Green Fire Agri Commodities Limited, Hyderabad V. Dy.CIT, Circle-2(3), Hyderabad

ITA 516/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69909 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Transfer pricing; Competent authority; Condonation of delay
• Section: 143(3); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 516/HYD/2013 ASSESSMENT YEAR : 2006-07 M/S. GREEN FIRE AGRI COMMODITIES LTD. (FORMERLY NORTHGATE TECHNOLOGIES LTD.) HYDERABAD PAN: AABCN7753P VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE -2(3), HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI P.V.S.S. PRASAD RESPONDENT BY: SRI P. SOMA SEKHAR REDDY DATE OF HEARING: 31 .1 0 .2013 DATE OF PRONOUNCEMENT: 27 .11.2013 O R D E R PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT-IV, HYDERABAD DATED 27.02.2012 FOR A.Y. 2006- 07. 2. AT THE OUTSET THERE IS A DELAY OF 346 DAYS FOR WH ICH THE ASSESSEE HAS FILED A PETITION FOR CONDONING THE DEL AY. THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF KEWALKUMAR JAIN VS. ACIT, CIRCLE-4, PUNE (2013) 37 TAXMANN.COM 248 ( PUNE-TRIB.) WHEREIN IT HAS BEEN HELD AS FOLLOWS : 'ASSESSMENT ORDER PASSED IN CASE OF ASSESSEE WAS SE T ASIDE BY COMMISSIONER IN EXERCISE OF POWER UNDER SECTION 263. AGAINST SAID REVISIONAL ORDER, ASSESSEE FILED INSTA NT APPEAL BELATEDLY ALONG WITH AN APPLICATION SEEKING CONDON ATION OF DELAY. IT WAS NOTED THAT ASSESSEE MISCONSTRUED LAW BY ASSUMING THAT SINCE MATTER WAS REMITTED BACK TO ASS ESSING ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 2 OFFICER, HE COULD AGITATE CONSEQUENTIAL ORDER TO B E PASSED BY ASSESSING OFFICER IN APPEAL PROCEEDINGS BEFORE COMM ISSIONER (APPEALS) ONLY. THUS ASSESSEE ENTERTAINED A BELIEF THAT AS ORIGINAL ASSESSMENT HAD BEEN SET ASIDE, THERE WAS NO NECESSITY OF CHALLENGING REVISIONAL ORDER OF COMMI SSIONER BEFORE TRIBUNAL. WHETHER ON FACTS, MISCONSTRUCTION OF ORDER OF COMMISSIONER BY ASSESSEE AND NOT FILING AN APPEAL AGAINST IT WITHIN PRESCRIBED TIME WAS WRONG BUT SAME COULD NO T BE CONSIDERED TO BE MALA FIDE OR WITH ANY ULTERIOR PU RPOSE. HELD, YES, WHETHER, THEREFORE, A CASE FOR CONDONATION OF DELAY IN FILING APPEAL BEFORE TRIBUNAL WAS MADE OUT. HELD Y ES'. 2.1. RESPECTFULLY FOLLOWING THE DECISION OF THE COO RDINATE BENCH (SUPRA), WE CONDONE THE DELAY IN FILING THE PRESENT APPEAL AND PROCEED TO DECIDE THE MATTER ON MERITS. 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS FILED NIL RETURN OF INCOME FOR A.Y. 2006-07 ON 28.11.2006 ADMITTING TOTAL INCOM E OF RS. 5,50,48,490 AFTER CLAIMING DEDUCTION U/S. 10A OF THE INCOME-TAX ACT, 1961 AT RS. 23,14,78,968. THE AO COMPLETED THE ASSE SSMENT U/S. 143(3) OF THE ACT ON 24.12.2009 DETERMINING THE TOTA L INCOME OF THE ASSESSEE AT RS. 5,64,64,480 AND RECOMPUTED THE DEDU CTION U/S. 10A AT RS. 23,00,62,980. 