DCIT 8(2), MUMBAI V. M. SURESH JEWELLERY P.LTD, MUMBAI

ITA 4424/MUM/2013

• Counselvise Citation: 442419914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: B V JHAVERI
• Section: 10AA; 115JB; 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA , ACCOUNTANT MEMBER ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) THE DCIT -8(2), ROOM NO.216-A, AAYKAR BHAVAN, MK MARG, MUMBAI 400 020 (APPELLANT ) VS. M/S. M. SURESH JEWELLERY PVT. LTD., PLOT NO.18, SEEPZ SEZ, ANDHERI (EAST), MUMBAI 400096 (RESPONDENT) APPELLANT BY : SHRI PA WAN KUMAR BEERLA RESPONDENT BY : SHRI B.V. JHAVERI DATE OF HEARING 26/03/2015 DATE OF PRONOUNCEMENT 01/04/2015 ORDER PER I.P.BANSAL, J.M: THESE ARE APPEALS FILED BY THE REVENUE AND ARE D IRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) MUMBAI DATED 20//03/2013 AND 22/3/2013 IN RESPECT OF ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. GROUNDS OF APPEAL RAISED ARE IDENTICAL FOR BOTH THE YEARS AND READ AS UNDER: 1)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN UPHOLDING THE ASSESSEE'S CLAIM THAT THE PROFIT U/S 10A IS NOT LIABLE TO BE INCLUDED IN THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT, IGNORING THE AMENDMENT BY FINANCE ACT, 2007 W.E.F. 01.04.2008 WHEREBY THE WORDS 10A AND 10B HAVE BEEN OMITTED FROM ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) 2 EXPLANATION 1(F) AND (H) OF SECTION 115JB OF THE AC T, THEREBY BRINGING THE PROFITS LOSS OF 10A & 10B UNITS WITHIN THE PURV IEW OF MAT', 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT ASSESSEE IS NOT LIA BLE TO TAX U/S 115JB OF THE ACT AS ITS UNIT IS IN THE SPECIAL ECONOMIC Z ONE AND, HENCE ITS CASE IS COVERED WITHIN THE EXEMPTION PROVIDED IN CL AUSE (6) OF SECTION 115JB OF THE ACT, IGNORING THE SPECIFIC OMISSION OF THE WORDS 10A AND 10B IN EXPLANATION 1(F) AND (II) OF SECTION 115JB O F THE ACT BY FINANCE ACT, 2007 W.E.F. 01.04.2008.' 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO TAX U/S 115J B OF THE ACT AS ITS UNIT IS IN THE SPECIAL ECO NOMIC ZONE AND, HENCE ITS CASE IS COVERED WITHIN THE EXEMPTION PROV IDED IN CLAUSE (6) OF SECTION 115JB OF THE ACT, WITHOUT APPRECIATING T HAT THE CLAUSE(6) HAS BEEN INSERTED BY THE SPECIAL ECONOMIC ZONES ACT 2005, W.E.F. 10.02.2006 CONCURRENTLY WITH THE INSERTION OF SECTI ON 10AA, ALSO BY THE SPECIAL ECONOMIC ZONES ACT 2005, W.E.F. 10.02.2 006 AND HENCE, CLAUSE (6) OF SECTION 115JB OF THE ACT IS APPLICABL E ONLY TO 10AA UNITS AND NOT TO 10A UNITS SINCE DUE TO AMENDMENT IN CLAU SES (F) AND (II) OF EXPLANATION 1 OF SECTION 115JB BY FINANCE ACT 2007, PROFIT/LOSS OF 10A & 10B UNITS HAS BEEN EXPRESSLY BROUGHT WITHIN T HE PURVIEW OF MA T W. E. F. AY 2008-09. ' 4) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RES TORED. 2. AT THE TIME OF HEARING IT WAS SUBMITTED BY LD. A R THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISION S OF THE TRIBUNAL. (A) DINURJE JEWELLERY (P) LTD. VS. ITO, 51 TAXAMAN N.COM 41 (B) GENESYS INTERNATIONAL CORPORATION LTD. 151 TTJ 206 3. IN THE AFOREMENTIONED DECISIONS IT HAS BEEN HELD THAT FOR A UNIT LOCATED IN SEZ ENTITLED TO CLAIM DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) 3 1961(THE ACT), DEDUCTION UNDER SECTION 10A IS NOT L IABLE TO BE INCLUDED IN THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE ACT. OU R ATTENTION WAS INVITED TO THE FOLLOWING OBSERVATIONS OF THE TRIBUNAL FROM DECISIO N IN THE CASE OF DINURJE JEWELLERY PVT. LTD. VS. ITO(SUPRA) 8. NOW COMING TO THE DEPARTMENTAL APPEAL, THE GRIE VANCE OF THE REVENUE AS EXPRESSED IN GROUND NO.1 TO 4 IS THAT LD. CIT(A) HA S ERRED IN ACCEPTING THE ASSESSEES CLAIM THAT PROFIT UNDER SECTION 10A OF THE INCOME T AX ACT,1961 (THE ACT) IS NOT LIABLE TO BE INCLUDED IN THE BOOK PROFIT COMPUTED UNDER SECTI ON 115JB OF THE ACT. THE MAIN ARGUMENTS HAVE BEEN REFERRED INTO THE GROUNDS OF AP PEAL ON THE BASIS OF WHICH LD. DR HAS ARGUED THIS ISSUE. IT WAS THE CONTENTION OF L D. DR THAT WHILE HOLDING SO LD. CIT(A) HAS IGNORED THE AMENDMENT BROUGHT INTO THE STATUTE W.E.F. 1/4/2008, WHEREBY WORDS 10A AND 10B WERE OMITTED FROM EXPLANATION-1(F) & (II) OF SECTION 115JB OF THE ACT. ACCORDING TO LD. DR, IN VIEW OF THE SAID AMENDMENT, THE PROFIT/LOSS OF 10A & 10B UNITS HAVE COME WITHIN THE PURVIEW OF MAT. IT IS ALSO TH E CONTENTION OF LD. DR THAT THIS AMENDMENT IS APPLICABLE TO ASSESSMENT YEAR 2008-09 AS PER MEMORANDUM EXPLAINING THE AMENDMENT. LD. DR SUBMITTED THAT LD. CIT(A) HAS COMMITTED AN ERROR IN ACCEPTING THE CLAIM OF THE ASSESSEE IN VIEW OF SECTION 115JB(6) AS ACCORDING TO LD. DR SINCE SUB- SECTION(6) OF SECTION 115JB IS CONCURRENTLY INSERTE D ON INSERTION OF SECTION 10AA, THEREFORE, SUB-SECTION(6) OF SECTION 115JB IS APPLI CABLE ONLY TO SECTION 10AA UNITS AND NOT TO 10A UNITS. LD. DR ALSO REFERRED TO PARA-44 OF THE BOARD CIRCULAR NO.3/2008 TO CONTEND THAT EXPLANATION 1(F) AND (II) OF SECTION 1 15JB IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. 9. AS AGAINST ABOVE ARGUMENTS OF LD. DR IT IS THE C ASE OF LD. AR THAT THIS ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF MUMBAI TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPN. LTD. VS. ACIT 55 SO T 10(MUM). IT WAS SUBMITTED THAT THE SAID CASE IS ALSO IN RESPECT OF ASSESSMENT YEAR 2008-09 AND 2009-10. HE SUBMITTED THAT SIMILAR ARGUMENTS WERE RAISED BY THE REVENUE IN THAT CASE AS HAVE BEEN RAISED IN THE PRESENT CASE BY LD. DR AND AFTER CONSIDERING AL L THESE ARGUMENTS IT WAS HELD BY THE TRIBUNAL THAT THE UNIT IN SEZ WILL BE COVERED BY SU B-SECTION (6) OF SECTION 115JB OF THE ACT