LILY JEWELLERY PVT. LTD., MUMBAI V. I.T.O.8(2)(2), MUMBAI

ITA 5469/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84063 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Section: 10AA; 115JB; 10B; 11

Judgement Text

, ( ), IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI . . , , . , ,, , ! '#$ BEFORE SHRI H L KARWA, PRESIDENT, & SHRI D KARUNAKA RA RAO, AM ' ./ITA NO.5469/MUM/2012 ( %& '& / ASSESSMENT YEAR : 2008-09) LILY JEWELLERY PRIVATE LTD., GALA NO.503, BLOCK NO.II, SEEPZ, ANDHERI (EAST), MUMBAI- 400 096 PAN AAACL9600J VS. THE ITO 8(2)(2), MUMBAI ( () /APPELLANT) ( *+() / RESPONDENT) APPELLANT BY : MS. AARTI VISSANJI RESPONDENT BY : MR. ASGHAR ZAIN V P DATE OF HEARING : 05.11.2014 DATE OF PRONOUNCEME NT : 05.11.2014 # , / O R D E R PER H L KARWA, PRESIDENT : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)- 17, MUMBAI, DATED 25.07.2012, FOR THE ASSESSMENT YE AR 2008-09. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER: 1. APPLICABILITY OF PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT DO NOT APPLY TO THE APPELLANT BY VIRTUE OF THE PROVISIONS OF SECTION 11 5JB(6) OF THE ACT AND CONSEQUENTLY, OUGHT TO HAVE DIRECTED THE LEARNED AS SESSING OFFICER NOT 2 ITA NO.5469/MUM/2012 AY:2008-09 TO ASSESS BOOK PROFITS UNDER SECTION 115JB OF THE A CT FOR ASSESSMENT YEAR UNDER REFERENCE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT WHILE COMPUTING THE BOOK PROFITS U/S 115JB, THE ASSESSEE HAD REDUCED THE DEDUCTION CLAIMED U/S. 10A . THE AO REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAID CLAIM SHO ULD NOT BE DISALLOWED AS THE PROVISIONS OF SECTION 115JB, AMENDED W.E.F. 1.4.200 8, DO NOT PERMIT THE DEDUCTION U/S. 10A. IN THIS RESPECT THE ASSESSEE SUBMITTED T HAT THE PROVISIONS OF SECTION 115JB(6) EXEMPTED THE ASSESSEE FROM TAXABILITY U/S. 115JB. THE ASSESSEE FURTHER TOOK THE PLEA THAT THE PROVISIONS OF SECTION 115JB( 6) EXEMPTED ALL UNITS SITUATED IN SPECIAL ECONOMIC ZONES FROM ITS RIGORS. THE CLAIM OF THE ASSESSEE WAS THAT IT CAME WITHIN THE MEANING OF THE WORDS ENTREPRENEUR AND UNIT AS DEFINED IN SPECIAL ECONOMIC ZONE ACT, 2005. HOWEVER, THE AO DID NOT A GREE WITH THE ASSESSEE FOR THE REASONS STATED IN PARAGRAPHS 6.2 TO 6.2.6 OF HIS OR DER AND CONCLUDED THAT FOR COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT, TH E INCOME RELATING TO 10A UNIT IS INCLUDIBLE IN THE BOOK PROFIT. 4. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE AO FOR THE REASONS STATED IN PARAGRAPHS 3.4 TO 3.9 OF HIS ORDER. HENCE, THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS WORTHWHILE TO OBSERVE H ERE THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT, MUMBAI E BENCH IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. V. ACIT (2012) 80 DTR(MUMBAI)23 FO R A.Y. 2008-09, WHEREIN THE TRIBUNAL VIDE ITS ORDER DATED 31.10.2012, CATEGORIC ALLY HELD THAT A UNIT LOCATED IN SPEICAL ECONOMIC ZONE (IN SHORT SEZ) IS COVERED BY SUB SECTION (6) OF SECTION 115JB IRRESPECTIVE OF THE FACT THAT SUCH UNIT IS CLAIMING DEDUCTION U/S 10A AND, THEREFORE, THE BOOK PROFIT OF THE SEZ UNIT COULD NOT BE INCLUD ED WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB FOR A.Y. 2008-09, DESPITE THE F ACT THAT CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) HAS BEEN AMENDED TO APPLY THE PROVISIONS OF MAT TO UNITS WHICH ARE ENTITLED TO DEDUCTION UNDER SECTION 10A. AT THIS JUNCTURE, WE THINK IT 3 ITA NO.5469/MUM/2012 AY:2008-09 PROPER TO REPRODUCE THE FINDINGS OF THE TRIBUNAL GI VEN IN THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. (SUPRA), WHICH READ AS UNDER: WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTATIV ES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY CONSIDERED THE RELEVANT PROVISIONS OF THE ACT. THERE IS NO DISPUTE TO THE FACT THAT ASSESSEES UNIT IN MUMBAI IS LOCATED IN SEZ. SECTIO N 10A PROVIDES DEDUCTION OF PROFITS DERIVED BY THE UNDERTAKING IN RESPECT OF UNITS WHICH ARE LOCATED NOT ONLY IN SEZ BUT ALSO IN THE F OLLOWING AREAS: FREE TRADE ZONE (FTZ) ELECTRONIC