4. BY VIRTUE OF THE POWERS VESTED U/S. 263 OF TH E ACT, THE CIT WAS OF THE OPINION THAT THE ASSESSMENT ORDER PASSED BY THE ACIT U/S. 143(3 ON 24.12.2009 IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE INWARD FOREIGN REMITTANCES U/S. 10A(3) OF THE ACT SHOULD BE RECEIVED BY THE ASSESSEE WITHIN SI X MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW THE ASSESSEE TO BRING THE FOREIGN EXCHANGE INTO INDIA. THE ASSESSEE DID NOT RECEIVE THE FOREIGN EXCHANGE WITHIN THE STIPULATED TIME U/S. 10A(3) AND HENCE NOTICE ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 3 U/S. 263 OF THE ACT WAS GIVEN ON 29.12.2011 TO THE A SSESSEE TO SUBMIT ITS OBJECTIONS. 5. IN RESPONSE, THE COMPANY HAS FILED WRITTEN SUBMI SSIONS ON 17.01.2012. IN THE WRITTEN SUBMISSIONS, THE ASSESSE E RELIED ON THE CIRCULAR NO. 25 OF RESERVE BANK OF INDIA DATED 01.1 1.2004, WHEREIN IT IS STATED THAT THE COMPETENT AUTHORITY CAN ALLOW TO REALIZE AND REPATRIATE THE FULL VALUE OF EXPORT PROCEEDS WITHIN A PERIOD OF 12 MONTHS FROM THE DATE OF THE EXPORT . THE ASSESSEE F URTHER SUBMITTED THAT SALE PROCEEDS WERE RECEIVED WITHIN 7 MONTHS FR OM THE DATE OF EXPORT AND NO SPECIFIC APPROVAL FROM RBI IS REQUIRE D. THE ASSESSEE ADMITTED THAT THE SALES PROCEEDS WERE NOT RECEIVED WITHIN SIX MONTHS BUT THEY WERE RECEIVED WITHIN 12 MONTHS FROM THE DATE OF EXPORT. 6. ON APPEAL THE CIT PERUSED THE CIRCULAR NO. 25 OF RESERVE BANK OF INDIA DATED 1.11.2004. HE OBSERVED THAT THI S CIRCULAR WAS ISSUED UNDER FOREIGN EXCHANGE MANAGEMENT ACT (FEMA). THE RELEVANT PORTION FROM THE CIRCULAR IS REPRODUCED AS UNDER: 'ATTENTION OF AUTHORIZED DEALER (AD) BANKS IS INVITED TO THE PROVISO 3 OF SUB REGULATION (1) OF REGULATION 9 OF NOTIFICATION NUMBER FEMA 23/2000-RB DATED MAY 3, 2000 IN TERMS OF WHICH THE RESERVE BANK HAS BEEN EMPOWERED TO EXTEND THE PERIOD FOR REALIZATION AND REPATRIATION OF EXPORT PROCEEDS TO INDIA BEYOND SIX MONTHS.' 7. THE CIT HELD THAT, NO DOUBT, THE RESERVE BANK OF INDIA IS THE COMPETENT AUTHORITY FOR RELAXING THE PERIOD OF SIX MONTHS UNDER THE PROVISIONS OF THE INCOME TAX ACT. BUT AN ASSESSEE H AS TO MAKE AN APPLICATION TO THE RESERVE BANK OF INDIA FOR CLAIMI NG THE RELAXATION UNDER THE PROVISIONS OF SECTION 10A(3) OF THE INCOME TAX ACT AND THE ASSESSEE CANNOT RELY ON THE GENERAL CIRCULAR OF THE RESERVE BANK OF INDIA. THE CIT, THEREFORE, HELD THAT AS THE ASSESS EE DID NOT PRODUCE THE PERMISSION FROM COMPETENT AUTHORITY FOR BRINGIN G THE FOREIGN ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 4 EXCHANGE INTO INDIA BEYOND 6 MONTHS FROM THE DATE O F EXPORT, THE ASSESSING OFFICER SHOULD NOT HAVE ALLOWED THE DEDUCT ION U /S. 10A ON THE SUM OF RS. 15 CRORES AND THUS, THE ACTION OF TH E ASSESSING OFFICER