IRRESPECTIVE OF THE FACT THAT THOSE UNITS WERE CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. HE IN THIS REGARD INVITED OUR ATTENTION T O PARA-14 OF THE SAID DECISION TO SUBMIT THAT THE VERY BASIS OF REJECTION OF THE CLAIM OF TH E ASSESSEE BY THE AO IS THE SAME WHICH HAVE BEEN ARGUED BY LD. DR. THE SAID PARA -14 READ AS UNDER: 14. AO DID NOT ACCEPT SAID CONTENTION OF THE ASSES SEE AND STATED THAT AS PER PROVISIONS OF SECTION 115JB OF THE ACT, BOOK PROFIT IS TO BE C OMPUTED AFTER MAKING SPECIFIED ADJUSTMENTS TO THE NET PROFIT AS SHOWN IN THE PROFI T AND LOSS ACCOUNT. IN THE FINANCE ACT, 2007, THE SCOPE OF MINIMUM ALTERNATE TAX (MAT) WAS WIDENED BY INCLUDING THE INCOME EXEMPT U/S.1OA/1OB OF THE INCOME TAX ACT IN THE BOO K PROFIT. AO AFTER CONSIDERING EXPLANATORY NOTES I.E. CIRCULAR NO.3/2008 DATED 12. 3.2008 HELD THAT MAT PROVISIONS ARE APPLICABLE TO A COMPANY ON THE INCOME WHICH IS FROM ANY BUSINESS OR SERVICES DERIVED ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) 4 FROM UNIT OR SPECIAL ECONOMIC ZONE. HE FURTHER STAT ED THAT SECTION 115JB(6) WAS INSERTED BY SPECIAL ECONOMIC ZONES ACT, 2005, WHEN SECTION 1 OAA WAS ALSO INSERTED BY THE SAME ACT. SECTION 1OAA PROVIDES A DEDUCTION OF SUCH PROF ITS AND GAIN DERIVED BY AN ASSESSEE BEING ENTREPRENEUR REFERRED TO IN CLAUSE (F) OF SEC TION 2 OF SPECIAL ECONOMIC ZONE ACT, 2005 FROM ITS UNIT. AO STATED THAT BY INSERTING SUB - SECTION(6) IN SECTION 115JB, THE LEGISLATURE HAS PROVIDED AN EXEMPTION UNDER MAT ALS O TO SUCH UNITS. THEREFORE, SECTION 115JB(6) IS APPLICABLE TO AN ASSESSEE CLAIMING DEDU CTION UNDER SECTION 1OAA OF THE ACT AND NOT AN ASSESSEE CLAIMING DEDUCTION UNDER 1OA OF THE ACT. AO STATED THAT ASSESSEE HAS CLAIMED DEDUCTION OF 1OA OF THE ACT UNDER NORMA L PROVISIONS OF THE ACT. THEREFORE, FOR COMPUTING BOOK PROFIT U/S.115JB OF THE ACT, INC OME RELATES TO SEC. 1OA UNIT IS TO BE INCLUDED IN THE BOOK PROFIT. BEING AGGRIEVED, ASSES SEE FILED APPEAL BEFORE LD CIT(A). LD. AR SUBMITTED THAT THESE ARGUMENTS HAVE BEEN CON SIDERED BY THE TRIBUNAL IN PARA 20 TO 22 OF THE ORDER WHICH READ AS UNDER: 20. WE HAVE CONSIDERED SUBMISSIONS OF LD. REPRESEN TATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY CONSIDERE D THE RELEVANT PROVISIONS OF THE ACT. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEES UNI T IN MUMBAI IS LOCATED IN SEZ. SECTION 1OA PROVIDES DEDUCTION OF PROFITS DERIVED BY THE UN DERTAKING IN RESPECT OF UNITS WHICH ARE LOCATED NOT ONLY IN SEZ BUT ALSO IN THE FOLLOWI NG AREAS: FREE TRADE ZONE (FTZ) ELECTRONIC HARDWARE TECHNOLOGY PARK (EHTP) SOFTWARE TECHNOLOGY PAR (STP) EXPORT ORIENTED UNITS (EOU5) BY SPECIAL ECONOMIC ZONE ACT, 2005 W.E.F 10.2.2006, A NEW SECTION 1OAA HAS BEEN INSERTED WHICH PROVIDE EXEMPTION TO THE UNITS LOCAT ED IN SEZ. SECTION 2 OF SEZ ACT, DEFINES SEZ AS UNDER: (ZA)SPECIAL ECONOMIC ZONE MEANS EACH SPECIAL ECON OMIC ZONE NOTIFIED UNDER THE PROVISO TO SUB-SECTION (4) OF SECTION 3 AND SUB-SEC TION(1) OF SECTION 4(INCLUDING FREE TRADE AND WAREHOUSING ZONE) AND INCLUDES AN EXISTIN G SPECIAL ECONOMIC ZONE 21. IT IS EVIDENT FROM ABOVE THAT AN EXISTING SEZ U NIT WILL ALSO BE GOVERNED BY SPECIAL ECONOMIC ZONES ACT, 2005. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE BENEFITS WHICH ARE TO BE PROVIDED TO THE NEWLY ESTABLISHED U NIT IN SEZ AS PER SECTION 1OAA OF THE ACT WILL ALSO BE AVAILABLE TO THE EXISTING UNITS IN SEZ. MOREOVER, SECTION 4(1) OF SEZ ACT PROVIDES THAT AN EXISTING SEZ UNIT SHALL BE DEEMED TO HAVE BEEN NOTIFIED AND ESTABLISHED IN ACCORDANCE WITH PROVISIONS OF SEZ ACT AND THE PR OVISIONS OF SPECIAL ECONOMIC ZONES ACT SHALL APPLY TO SUCH EXISTING SEZ UNITS. IT IS A LSO OBSERVED THAT BY THE SEZ ACT, SUB- SECTION (6) TO SECTION 115JB WAS ALSO INSERTED PROV IDING THAT PROVISIONS OF SECTION 115JB SHALL NOT APPLY TO THE INCOME ACCRUED OR ARISEN ON OR AFTER 1.4.2005 FROM ANY BUSINESS CARRIED ON, OR SERVICES RENDERED, BY AN ENTREPRENEU R OR A DEVELOPER, IN A UNIT OR SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE. HENCE, INCOME OF UNITS LOCATED SEZ WILL NOT BE INCLUDED WHILE COMPUTING BOOK PROFIT FOR THE PURPOS E OF MAT AS PER SECTION 115JB(6) OF THE ACT. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS MERIT IN THE CONTENTION OF LD A.R. THAT IRRESPECTIVE OF THE FACT THAT AMENDMENT HAS BEEN MADE IN CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB(2) OF THE A CT TO APPLY THE PROVISIONS OF MAT IN RESPECT OF UNITS WHICH ARE ENTITLED TO DEDUCTION U/ S.1OA OR 1OB BUT THE UNITS WHICH ARE IN SEZ WILL CONTINUE TO GET BENEFITS FROM THE APPLICAB ILITY OF PROVISIONS OF MAT IN VIEW OF ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) 5 SUBSECTION(6) OF THE ACT. THE CONTENTION OF LD D.R. THAT ASSESSEE WILL NOT BE ENTITLED TO GET THE BENEFIT U/S.1153B(6) OF THE ACT AS ASSESSEE HAS CLAIMED DEDUCTION U/S.1OA OF THE ACT IS TO BE REJECTED FOR THE REASON THAT SECTION 115JB (6) DOES NOT REFER SECTION 1OA OR SECTION 1OAA BUT IT ONLY REFER THAT PROVISIONS OF S ECTION 115JB WILL NOT APPLY TO THE INCOME ACCRUED OR ARISEN ON OR AFTER 1.4.2005 FROM ANY BUSINESS CARRIED ON IN AN UNIT LOCATED IN SEZ. HENCE, WE ARE OF THE CONSIDERED VIE W THAT THE UNIT IN SEZ WILL BE COVERED BY SUB-SECTION(6) TO SECTION 115JB OF THE ACT IRRE SPECTIVE OF THE FACT THAT THOSE UNITS WERE CLAIMING DEDUCTION U/S.1OA OF THE ACT. WE ALSO OBSE RVE THAT BENEFIT GIVEN TO SEZ UNIT FROM THE APPLICABILITY OF PROVISIONS OF SECTION 115 JB HAS BEEN WITHDRAWN BY THE FINANCE ACT, 2011 BY INSERTING A PROVISO TO SECTION 115JB(6 ) OF THE ACT, WHICH READS AS UNDER: SECTION 15JB(6) PROVIDED THAT THE PROVISIONS OF THIS SUB-SECTION SH ALL CEASE TO HAVE EFFECT IN RESPECT OF AN PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON OR AFTER THE 1ST DAY OF APRIL, 2012. .. 