HARDWARE TECHNOLOGY PARK (EHTP) SOFTWARE TECHNOLOGY PAR (STP) EXPORT ORIENTED UNITS (EOUS) BY SPECIAL ECONOMIC ZONE ACT, 2005 W.E.F 10.2.2006, A NEW SECTION 10AA HAS BEEN INSERTED WHICH PROVIDE EXEMPTION TO T HE UNITS LOCATED IN SEZ. SECTION 2 OF SEZ ACT, DEFINES SEZ AS UNDER: (ZA)SPECIAL ECONOMIC ZONE MEANS EACH SPECIAL ECO NOMIC ZONE NOTIFIED UNDER THE PROVISO TO SUB-SECTION (4) OF SECTION 3 AND SUB-SECTION(1) OF SECTION 4(INCLUDING FREE TRAD E AND WAREHOUSING ZONE) AND INCLUDES AN EXISTING 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. THERE FORE, WE ARE OF THE CONSIDERED VIEW THAT THE BENEFITS WHICH ARE TO BE PROVIDED TO THE NEWLY ESTABLISHED UNIT IN SEZ AS PER SECTION 10AA O F 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 DEE MED TO HAVE BEEN NOTIFIED AND ESTABLISHED IN ACCORDANCE WITH PROVISI ONS OF SEZ ACT AND THE PROVISIONS OF SPECIAL ECONOMIC ZONES ACT SHALL APPLY TO SUCH EXISTING SEZ UNITS. IT IS ALSO OBSERVED THAT BY THE SEZ ACT, SUB-SECTION (6) TO SECTION 115JB WAS ALSO INSERTED PROVIDING TH AT PROVISIONS OF SECTION 115JB SHALL NOT APPLY TO THE INCOME ACCRUED OR ARISEN ON OR AFTER 01.04.2005 FROM ANY BUSINESS CARRIED ON, OR S ERVICES RENDERED, BY AN ENTREPRENEUR OR A DEVELOPER, IN A UNIT OR SPE CIAL 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 A RE 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 ACT TO APPLY THE PRO VISIONS OF MAT IN RESPECT OF UNITS WHICH ARE ENTITLED TO DEDUCTION U/ S.10A OR 10B BUT THE UNITS WHICH ARE IN SEZ WILL CONTINUE TO GET BENEFIT S FROM THE 4 ITA NO.5469/MUM/2012 AY:2008-09 APPLICABILITY OF PROVISIONS OF MAT IN VIEW OF SUB-S ECTION(6) OF THE ACT. THE CONTENTION OF LD D.R. THAT ASSESSEE WILL NOT BE ENTITLED TO GET THE BENEFIT U/S. 115JB(6) OF THE ACT AS ASSESSEE HAS CL AIMED DEDUCTION U/S.10A OF THE ACT IS TO BE REJECTED FOR THE REASON THAT SECTION 115JB (6) DOES NOT REFER SECTION 10A OR SECTION 10AA BUT IT ONLY REFER THAT PROVISIONS OF SECTION 115JB WILL NOT APPLY TO THE I NCOME ACCRUED OR ARISEN ON OR AFTER 01.04.2005 FROM ANY BUSINESS CAR RIED 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 11 5JB OF THE ACT IRRESPECTIVE OF THE FACT THAT THOSE UNITS WERE CLAI MING DEDUCTION U/S.10A OF THE ACT. WE ALSO OBSERVE THAT BENEFIT GI VEN TO SEZ UNIT FROM THE APPLICABILITY OF PROVISIONS OF SECTION 115JB HA S BEEN WITHDRAWN BY THE FINANCE ACT, 2011 BY INSERTING A PROVISO TO SEC TION 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 COMMENCING 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 ASSE SSMENT YEAR 2008- 09. THEREFORE, WE REVERSE THE ORDERS OF AUTHORITIES BELOW BY HOLDING THAT INCOME RELATING TO SEZ UNIT AT 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 ASSES SEE FOR ASSESSMENT YEAR 2008-09 IS ALLOWED. 6. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THA T OF THE CASE OF GENESYS INTERNATIONAL CORPORATION LTD. (SUPRA), AND THE ASS ESSMENT YEAR INVOLVED IN BOTH THE CASES IS 2008-09. AFTER CONSIDERING THE ARGUMENTS ADVANCED BY THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, WE ARE OF THE CONSIDERED VIEW THAT THE DECISION RENDERED IN THE CASE OF GENESYS INTERNATIONAL CORPO RATION LTD. (SUPRA), IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. NO CO NTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE REVENUE. RESPECTFULLY FOLLOWING THE DECISION OF ITAT, MUMBAI E BENCH IN THE CASE OF GENESYS INTERNATIONAL CORPORAT ION LTD. (SUPRA), WE REVERSE THE ORDERS OF THE AUTHORITIES BELOW AND HOLD THAT THE I NCOME RELATING TO SEZ UNIT IS TO 5 ITA NO.5469/MUM/2012 AY:2008-09 BE EXCLUDED WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE IT ACT, 1961 FOR A.Y. 2008-09. ACCORDINGLY THE APPEAL STANDS ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF NOVEMBER, 2014. SD/- SD/- (D KARUNAKARA RAO) (H L KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DT : 5 TH NOVEMBER, 2014 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, MUMBAI A BENCH BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI