DCIT 8(3), MUMBAI V. TARA JEWELS EXPORT P. LTD, MUMBAI

ITA 662/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75451 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: B V JHAVERI
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO. 662/MUM/2012 ( / ASSESSMENT YEAR: 2003-04) ASST. CIT-8(3), ROOM NO.217, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400 020 / VS. TARA JEWELS EXPORT PVT. LTD. G-44, GEMS & JEWELLERY COMPLEX, SSPZ, ANDHERI (E), MUMBAI-400 096 ./ ./PAN/GIR NO. AAACT 1161 H ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ % / APPELLANT BY : SHRI ASHOK SURI '#! $ % / RESPONDENT BY : SHRI B. V. JHAVERI & ' ( $ ) * / DATE OF HEARING : 23.01.2014 +,- $ ) * / DATE OF PRONOUNCEMENT : 29.01.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI (CIT(A) FOR SH ORT) DATED 09.11.2011, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2003-04 VIDE ORDER DATED 20.12.2010. 2 ITA NO.662/MUM/2012 (A.Y. 2003-04) ASST. CIT VS. TARA JEWELS EXPORTS PVT. LTD. 2. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE VAL IDITY OF THE DISALLOWANCE OF THE DEDUCTION U/S.10A OF THE ACT AT RS.37,82,201/-. THE SAME STOOD MADE IN VIEW OF THE FACT THAT A PART (I.E., RS.11.51 CRORES) OF THE EXPORT P ROCEEDS HAD NOT BEEN REALIZED WITHIN SIX MONTHS FROM THE END OF THE RELEVANT PREVIOUS YEAR; IN FACT, HAVING NOT BEEN RECEIVED EVEN BY THE DATE OF THE AUDIT REPORT FOR THE RELEVANT YE AR (29.11.2003), SO THAT THE CONDITION OF SECTION 10A(3) STOOD BREACHED. THE LD. CIT(A), HOWE VER, ALLOWED RELIEF TO THE ASSESSEE ON THE PRODUCTION OF A LETTER FROM THE RESERVE BANK OF INDIA (RBI), CLARIFYING THAT NO TIME LIMIT STOOD PRESCRIBED FOR REALIZATION OF THE EXPORT PROCEEDS FOR EXPORT UNITS LOCATED IN SPECIAL ECONOMIC ZONES (SEZS). 3. BEFORE US, THE CASES OF BOTH THE PARTIES WERE TH E SAME, WITH THE ASSESSEE RELYING ON MASTER CIRCULAR NO. 10/2011-12 (DATED 01.07.2011/PB PGS.19-23), WHICH CLARIFIES THAT NO SPECIFIC TIME LIMIT HAS BEEN PRESCRIBED IN RESPECT OF UNITS IN SEZS FOR REALIZATION AND REPARTITION OF THE EXPORT PROCEEDS. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 THE PRIMARY FACTS OF THE CASE ARE NOT IN DISPUT E. THAT IS, THAT THE ASSESSEE IS A UNIT LOCATED IN SEZ AND, TWO, THAT NEITHER WERE THE EXPO RT PROCEEDS REALIZED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS NOR DOES IT HAVE ANY AUTHORIZATION FROM THE COMPETENT AUTHORITY ALLOWING IT FURTHER PERIOD OF TIME FOR REPATRIATING THE SAME TO INDIA. RATHER, NO CONTENTION AS TO THE AMOUNT HAVIN G BEEN RECEIVED EVEN SUBSEQUENTLY HAS BEEN MADE BEFORE THE AUTHORITIES BELOW, SO THAT IT IS NOT CLEAR AS TO WHEN THE RELEVANT EXPORT PROCEEDS WERE IN FACT RECEIVED, OR IN FACT H AVE AT ALL BEEN RECEIVED. 