IN ALLOWING THE DEDUCTION U/ S. 10A IS ERRON EOUS AND IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CIT FURTHER HELD THAT THE ASSESSMENT ORDER U/S. 143(3) DATED 24.12.2009 P ASSED BY THE ACIT, CIRCLE-16(1), HYDERABAD IS TO BE SET ASIDE FOR COMPUTATION OF DEDUCTION/S. 10A, DE NOVO AND THE AO SHOULD GIVE OPPORTUNITY TO THE ASSESSEE FOR PRODUCING THE PERMISSION FROM THE RESE RVE BANK OF INDIA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT IS ERRONEOUS IN LAW AND ON THE FACTS OF THE CASE. 2. THE LD CIT IS LEGALLY AND FACTUALLY INCORRECT IN CONCLUDING THAT THE ASSESSEE COMPANY DID NOT RECEIVE THE SALE PROCEEDS OF RS 15 CRORES WITHIN 6 MONTHS AND THEREBY SETTING ASIDE THE DEDUCTION U/S 10A TO RS 11,00,14,953/- DETERMINED BY THE LD. ASSESSING OFFICER (AO) ON THE GROUND THAT THE ASSESSEE COMPANY DID NOT PRODUCE THE PERMISSION FROM THE COMPETENT AUTHORITY I.E., RBI FOR BRINGING THE FOREIGN EXCHANGE INTO INDIA BEYOND 6 MONTHS FROM THE DATE OF EXPORT BUT WITHIN 12 MONTHS. 3. THE LD. CIT OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE COMPANY HAD RECEIVED THE SALE PROCEEDS WITHIN 12 MONTHS FROM THE DATE OF EXPORT AS SPECIFIED IN CIRCULAR NO 25 OF RBI DATED 1.11.2004 WHICH CLEARLY STATES THAT EXPORT ORIENTED UNITS (EOU'S) WILL BE ALLOWED TO REALISE AND REPATRIATE THE FULL VALUE OF EXPORT PROCEEDS WITHIN A PERIOD OF TWELVE MONTHS FROM THE DATE OF EXPORT. 4. THE LD. CIT ERRED IN OBSERVING THAT RBI IS THE COMPETENT AUTHORITY FOR RELAXING THE PERIOD OF 6 MONTHS UNDER THE PROVISIONS OF THE IT ACT AND THAT THE ASSESSEE COMPANY HAD TO MAKE AN APPLICATION TO RBI FOR CLAIMING RELAXATION UNDER THE PROVISIONS OF SECTION 10A(3) OF THE IT ACT, ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 5 WHEN THERE WAS A BLANKET PERMISSION GRANTED BY RBI VIDE CIRCULAR NO. 25 DTD. 1.11.2004 AS EXPLAINED IN GROUND (3) ABOVE. 5. THE LD. CIT OUGHT TO HAVE ALLOWED ASSESSEE'S CLAIM OF SECTION 10A AGAINST DISPUTED EXPORT TURNOVER OF RS. 15 CRORES ALSO ALONG WITH OTHER TURNOVER ON THE BASIS OF RBI CIRCULAR MENTIONED ABOVE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THE CASE OF HCL EAI SERVICES LTD. VS DCIT [2013] 35 TAXM ANN.COM 146 (BANGALORE TRIBUNAL) THE TRIBUNAL HELD THAT WHERE T HE AMOUNT OF EXPORT PROCEEDS WERE BROUGHT INTO INDIA BY THE ASSE SSEE WITHIN EXTENDED TIME PERMITTED BY RBI CIRCULAR, SUCH RECEI PTS SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER AND SINCE THE AMOUNT HAS BEEN BROUGHT INTO INDIA WITHIN THE EXTENDED TIME PE RMITTED BY RBI THE SAME IS ELIGIBLE FOR EXEMPTION U/S. 10A. 9. IN THE ALTERNATIVE, THE ASSESSEE HAS SUBMITTED A S FOLLOWS : 'THE TOTAL AMOUNT DUE FROM OUR ASSOCIATED ENTERPRISE AXIL INC FOR THE FINANCIAL YEAR 2005-06 WAS USD 60,66,356/- . OUT OF THIS AN AMOUNT OF USD 