M/s. GTP Granites Ltd., Salem V. ACIT, Salem

ITA 68/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2499 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 115JB; 10B; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO.68/MDS/2013 ASSESSMENT YEAR : 2005-06 M/S. GTP GRANITES LTD., 4/36, BHARATHI STREET, SWARNAPURI, SALEM-636 004. V. THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, SALEM. (PAN : AAACG7711K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. BASKAR, ADVOCATE RESPONDENT BY : SHRI GURU BASHYAM, JCIT DATE OF HEARING : 20.03.2013 DATE OF PRONOUNCEMENT : 06.05. 2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS), SALEM DATED 22-11-2012 FOR THE ASSESSMENT YEAR 2005-06. ITA NO.68/MDS/2013 : 2 : 2. GROUND NOS. 1.1 AND 1.2 HAVE NOT BEEN PRESSED AT THE TIME OF HEARING. ACCORDINGLY, THE SAME ARE DISMISS ED AS NOT PRESSED. 3. THE ONLY GROUND THAT REMAINS FOR OUR CONSIDERATI ON IS IN RESPECT OF THE DEDUCTION CLAIMED UNDER SECTION 10-B OF THE INCOME TAX ACT, 1961 ('THE ACT' FOR SHORT). FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND EXPORT OF GRANITE MONUMENTS AND SLABS. THE ASSESSEE FILED A RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BY SHOWING UNABSORBED DEPRECIATION OF ` 1,68,11,901/- AND ` 2,01,03,462/- UNDER SECTION 115JB OF THE ACT. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER THE AS SESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 30-03-2007. SUBSEQUENTLY, A NOTICE UNDER SECTION 148 WAS ISSUED AND THEREAFTER THE ASSESSMENT WAS COMPLETED. DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R CONSIDERED THE EXEMPTION U/S 10-B OF THE ACT ON TRA DING PROFITS AND OBSERVED THAT THE ASSESSEE COMPANY HAS GOT TWO UNITS AND BOTH ARE ENGAGED IN THE BUSINESS OF EXPORTING G RANITES MONUMENTAL SLABS. THE ASSESSEE COMPANY CLAIMED EXEM PTION U/S 10-B OF THE ACT FOR THE UNIT II ONLY WHICH IS B EING 100% EXPORT ORIENTED UNDERTAKING. THE ASSESSING OFFICER NOTICED ITA NO.68/MDS/2013 : 3 : FROM SCHEDULE-10 PERTAINING TO THE EXPORT SALES AND PURCHASES FOR TRADING EXPORTS THAT THE ASSESSEE COMPANY HAD M ADE OUTRIGHT PURCHASE (TRADING) TO THE EXTENT OF ` 42,62,996/- AND EXPORTED (TRADING) THE SAME AT THE COST OF ` 44,45,.403/- IN UNIT-II ALONE. AS PER SECTION 10B TO CLAIM EXEMPTIO N THE FOLLOWING CONDITIONS HAVE TO BE FULFILLED : A) THE UNDERTAKING MUST BE 10 0% EOU, B) IT SHOULD MANUFACTURE OR PRODUCE ANY ARTICLE OR THING AND C) IT SHOULD EXPORT THAT MANUFACTURED ARTICLES OR THINGS. 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT IT I S CLEAR FROM EXPLANATION 4 OF THE ABOVE SECTION THAT THE TE RM MANUFACTURE OR PRODUCE IS AN INCLUSIVE ONE AND IN CLUDES THE CUTTING AND POLISHING OF PRECIOUS AND SEMI-PRECIOUS STONES. IT IS ALSO SEEN THAT THE TERM MANUFACTURE OR PRODUCE DOES NOT INCLUDE THE TERM TRADING. SECTION 10B IS APPLICA BLE ONLY TO THE PRODUCTS THAT ARE BEING MANUFACTURED OR PRODUCE D BY THE ENTITY WHICH ARE EXPORTED. ACCORDINGLY, HE HELD TH AT THE TRADING PROFITS CANNOT BE CONSIDERED FOR THE PURPOSE OF ARR IVING AT THE EXPORT TURNOVER, EVEN IF THE PRODUCTS ARE EXPORTED AND THE REALIZATION HAS BEEN MADE IN FOREIGN EXCHANGE. ACC ORDINGLY, ITA NO.68/MDS/2013 : 4 : THE INCOME CLAIMED TO BE EXEMPTED IN UNIT II HAS TO BE RESTRICTED ONLY TO THE EXPORT OF MANUFACTURING OF G RANITE SLABS. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS). BEFORE THE CIT(APPEALS) THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE TRIB UNAL IN THE CASE OF T.TWO INTERNATIONAL (P) LTD. V. ITO 26 SOT 583 (MUM) AND SUBMITTED THAT THE SECTION 10A AND SECTION 10B ARE SIMILAR AND THE MUMBAI BENCH OF THE TRIBUNAL IN THE ABOVE C ASE HAS HELD THAT TRADING RECEIPTS ARE ALSO ELIGIBLE FOR DE DUCTION U/S 10B OF THE ACT. HOWEVER, THE CIT(APPEALS) DID NOT ACCE PT THE CONTENTION OF THE ASSESSEE AND OBSERVED THAT THE C ONDITIONS OF THE ESTABLISHMENT OF SPECIAL ECONOMIC ZONE RE-I NVESTMENT ALLOWANCE RESERVE ACCOUNT AND UTILIZATION ARE NOT AVAILABLE IN SECTION 10B. THE DECISION CITED BY THE LEARNED CO UNSEL FOR THE ASSESSEE WAS NOT ACCEPTED. 6. THE CIT(APPEALS) FURTHER OBSERVED THAT A PERUSAL OF SUB- SECTION (2) OF SECTION 10B STATES THAT THE MANUFAC TURE OR PRODUCTION IS AN ESSENTIAL INGREDIENT FOR AVAILING OF EXEMPTION. THE ASSESSEE HAS IN ITS SUBMISSION STATED REASONABL E INTERPRETATION WOULD BE ABLE TO SEE IF THE UNIT HAS STARTED MANUFACTURING OR NOT. IF THAT CONDITION IS SATISFI ED NOTHING ELSE SHOULD MATTER. THE CORRECT INTERPRETATION IS THAT THAT THE ITA NO.68/MDS/2013 : 5 : EXEMPTION IS ALLOWED TO MANUFACTURED GOODS AND THAT IS WHY MANUFACTURING IS A PRE-CONDITION. IF THE ASSESSEE S VIEW IS TO BE ACCEPTED THEN THE ASSESSEE WILL SET UP A TOKEN P RODUCTION AND WILL START TRADING FREELY AND STILL CLAIM EXEMP TION. NOTHING CAN BE FARTHER FROM THE LEGISLATIVE INTENT AND REAS ONABLE INTERPRETATION. THUS OBSERVING THE CIT(APPEALS) DI SMISSED THE APPEAL FILED BY THE ASSESSEE. 7. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT SEC. 10A AND 10B ARE PARI MATERIA AND THE TRIBUNAL HAS ALREADY CONSIDERED THAT WHEN THE ASSES SEE IS MANUFACTURING EVEN TRADING RECEIPTS ARE ALSO ELIGIB LE FOR DEDUCTION U/S 10B OF THE ACT. 8. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT SECTION 10A AND 10B ARE DIFFERENCE. SEC. 10B IS WITH REFER ENCE TO 100% EOU WHEREAS SECTION 10A RELATED TO SPECIAL ECO NOMIC ZONE AND SUBMITTED THAT TRADING RECEIPTS ARE NOT EL IGIBLE FOR DEDUCTION U/S 10B OF THE ACT. 9. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS A MANUFACTURER AND EXPORTER OF GRANITE MONUMENTAL SLABS. THESE FACTS ARE NOT DISPUTED BY THE ITA NO.68/MDS/2013 : 6 : REVENUE. DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COM PANY HAS PURCHASED GRANITES TO THE EXTENT OF ` 42,62,996/- AND THE SAME WAS EXPORTED. THE ONLY QUESTION BEFORE US IS WHETH ER THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION UNDER SECTIO N 10BIN RESPECT OF TRADING PROFITS OR NOT. THE TRIBUNAL, M UMBAI BENCH IN THE CASE OF T.TWO INTERNATIONAL (P) LTD. V. ITO (26 SOT 583) (MUM) HAS OBSERVED THAT TO ALLOW DEDUCTION U/S 10A THE MATERIAL CONSIDERATION IS EXPORT OF ELIGIBLE GOODS AND NOT WHETHER THOSE GOODS ARE MANUFACTURED OR PURCHASED B Y THE ASSESSEE. PROFITS FROM BOTH, THE SELF-MANUFACTURED AS WELL AS TRADING IN GOODS HAVE BEEN MADE ELIGIBLE FOR DEDUCT ION U/S 10A OF THE ACT. THE ABOVE DECISION WAS RENDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN RESPECT OF DEDUCTIO N RELATING TO SECTION 10A OF THE ACT. HOWEVER, WE ARE OF THE OPINION THAT SECTION 10A AND SEC. 10B ARE SIMILAR. THE APPREHEN SION OF THE CIT(APPEALS) IS THAT IF THE TRADING RECEIPT ALSO IS INCLUDED IN THE ELIGIBILITY U/S 10B, THE ASSESSEE WILL SET UP A TOK EN PRODUCTION AND START FREE TRADING. THE FACTS IN THE PRESENT C ASE ARE NOT SUPPORTING THE VIEW TAKEN BY THE CIT(APPEALS) . TH EREFORE, THE DECISION RENDERED IN THE CASE OF T.TWO INTERNATIONA L (P) LTD. (SUPRA) EVEN APPLIES TO SECTION 10B ALSO. WE THERE FORE ITA NO.68/MDS/2013 : 7 : RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA) AND TAKING INTO CONSIDERATION THE FACTS OF THE PRESENT CASE, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 6 TH OF MAY, 2013, AT CHENNAI. SD/- (N. S. SAINI) SD/- (V.DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 6 TH MAY, 2013. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE