIDES ADMITTED THAT THE FACTS OF AS SESSEES CASE ARE IDENTICAL WITH THAT OF MONARCH OVERSEAS (SUPRA). WE, THEREFORE, FO LLOWING THE DECISION DATED 28.09.2012 OF ITAT RAJKOT BENCH IN THE CASE OF ITO V. MONARCH OVERSEAS (SUPRA), REVERSE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND H OLD THAT THE ASSESSEE FIRM IS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT IN RESPEC T OF SALES MADE TO ANOTHER E.O.U. 1079-RJT-2010 & 409-RJT-2013 - HARSH INTERNATIONAL 4 WHEREIN THE SALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE. CONSEQUENTLY, BOTH THE APPEALS OF THE RE VENUE ARE ALLOWED. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- SD/- (B. R. JAIN) (T. K. SHARM A) #( '* / ACCOUNTANT MEMBER '* /JUDICIAL MEMBER *#+ ,*-/ ORDER DATE 03.01.2014 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- INCOME-TAX OFFICER,WARD-2(1),JAMNAGAR 2. /RESPONDENT-M/S. HARSH INTERNATIONAL, PLOT NO.633, GIDC, PHASE-II, DARED, JAMNAGAR 3. '-2- % & 3% / CIT, JAMNAGAR 4. & 3%- / CIT(A), JAMNAGAR 5 . 678 % , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *#+ '# / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.