43,96,652/- WAS REALISED AT OUR BRANCH BANK I.E., COMMERCE BANK NEW JERSEY USA FROM 1 ST AUGUST TO 21 ST MARCH, 2006. THE BALANCE OF USD 16,69,704 (60,66,3 56- 43,96,652) WAS RECEIVED IN INDIA AT HDFC BANK AFTE R 31.03.2006 BUT BEFORE 30.09.2006. THE EXPORT PROCEEDS WERE ACTUALLY CREDITED TO A SEPARATE ACCOUNT WITH A BAN K OUTSIDE INDIA (COMMERCE BANK, NEW JERSEY, USA) WHICH WAS O PENED WITH THE APPROVAL OF THE RESERVE BANK OF INDIA AND THE AMOUNT RECEIVED WAS USD 43,96,652/- OR RS.19,39,03 ,197/- AS MENTIONED HEREINABOVE. FROM THIS AN AMOUNT OF USD 27,99,975/- WAS TRANSFERRED TO HDFC BANK ON 3 RD JANUARY, 2007. THE ASSESSEE DID NOT TAKE INTO ACCOUNT THE F ACT THAT RECEIPT OF THE PROCEEDS IN A SEPARATE ACCOUNT OUTS IDE INDIA WOULD AMOUNT TO A CONSTRUCTIVE RECEIPT OF EXPORT P ROCEEDS IN ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 6 INDIA. THE ASSESSEE WAS UNDER THE WRONG IMPRESSION THAT ONLY IF THE PROCEEDS WERE BROUGHT INTO INDIA WITHIN 6 M ONTHS FROM THE END OF THE FINANCIAL YEAR OR THE EXTENDED PERI OD OF TIME WHICH IS 12 MONTHS, IT WOULD BE ELIGIBLE FOR EXEMP TION U/S. 10A. HOWEVER, THE FACT REMAINS THAT ONCE THE AMOUNT IS RECEIVED IN THE BANK BRANCH OUTSIDE INDIA THE ASSE SSEE CAN CLAIM EXEMPTION AS PER EXPLANATION 2 TO SECTION 10 A. FURTHER, EXPLANATION 2 TO SECTION 10A READS AS UNDER 'THE SALE PROCEEDS REFERRED TO IN THIS SUB SECTION SHALL DEE MED TO HAVE BEEN RECEIVED IN INDIA WHERE SUCH SALE PROCEEDS AR E CREDITED TO A SEPARATE ACCOUNT MAINTAINED FOR THE PURPOSE B Y THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPR OVAL OF THE RESERVE BANK OF INDIA'. THEREFORE, AS PER THE EXPL ANATION GIVEN SUPRA THE ASSESSEE IS ELIGIBLE FOR EXEMPTION . THIS FACT OF HAVING RECEIVED THE EXPORT PROCEEDS WITHIN 6 MONTH S IS A BANK OUTSIDE INDIA WAS NOT BROUGHT TO THE NOTICE O F THE LEARNED CIT AT THE TIME OF ASSESSMENT U/S 263 NOR WAS IT BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER DURI NG ASSESSMENT PROCEEDINGS IN THE LIGHT OF ORDER U/S. 263 OF THE IT ACT, 1961'. 10. THE LEARNED DR FAIRLY CONCEDED THAT THE ISSUE U NDER DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND SIMILAR ISSUE HAS COME BEFORE THE BANGALORE BENCH 'A' OF THE TRIBUNAL IN THE CASE OF HCL EAI SERVICES L TD. VS. DCIT, CIRCLE 11(4) IN 35 TAXMAN.COM 146 (BANGALORE). THE RELEVANT PORTION IS EXTRACTED BELOW: '35. IT IS THE STAND OF THE ASSESSEE THAT IN VIEW O F THE RBI CIRCULAR DATED 01.11.2004, THE ASSESSEE WHO IS A UN IT SET UP UNDER THE STP SCHEME, IS ALLOWED TO REALIZE AND REP ATRIATE THE FULL VALUE OF EXPORT PROFITS WITHIN A PERIOD OF 12 MONTHS FROM THE DATE OF EXPORTS. OUR ATTENTION WAS DRAWN TO THE PROVISIONS OF SECTION 10A(3) OF THE ACT WHEREBY RBI IS A ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 7 COMPETENT AUTHORITY TO PRESCRIBE THE PERIOD WITHIN WHICH THE SALE PROCEEDS FROM EXPORT ARE TO BE BROUGHT INT O INDIA. