M/s Sutures India P. Ltd., V. JCIT,

ITA 872/BANG/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8498 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS J
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Deemed export; Competent authority
• Section: 10B; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, BANGALORE BEFORE S MT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 872 / BANG/20 1 3 (ASSESSMENT YEAR: 2009 - 10 ) AND ITA NO. 1397/ BANG/20 14 (ASSESSMENT YEAR:2010 - 11) M/S.SUTURES INDIA (P) LTD., 472/D, IV PHASE, 13 TH CROSS, PEENYA, INDUSTRIAL AREA, BENGALURU - 560008. PAN:AACCS6580N VS. APPELLANT JOINT COMMISSIONER OF INCOME - TAX (OSD) CIRCLE 12(3), BENGALURU. RESPONDENT APPELLANT BY : SHRI V.CHANDRASHEKAR, CA. RESPONDENT BY : SMT.SWAPNA DAS, JCIT(DR). DATE OF HEARING : 03/01/2017 DATE OF PRONOUNCEMENT : 15/03/2017 O R D E R PER I NTURI RAMA RAO, AM : THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A) - III, BENGALURE, FOR ASSESSMENT YEARS 2009 - 10 AND 2010 - 11. SINCE COMMON ISSUES ARE INVOLVED, WE DISPOSE OF THE SAME BY THIS C ONSOLIDATED ORDER. ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 2 OF 8 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: ASSESSMENT YEAR 2009 - 10: ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 3 OF 8 ASSESSMENT YEAR 20 10 - 11 : ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 4 OF 8 3. BRIEFLY FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT,1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF ALL TYPES OF SURGICAL SUTURES LIKE ABSORBABLE SUTURES AND NON - ABSORBABLE SUTURES. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 WAS FILED ON 30/09/2009 D ECLARING TOTAL INCOME OF RS.9,48,36,690/ - C LAIMING A DEDUCTION OF RS.9,48,2 4, 379 / - U/S 10B OF THE INCOME - TAX ACT,1961 [ THE ACT FOR SHORT]. THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY ASSESSMENT AFTER ISSUING NOTICE U/S 143(2) AND THE ASSESSMENT WAS COMPLETED BY THE AO AT TOTAL INCOME OF RS.9,80,65,487/ - . THE DISPARITY BETWEEN RETURN ED INCOME AND ASSESSED I NCOME WAS ON ACCOUNT OF RESTRICTING DEDUCTION U/S 10B TO THE EXTENT OF RS.9,15,95,578/ - AS AGAINST RS.9,48,24,375/ - CLAIMED BY THE ASSESSEE ON THE GROUND THAT SALES OF RS.57,40,758/ - WERE MADE TO A DOMESTIC PARTY WHICH DOE S NOT FORM PART OF EXPORT SALES, T HEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S 10B AND ALSO THAT THE ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 5 OF 8 EXPENSES OF RS.21,50,562/ - INCURRED IN FOREIGN EXCHANGE TOWARDS INSURANCE, TRAVELLING AND COMMUNICATION WERE REDUCED FROM EXPORT TURNOVER. THE DIFFERENCE WAS BROUGHT TO TAX AS ADDITION. 4 . ON APPEAL BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ADDITION HOLDING THAT SALE OF PRODUCTS TO DOMESTIC EOUS . DOES NOT ENTITLE ASSESSEE TO BENEFITS OF EXEMPTION U/S 10B. AS REGARDS DEDUCTION OF EXPENSES INCURRED IN FOREIGN EXCHANGE TOWARDS INSURANCE, T RAVELLING AND COMMUN ICATION EXPENSES, THE CIT(A) CONFIRMED THE FINDING OF THE AO. 5 . BEING AGGRIEVED, ASSESSEE IS BEFORE US IN THE PRESENT APPEAL CONTENDING THAT THE CIT(A) WAS NOT JUSTIFIED IN NOT CONSIDERING SALES MADE TO DOMESTIC PARTY AS DEEMED EXPORTS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT MADE SALES OF RS.57,40,758/ - TO 100% EOU I.E M/S.SURU INTERNATIONAL PVT. LTD., THANE , AND IT CONSTITUTES DEEMED EXPORTS WITHIN THE MEANING OF EXIM POLICY ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTR Y AND THEREFORE SHOULD BE TREATED AS EXPORT SALES AND SHOULD BE EXEMPT U/S 10B OF THE ACT. 6 . WE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE IN THE APPEAL REVOLVES AROUND THE APPLICABILITY OF THE PROVISIONS OF SUB - SECT ION (3) OF SECTION 10B OF THE ACT. THE SAID SECTION IS REPRODUCED BELOW: ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 6 OF 8 10B. (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY T HE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS 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 EXPRE SSION 'COMPETENT AUTHORITY' MEANS THE RESERVE BANK OF INDIA OR SUCH OTHER AUTHORITY AS IS AUTHORISED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANGE. EXPLANATION 2. THE SALE PROCEEDS REFERRED TO IN THIS S UB - SECTION SHALL BE DEEMED TO HAVE BEEN RECEIVED IN INDIA WHERE SUCH SALE PROCEEDS ARE CREDITED TO A SEPARATE ACCOUNT MAINTAINED FOR THE PURPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPROVAL OF THE RESERVE BANK OF INDIA. THE PROVISIONS O F SUB - SECTION (3) OF SECTION 10B MAKE IT MANDATORY THAT IN ORDER TO INVOKE THE BENEFICIAL PROVISIONS OF SECTION 10B, SALE PROCEEDS OF AN ARTICLE OR THING OR COMPUTER SOFTWARE SHOULD BE RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIG N EXCHANGE WITHIN SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR SUCH OTHER PERIOD AS MAY BE PERMITTED BY THE RESERVE BANK OF INDIA. THUS, ON PLAIN READING OF THE PROVISIONS, IT IS CLEAR THAT THE BENEFIT CANNOT BE GIVEN TO AN UNDERTAKING IN CASE NO FOREI GN EXCHANGE IS RECEIVED OR BROUGHT INTO INDIA ON ACCOUNT OF EXPORTS MADE BY IT. REFERENCE TO FOREIGN EXCHANGE POLICY I.E. EXIM IS NOT REQUIRED WHEN THE PROVISIONS OF THE ACT ARE PLAIN AND UNAMBIGUOUS. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IN THIS R EGARD ARE DISMISSED. 7 . AS REGARDS PORTION OF THE EXPENSES INCURRED IN FOREIGN EXCHANGE TOWARDS INSURANCE, TRAVELLING AND COMMUNICATION IS ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 7 OF 8 CONCERNED, IN THE CASE OF CIT VS. TATA ELXSI (349 ITR 98) , THE HON BLE JURISDICTIONAL HIGH COURT HELD THAT THE SAM E IS REQUIRED TO BE REDUCED FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. RESPECTFULLY FOLLOWING THE RATIO OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WE DIRECT THAT EXPENSES INCURRED IN FOREIGN EXCHANGE TOWARDS INSURANCE, TRAVELLING AND COM MUNICATION ARE TO BE REDUCED BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. THEREFORE, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009 - 10 IS PARTL Y ALLOWED. 9 . THE ISSUES RAISED IN THE GROUNDS OF APPEAL IN ASSESSMENT YEAR 2010 - 11 ARE IDENTICAL TO THE ONE RAISED IN ASSESSMENT YEAR 2009 - 10. SINCE WE HAVE DECIDED THE ISSUE OF DEEMED EXPORT AGAINST THE ASSESSEE IN ITS APPEAL I.E. ITA NO.872/BANG/2 013 FOR ASSESSMENT YEAR 2009 - 10, FOR THE SAME REASONS, GROUNDS OF APPEAL NO.2, 3, 4 5 AND 6 RAISED FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.1397/BANG/2014 ARE DISMISSED AGAINST THE ASSESSEE. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESS MENT YEAR 2010 - 11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 201 7 S D/ - SD/ - (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 15 / 0 3 /2017 SRINIVASULU, S PS ITA NO S . 827/B/2013 & 1397 /B/201 4 PAGE 8 OF 8 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSIS TANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE