M/S. METAL RECYCLING INDUSTRY, MUMBAI V. THE ITO 14(1)-1, MUMBAI

ITA 6201/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7275 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 08-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA; S S RANA
• Keywords: Deemed export
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.K.GUPTA, JM AND SHRI R.S.SYAL, AM ITA NO.6201/MUM/2007 : ASST.YEAR 2004-2005 M/S.METAL RECYCLING INDUSTRY 99 SHAKUNTALA SADAN, KIKA STREET SHOP NO.2, GROUND FLOOR GULAL WADI, MUMBAI 400 004. PA NO.AAGFM3619R. VS. THE INCOME TAX OFFICER WARD 14(1)-1 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : S/SHRI VIRENDRA OJHA & S.S.RANA O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 27.06.2007 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. IT IS A RECALLED MATTER INASMUCH AS THE EARLIER EX PARTE ORDER PASSED BY THE BENCH WAS SUBSEQUENTLY RECALLED VIDE ITS LAT ER ORDER DATED 23 RD SEPTEMBER, 2009. 2. FIRST GROUND IS AGAINST NOT ALLOWING CLAIM U/S.1 0B AMOUNTING TO RS.70,21,911. BRIEFLY STATED THE FACTS OF THIS CASE ARE THAT THE ASSESSEE IS A 100% EXPORT ORIENTED UNIT (EOU) ENGAGED IN MANUFACTURE O F FERROUS AND NON-FERROUS METALS. DURING THE YEAR DEDUCTION OF RS.1,54,68,831 WAS CLAIMED U/S.10B. ON THE PERUSAL OF THE DETAILS THE A.O. FOUND THAT THE ASSE SSEE HAD MADE SUBSTANTIAL SALES TO LOCAL PARTIES. NOTICES WERE ISSUED U/S.133(6) TO CE RTAIN PARTIES. SUCH NOTICES COULD BE SERVED ONLY ON A FEW PARTIES AND THOSE PARTIES A LSO STATED THAT THEY WERE ENGAGED ITA NO.6201/MUM/2007 M/S.METAL RECYCLING INDUSTRY. 2 IN THE BUSINESS OF RECYCLING METALS AT LOCAL LEVEL. ACCORDING TO THE A.O. THIS FACT WAS CONFRONTED TO THE PARTNERS OF THE ASSESSEE-FIRM SHRI DILIP JAIN WHO ADMITTED THE FACT THAT THE LOCAL SALES WERE NOT MADE TO 100% EOU UNDERTAKINGS. IN THE OPINION OF THE ASSESSING OFFICER DEDUCTION U/S.10B WAS ALLOWABLE ONLY ON THE EXPORT TURNOVER AND NOT IN RESPECT OF LOCAL SALE S. CONSIDERING THE PROVISIONS OF SUB-SECTION (4) OF SECTION 10B, THE ASSESSING OFFIC ER ALLOWED DEDUCTION AT A REDUCED FIGURE OF RS.84,46,920 QUA THE EXPORT TURNOVER. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT IN VIEW OF THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF T.TWO INTERNATIONAL (P.) LTD. VS. ITO [(2010) 122 ITD 255 (MUM)] THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S.10B IN RESPECT OF DEEMED EXPORTS AND LOCAL TURNOVER, EVEN THOUGH SUCH DECISION WAS RENDERED IN THE CONTEXT OF SECTION 10A, THE LANGUAGE OF WHICH WAS SIMILAR. A COPY OF THE SAID ORDER WAS ALS O PLACED ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE IMPUGNED ORDER. IT IS SEEN THAT THE PROVISIONS OF SECTION 10A AND 10B ARE SIMILAR ON TH IS ASPECT OF THE MATTER. THE MUMBAI BENCH OF THE TRIBUNAL IN T.TWO INTERNATIONAL (P.) LTD. (TO WHICH ONE OF US, NAMELY, THE AM IS PARTY) HAS HELD THAT THE RECE IPT OF CONVERTIBLE FOREIGN EXCHANGE BY THE ASSESSEE IN INDIA TOWARDS SALE PROC EEDS OF THE EXPORT OF THE ELIGIBLE ARTICLE IS SINE QUA NON FOR THE CLAIM OF DEDUCTION U/S.10A AND SUCH DEDUCTION CANNOT BE ALLOWED IN RESPECT OF SALE OF G OODS MADE BY THE ASSESSEE IN INDIA. IN VIEW OF THESE RIVAL BUT COMMON SUBMISSION S AND RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE UPHOLD THE IMPUGNED ORDER O N THIS ISSUE. THIS GROUND IS NOT ALLOWED. ITA NO.6201/MUM/2007 M/S.METAL RECYCLING INDUSTRY. 