22. HENCE, WE HOLD THAT AUTHORITIES BELOW WERE NOT JUSTIFIED TO INCLUDE THE BOOK PROFIT IN RESPECT OF SEZ UNIT AT MUMBAI OF THE ASSESSEE WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT FOR ASSESSMENT YEAR 2008-09. THEREFORE, WE REVERSE THE ORDERS OF AUTHORITIES BELOW BY HOLDING THAT INCOME RELATING TO SEZ UNIT A T MUMBAI IS TO BE EXCLUDED WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT FOR ASSE SSMENT YEAR 2008-09. HENCE, GROUND NO.4 OF APPEAL TAKEN BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IS ALLOWED. LD. A.R SUBMITTED THAT FOLLOWING THE SAID DECISION LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE AND HIS ORDER SHOULD BE UPHELD. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSE E ON THE BASIS OF AFOREMENTIONED DECISION OF TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPN. LTD. VS. ACIT (SUPRA). THE RELEVANT OBSERVATIONS OF THE TRIBUNAL FROM THE SAID DECISION HAVE ALREADY BEEN REPRODUCED. NO CONTRARY DECISION HAS BEEN CITED BY THE REVENUE. T HEREFORE, RESPECTFULLY FOLLOWING THE THE DECISION IN THE CASE OF GENESYS INTERNATIONAL C ORPN.(SUPRA) WE DECLINE TO INTERFERE IN THE RELIEF GRANTED BY LD. CIT(A) AND GROUND NO.1 TO 4 OF THE REVENUE ARE DISMISSED. 4. AS IT CAN BE SEEN FROM THE ABOVE DECISION, THE S AME HAS BEEN RENDERED BY FOLLOWING THE DECISION OF GENESIS INTERNATIONAL C ORPORATION VS. ACIT (SUPRA). 5. ON THE OTHER HAND, LD. DR DID NOT OBJECT TO SUC H CONTENTION OF LD.A.R. HOWEVER, HE RELIED UPON THE ORDER PASSED BY AO. 6. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES, FOLLOWING THE AFOREMENTIONED DECISION OF THE TRI BUNAL IN THE CASE OF GENESYS ITA NO.4424/MUM/2013(A.Y. 2009-10) ITA NO.4425/MUM/2013(A.Y. 2008-09) 6 INTERNATIONAL CORPORATION LTD. (SUPRA) (IN WHICH ON E OF US AM IS THE PARTY) AND ALSO THE DECISION OF DINURJE JEWELLERY PVT. LTD. VS . ITO(SUPRA) (IN WHICH ONE OF US JM IS THE PARTY), WE FIND NO MERIT IN REVENUES APP EAL FOR BOTH THE YEARS. THE RELEVANT PORTION OF THE DECISION HAS ALREADY BEEN R EPRODUCED ABOVE. 7. IN THE RESULT, REVENUES APPEAL FOR BOTH THE YEA RS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/04/2015 01/04/2015 SD/- SD/- ( , /RAJENDRA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; $% DATED 01/04/2015 / COPY OF THE ORDER FORWARDED TO : 1. & '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. +, ( & ) / THE CIT(A)- 4. +, / CIT 5. -. ),%/0 , &1 &/0 , / DR, ITAT, MUMBAI 6. 2 / GUARD FILE. / BY ORDER, * -, ), //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . ./ VM , SR. PS