4.2 SECTION 10A(3) OF THE ACT READS AS UNDER: SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS IN FREE TRADE ZONE, ETC. 10A. (1) .. (2) 3 ITA NO.662/MUM/2012 (A.Y. 2003-04) ASST. CIT VS. TARA JEWELS EXPORTS PVT. LTD. (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF TH E SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OU T OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVE RTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE P REVIOUS YEAR OR, WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSI ON 'COMPETENT AUTHORITY' MEANS THE RESERVE BANK OF IND IA OR SUCH OTHER AUTHORITY AS IS AUTHORISED UNDER ANY LAW FOR THE TI ME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANG E. EXPLANATION 2. THE SALE PROCEEDS REFERRED TO IN THIS SUB-SECTION SHALL BE DEEMED TO HAVE BEEN RECEIVED IN INDIA WHERE SUCH SA LE PROCEEDS ARE CREDITED TO A SEPARATE ACCOUNT MAINTAINED FOR THE P URPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPROVAL OF TH E RESERVE BANK OF INDIA. IT IS THUS CLEAR THAT THE LAW DOES NOT PROVIDE AN I NFLEXIBLE CONDITION IN THE MATTER; LEAVING IT TO THE COMPETENT AUTHORITY, THE RBI, WHO SE DECISION, BESIDES BEING BINDING ON THE REVENUE, WOULD PRESUMABLY ONLY BE WITH REGARD T O AND ON AN ASSESSMENT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, APART FROM BEING CON SISTENT WITH ANY POLICY GUIDELINE IT MAY HAVE FRAMED IN THE MATTER, ALSO HAVING REGARD T O ANY OTHER LAW, IF ANY, THAT MAY HAVE A BEARING OR WHICH IMPINGES THEREON. ONCE, THEREFORE, THE RBI HAS CLARIFIED THAT IT HAS NOT STIPULATED ANY TIME PERIOD FOR THE REALIZATION OF THE SALE PROCEEDS FOR THE SEZ UN ITS, AS THE ASSESSEE, IT CAN ONLY BE CONSIDERED AS HAVING ALLOWED AN INDEFINITE TIME PER IOD FOR THE SAME. CONSEQUENTLY, IT CANNOT BE SAID THAT THE CONDITION OF SECTION 10A(3) IS NOT SATISFIED. THE OBJECTION OF THE REVENUE IS, IN OUR VIEW, NOT VALID. 4.3 WE FURTHER OBSERVE THAT THE REVENUE HAS, PER IT S GROUND NO.2 ASSUMED BEFORE US, ALSO OBJECTED ON THE BASIS THAT THE RBI CIRCULAR BE ING RELIED UPON IS ONLY APPLICABLE TO SHIPMENTS MADE ON OR AFTER 01.04.2003, SO THAT IT W OULD NOT APPLY FOR THE CURRENT YEAR. THE OBJECTION, IF TRUE, IS CERTAINLY VALID INASMUCH AS THE LAW CLEARLY PROVIDES FOR AN EXTENDED TIME ONLY WHERE AND AS ALLOWED BY THE COMP ETENT AUTHORITY. THE OBJECTION, AS IT 4 ITA NO.662/MUM/2012 (A.Y. 2003-04) ASST. CIT VS. TARA JEWELS EXPORTS PVT. LTD. WOULD APPEAR TO US; NO ARGUMENTS QUA THE SAME HAVING BEEN MADE BEFORE US, IS BASED ON A READING OF CIRCULAR NO.91 DATED 01.04.2003 (PB PGS.6-8), WHICH READS AS UNDER: ATTENTION OF AUTHORIZED DEALERS IS INVITED TO A.P. (DIR SERIES) CIRCULAR NO.28 DATED MARCH 30, 2001 AND SUBSEQUENT CIRCULARS ISSUED EXTENDING VARIOUS FACILITIES TO UNITS IN SPECIAL EC ONOMIC ZONES. IT HAS BEEN DECIDED TO EXTEND THE FOLLOWING FACILITIES TO THE U NITS LOCATED IN THE SPECIAL ECONOMIC ZONES (SEZS): A. REALISATION OF EXPORT PROCEEDS IN TERMS OF PARA 11(C) OF AP (DIR SERIES) CIRCULAR NO.28 DATED MARCH, 30, 2001, UNITS SITUATED IN SPECIAL ECONOMIC ZONES HAVE BEEN PERMITTED TO REALIZE AND REPATRIATE TO INDIA THE FU LL VALUE OF GOODS OR SOFTWARE WITHIN A PERIOD OF TWELVE MONTHS FROM THE DATE OF EXPORT. IT HAS NOW BEEN DECIDED TO REMOVE THE STIPULATION OF TWELV E MONTHS OR EXTENDED PERIOD THEREOF FOR REALIZATION OF EXPORT PROCEEDS. ACCORDINGLY, THERE SHALL BE NO PRESCRIPTION OF ANY TIME LIMIT FOR REALIZATIO N OF EXPORTS MADE BY UNITS IN SEZS. HOWEVER, THE UNITS IN SEZS WILL CONTINUE T O FOLLOW THE GR/PP/SOFTEX EXPORT PROCEDURE OUTLINED IN PART B OF ANNEXURE TO A.P. (DIR SERIES) CIRCULAR NO.12 DATED SEPTEMBER 9, 2000 AS AMENDED FROM TIME TO TIME. B. WE ARE, HOWEVER, UNABLE TO READ THE RELEVANT CLAUSE A SUPRA IN THE MANNER AS PROJECTED BY THE REVENUE PER ITS GD.2. ALL IT, TO O UR MIND, CLARIFIES IS THAT THE EXTENDED TIME PERIOD, WHICH PRIOR TO 01.04.2003 STOOD AT TWE LVE MONTHS (FROM THE DATE OF EXPORT), SHALL HENCEFORTH, I.E., W.E.F. 01.04.2003, EXTEND I NDEFINITELY AGAIN, FROM THE DATE OF EXPORT ITSELF. THE REVENUES RELEVANT GROUND IS, TH US, EQUALLY MISCONSTRUED. FURTHER STILL, IT COULD BE ARGUED THAT THE SALE PRO CEEDS (OR PART THEREOF) MAY NOT BE REALIZED AT ALL IN THE FACT SITUATION OF A PARTICUL AR CASE, WHILE THE ASSESSEE SHALL STAND TO BE ACCORDED TAX EXEMPTION ON THE RELEVANT INCOME, WHIC H IS ONLY FOR THE REASON OR ON THE PREMISE THAT THE SAME IS OR IS TO BE BROUGHT INTO I NDIA IN CONVERTIBLE FOREIGN EXCHANGE. THE ARGUMENT, THOUGH APPEALING AT FIRST BLUSH, IS M ISCONCEIVED. THIS IS AS WHERE THE SALE PROCEEDS ARE NOT REALIZED, THERE IS NO QUESTION OR POSSIBILITY OF ANY INCOME. THE QUESTION OF IT BEING SUBJECT TO TAX, QUITE APART FROM IT BEI NG EXEMPT U/S.10A, THUS DOES NOT ARISE AT 5 ITA NO.662/MUM/2012 (A.Y. 2003-04) ASST. CIT VS. TARA JEWELS EXPORTS PVT. LTD. ALL. ACCORDINGLY, THE NON-STIPULATION OF ANY TIME F RAME BY THE RBI FOR THE REALIZATION AND REPATRIATION OF THE EXPORT PROCEEDS FOR THE UNITS L OCATED IN SEZS DOES NOT PER SE LEAD TO ANY CONFLICT OR INCONSISTENCY BETWEEN THE SAME AND THE PROVISIONS OF THE ACT. TAX IMPLICATION MAY THOUGH ARISE WHERE THE SALE PROCEED S ARE EITHER RECEIVED OTHERWISE THAN IN CONVERTIBLE FOREIGN EXCHANGE OR, THOUGH RECEIVED AS SO, IS NOT BROUGHT INTO INDIA INASMUCH AS SEC. 10A(3) GETS ATTRACTED. THESE ASPEC TS, HOWEVER, DO NOT ARISE FOR CONSIDERATION IN THE FACTS OF THE PRESENT CASE. 5. IN VIEW OF THE FOREGOING, IN OUR VIEW, THE REVEN UES CASE IS WITHOUT MERIT AND, ACCORDINGLY, WE UPHOLD THE IMPUGNED ORDER. WE DIREC T ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . /- )0 $ / $ ) 12 ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 29, 2 014 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & 3( MUMBAI; 4' DATED : 29.01.2014 .'../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & 5) ( ) / THE CIT(A) 4. & 5) / CIT CONCERNED 5. 8 9 ')':; , * :;- , & 3( / DR, ITAT, MUMBAI 6. 9 <= > ( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , & 3( / ITAT, MUMBAI