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE AO SHOULD BE DIRECTED TO ADD THE SUM OF FOREIGN EXCHANGE BROUGHT INTO INDIA BY THE ASSESSEE WITHIN THE EXTENDED PERIOD OF 12 MONTHS PERMITTED BY THE RBI CIRCULAR [REF: RBI/2004 -05/264 A.P. (DIR SERIES) CIRCULAR NO. 25 DATED NOVEMBER 1, 2004. 36. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND WE FIND THAT IN THE LI GHT OF THE RBI CIRCULAR AND THE PROVISIONS OF SECTION 10A(3) O F THE ACT, THE AMOUNT OF EXPORT PROCEEDS BROUGHT INTO INDIA WI THIN THE EXTENDED TIME PERMITTED BY RBI SHOULD NOT BE EXCLUD ED FROM THE EXPORT TURNOVER. WE HOLD AND DIRECT ACCOR DINGLY. GROUND NO. 4 IS ALLOWED.' 12. IN THE PRESENT CASE, THE ASSESSEE-COMPANY ALSO SUBMITTED A LETTER TO THE LEARNED A.O. FROM HDFC BANK BEING THE AUTHORIZED DEALER WHICH CLEARLY STATED THAT THEY ARE AUTHORIZE D BY RBI UNDER SUB SECTION (1) OF SECTION 10 FOREIGN EXCHANGE MANA GEMENT ACT, 1999 (FEMA) AS AUTHORISED PERSON. CONFIRMATION WAS P ROVIDED BY THE AUTHORIZED DEALER I.E., HDFC BANK THAT THE REAL ISATION AND REPATRIATION OF THE REMITTANCES OF RS. 15 CRORES WA S PERMITTED BY RBI UNDER NOTIFICATION NO.FEMA/25/2000-RB DATED 3.5. 2000 TO BE BROUGHT INTO INDIA WITHIN 12 MONTHS FROM THE DATE O F EXPORT. THE PROCEEDS HAVE BEEN BROUGHT INTO INDIA WITHIN EXTEND ED TIME STIPULATED BY RBI AND HENCE, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL. FURTH ER, AS SEEN FROM THE RECORD THE ASSESSEE HAS RECEIVED THE AMOUNT WIT HIN THE PERMITTED PERIOD BY THE COMPETENT AUTHORITY. ACCORDI NGLY, THE ORDER OF ASSESSING OFFICER IS NOT PREJUDICIAL TO THE INTER ESTS OF REVENUE NOR IS ERRONEOUS. THEREFORE, THE OPINION EXPRESSED BY T HE CIT IS NOT CORRECT AND ACCORDINGLY, THE CIT DOES NOT HAVE JURI SDICTION TO INITIATE PROCEEDINGS UNDER SECTION 263 OF THE I.T. ACT, 1961. THEREFORE, THE ORDER OF THE CIT IS SET ASIDE AND AS SESSEE'S APPEAL IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 516/HYD/2013 M/S. GREEN FIRE AGRI COMMODITIES LTD. ============================= 8 ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2013 SD/- SD/- SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 27 TH NOVEMBER, 2013 TPRAO COPY FORWARDED TO: 1. M/S. GREEN FIRE AGRI COMMODITIES LTD. (FORMERLY NORT HGATE TECHNOLOGIES LTD.), C/O. M/S. PRASAD & PRASAD, CHAR TERED ACCOUNTANTS, FLAT NO. 301, 3 RD FLOOR, M.J. TOWERS, ROAD NO. 12, BANJARA HILLS, HYDERABAD-500 034. 2. THE DY. COMMISSIONER OF INCOME - TAX, I CIRCLE - 2(3), HYDERABAD. 3. THE COMMISSIONER OF INCOME - TAX - IV, HYDERABAD. 4. THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 16(1), HYDERABAD. 5. THE DR ' A ' BENCH, ITAT, HYDERABAD