Universal Precision Screws, New Delhi V. ACIT, New Delhi

ITA 4936/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58436 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: VED JAIN; RANI JAIN C AS
• Section: 10; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI. BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL I.T.A. NO. 4936(DEL)/2011 ASSESSMENT YEAR: 2007-08 UNIVERSAL PRECISION SCREWS, ADDITI ONAL COMMISSIONER OF 146, NEW CYCLE MARKET, VS. INCOME-T AX, RANGE-39, JHANDEWALAN EXTN., N EW DELHI. NEW DELHI-55. (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI VED JAIN & MS. RANI JAIN, C.AS RESPONDENT BY: SHR I A.K. MONGA, SR. D.R. DATE OF HEARIN G: 10.01.2012 DATE OF PRONOUN CEMENT: 10.01.2012. ORDER PER K.G. BANSAL : A.M THE FACTS OF THE CASE ARE THAT THE ASSESSEE-FI RM FILED ITS RETURN ON 29.10.2007 DECLARING TOTAL INCOME OF RS. 75,45,940 /-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 . THEREAFTER, ASSESSMENT PROCEEDINGS WERE INITIATED BY SERVING A NOTICE U/S 143(2) OF THE ACT ON THE ASSESSEE. IT WAS FOUND THAT THE FIRM WAS CONSTITUTED ON 18.10.2004 WITH SEVEN PARTNERS. THIS IS THE FIRST YEAR OF CO MMERCIAL PRODUCTION. ITA NO. 4936(DEL)/2011 2 1.1 COMING TO THE SPECIFIC, THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,29,96,359/- U/S 10B. IT WAS HELD THAT THE ASS ESSEE IS ENTITLED TO DEDUCTION OF RS. 1,16,96,723/- ONLY, BEING 90% O F THE PROFIT OF RS. 1,29,96,359/-. ACCORDINGLY, THE CLAIM OF DEDUCTI ON WAS REDUCED WHILE COMPUTING THE TOTAL INCOME, WHICH WAS COMPUTED AT RS. 88,45,280/-. 1.2 THE LD. CIT(APPEALS) CONFIRMED THIS FINDING B Y REFERRING TO THE SECOND PROVISO TO SECTION 10B, WHICH ACCORDING TO HER PROVIDED FOR DEDUCTION OF ONLY 90% OF THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE UNDERTAKING. 1.3 AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. IT HAS TAKEN UP THREE GROUNDS. GROUND NOS. 1 AND 3 ARE GENERAL AND RESIDUARY IN NATURE, WHICH WERE NOT ARGUED BEFORE US. GROUN D NO. 2 IS TO THE EFFECT THAT THE LD. CIT(APPEALS) ERRED IN HOLDING THAT T HE ASSESSEE IS ENTITLED TO DEDUCTION OF RS. 1,16,96,723/- U/S 10B AGAINST THE CLAIM OF RS. 1,29,96,359/-. 2. BEFORE US, THE LD. COUNSEL REFERRED TO THE PR OVISION CONTAINED IN THE SECOND PROVISO TO SECTION 10B WHICH IS PROVIDED FURTHER THAT FOR THE ITA NO. 4936(DEL)/2011 3 ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2003, THE DEDUCTION UNDER THIS SUB-SECTION SHALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SU CH ARTICLES OR THINGS OR COMPUTER SOFTWARE. THE CASE OF THE LD. COUNSEL I S THAT THIS PROVISION IS APPLICABLE ONLY IN RESPECT OF ASSESSMENT YEAR 2 003-04. OTHERWISE, THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE WHOLE O F THE PROFITS AND GAINS WHICH ARE DERIVED BY THE UNDERTAKING FROM THE EXPO RT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS MENTIONED IN SUB-SECTION (1). 