3 4. THE ONLY OTHER EFFECTIVE GROUND RAISED BY THE AS SESSEE IS AGAINST NOT ALLOWING OF DEDUCTION U/S.10B ON INTEREST INCOME OF RS.41,96 1 WHICH WAS TREATED BY THE A.O. AS TAXABLE UNDER THE HEAD `INCOME FROM OTHER S OURCES. THE ASSESSEE INCLUDED SUCH INTEREST IN THE PROFITS OF THE BUSINE SS WHICH IN THE OPINION OF THE A.O. COULD NOT QUALIFY FOR THE BENEFIT OF SECTION 10B NO TWITHSTANDING THE FACT THAT THE DEPOSIT WAS MADE FOR THE PURPOSES OF OBTAINING LETT ERS OF CREDIT FROM THE BANK WHICH WERE USED FOR THE PURPOSE OF BUSINESS OF INDU STRIAL UNDERTAKING. THE LEARNED CIT(A) UPHELD THE ASSESSMENT ORDER ON THIS ISSUE. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL IN LIVINGSTONES JEWELLERY (P.) LTD. VS. DCIT [(2009) 3 1 SOT 323 (MUM.)] (TO WHICH ONE OF US, NAMELY, THE A.M. IS PARTY) I N THE CONTEXT OF SECTION 10A. IT HAS BEEN HELD THAT ALL THE PROFITS WHICH HAVE NEXUS WITH THE BUSINESS OF AN UNDERTAKING WILL QUALIFY FOR DEDUCTION U/S.10A IN V IEW OF SUB-SECTION (4) WHICH SPECIFICALLY GIVES MEANING TO THE EXPRESSION DERIV ED FROM EXPORT OF ARTICLES AS EMPLOYED IN SUB-SECTION (4) OF SECTION 10A. SUB-SEC TION (4) IN TURN STATES THAT IT SHALL BE AMOUNT WHICH BEARS TO THE PROFITS OF THE B USINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT O F SUCH ARTICLES OR THINGS ETC. BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. IT IS NOTICED THAT THE LANGUAGE OF SUB-SECTION (4) OF SEC TION 10B IS SIMILAR TO THAT OF SECTION 10A. AS THE INTEREST HAS RESULTED FROM THE FDR WHICH WERE TAKEN FOR THE PURPOSE OF OBTAINING LETTER OF CREDIT FROM THE BANK , SUCH INTEREST DESERVES TO BE INCLUDED UNDER THE HEAD `PROFITS AND GAINS OF BUSIN ESS OR PROFESSION AND THEREAFTER ELIGIBLE FOR DEDUCTION U/S.10B. THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT, RELIED ON BY THE ASSESSING OFFICER IN CIT VS. MENON IMPEX P.LTD. [(2003) 259 ITR 403 (MAD.)] , IS NOT APPLICABLE IN VIEW OF THE FACT THAT THE L ANGUAGE OF SECTION 10A AT THE MATERIAL TIME IN THAT CASE DID NOT CONTAIN A NY PROVISION SIMILAR TO SUB-SECTION (4) OF SECTION 10A. IN VIEW OF THE FOREGOING DISCUS SION, WE ARE OF THE CONSIDERED ITA NO.6201/MUM/2007 M/S.METAL RECYCLING INDUSTRY. 4 OPINION THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED I N NOT GRANTING DEDUCTION U/S.10B IN RESPECT OF INTEREST INCOME OF RS.41,961. THIS GR OUND IS ALLOWED. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF MARCH 2010. SD/- SD/- ( R.K.GUPTA ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 24 TH MARCH, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XIV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.