2.1 IN ORDER TO SUPPORT THE AFORESAID CONTENTION, RELIANCE IS PLACED ON THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANC E BILL, 2002 (2002) 254 ITR 190 (STATUTES). WHILE EXPLAINING CLAUS ES 5 AND 6 OF THE BILL REGARDING DEDUCTION TO UNITS IN FREE TRADE ZONES ETC., IT IS MENTIONED THAT UNDER THE EXISTING PROVISIONS OF SECTION 10 A, PROFITS AND GAINS FROM EXPORT EARNING OF NEW UNDERTAKING ESTABLISHED IN FREE TRADE ZONES, SOFTWARE TECHNOLOGY PARKS, ELECTRONICS HARDWARE TE CHNOLOGY PARKS OR SPECIAL ECONOMIC ZONES, WHICH ARE ENGAGED IN MANUFA CTURING OR PRODUCTION OF ARTICLE OR THINGS ETC. ARE PROVIDED WITH A DE DUCTION EQUAL TO 100% OF SUCH PROFITS. SECTION 10B PROVIDES FOR A SIMIL AR DEDUCTION IN RESPECT OF EARNINGS OF 100% EXPORT ORIENTED UNITS. IT IS FURTHER MENTIONED THAT IN ITA NO. 4936(DEL)/2011 4 VIEW OF THE NEED FOR RESOURCE MOBILIZATION FOR SH ORT TERM, THE AMENDMENT SEEKS TO RESTRICT THE DEDUCTION TO 90% OF SUCH P ROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTIC LES OR THINGS ETC. FOR THE ASSESSMENT YEAR 2003-04 ONLY. 2.2 RELIANCE HAS ALSO BEEN PLACED ON CIRCULAR NO. 8 OF 2002, DATED 27.08.2002, REGARDING FINANCE ACT, 2002 AND EXPLA NATORY NOTES ON PROVISIONS RELATING TO DIRECT TAXES, (2002) 258 ITR 13 (ST.). IN PARAGRAPH NO. 19.4 OF THE CIRCULAR, IT IS MENTIONED THAT IN VIEW OF THE NEED FOR RESOURCE MOBILIZATION FOR THE SHORT TERM, FINAN CE ACT, 2002 SEEKS TO RESTRICT THE 100% DEDUCTION U/S 10A AND 10B, F OR ONE ASSESSMENT YEAR 2003-04 TO 90% OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THING S OR COMPUTER SOFTWARE. 2.3 IN REPLY, THE LD. SENIOR DR RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE CASE INVOLVE INTERPRETATION OF THE PROVISIONS CONTAINED IN THE SECOND PROVISO TO SECTION 10B AND SUB-SECT ION (1) OF SECTION 10B. THE GENERAL RULE FOR DEDUCTION IS THAT THE WHOLE OF THE PROFIT OF ELIGIBLE ITA NO. 4936(DEL)/2011 5 UNDERTAKING IS DEDUCTIBLE UNDER SUB-SECTION (1). THE SECOND PROVISO CARVED OUT AN EXCEPTION FOR GRANT OF THE DEDUCTI ON @ 90% OF SUCH PROFIT FOR THE ASSESSMENT YEAR BEGINNING ON 01.04.2003, I.E., ASSESSMENT YEAR 2003-04. THIS EXCEPTION IS CARVED OUT ONLY FOR ONE YEAR AND IT DOES NOT APPLY TO ANY SUBSEQUENT YEAR. IN SUBSEQUENT YE ARS, THE PROVISION CONTAINED IN SUB-SECTION (1) IS APPLICABLE. THER EFORE, ON THE FACE OF IT, THE EXCEPTION IS NOT APPLICABLE TO ASSESSMENT YE AR 2007-08, WHICH IS THE YEAR BEFORE US. THIS VIEW IS STRENGTHENED BY THE MEMORANDUM AND THE CIRCULAR MENTIONED ABOVE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) ERRED IN RESTRICTING THE DEDUCTION TO 90% OF THE PROFITS. 4. IN THE RESULT, THE APPEAL IS ALLOWED. SD/- SD/- (A.D. JAIN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- UNIVERSAL PRECISION SERVICES, NEW DELHI. ADDITIONAL CIT, RANGE-39, NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.