M/s International Stones India Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 888/BANG/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80693 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Deemed export; Competent authority; Unabsorbed depreciation
• Section: 80C; 234B; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NOS.888(BANG) 2010 & 1130(B)/2011 (ASSESSMENT YEARS : 2007-08 & 2008-09) M/S INTERNATIONAL STONES INDIA PVT.LTD., NO.55/12, ALANKAR APARTMENT, FLAT NO.1, 39 TH CROSS, 14 TH MAIN, JAYANAGAR, BANGALORE-560 011. APPELLANT PAN NO.AABCI1821R VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), BANGALORE RESPONDENT AND ITA NO.893(BANG)/2010 (ASSESSMENT YEAR : 2007-08) (BY REVENUE) ASSESSEE BY : SHRI C.RAMESH, CA REVENUE BY : MS. PRISCILLA SINGSIT, CIT-III DATE OF HEARING : 26-08-2014 DATE OF PRONOUNCEMENT : 05-09-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: THESE ARE APPEAL OF THE ASSESSEE FOR AY: 2008-09 A ND CROSS APPEALS OF THE ASSESSEE & REVENUE FOR AY: 2007-08. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 2 2. APPEAL OF THE ASSESSEE FOR AY: 2007-08 IS FIRST TAKEN UP. ASSESSEE HAS RAISED FIVE GROUNDS IN ITS APPEALS OF WHICH GRO UND 4 IS CONSEQUENTIAL AND GROUND 5 IS GENERAL IN NATURE, NEEDING NO ADJUD ICATION. 3. IN ITS GROUND NUMBER ONE IT IS AGGRIEVED THAT U NABSORBED DEPRECIATION OF RS.2,40,56,524/- WAS SET OFF AGAINS T THE PROFITS OF ITS UNDERTAKING CLAIMING DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), BEFORE ALLOWING SUCH DED UCTION. 4. LEARNED AR PLACED RELIANCE ON THE JUDGMENT OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS YOK OGAWA INDIA LTD., (2011) 246 CTR 226 AND CIT VS TATA ELXSI LTD., 247 CTR 334 , IN SUPPORT OF THE ABOVE GROUND. LEARNED DR ON THE OTHER HAND, SUPPO RTED THE ORDERS OF THE LEARNED CIT(A). 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. COMPUTATION OF TOTAL INCOME AS MADE BY THE LEARNED AO IS REPRODUCED HEREUNDER; ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 3 COMPUTATION OF TOTAL INCOME TOTAL INCOME BEFORE ALLOWING DEDUCTION U/S 10B RS. 12,32,65,040 LESS: DEDUCTION U/S 10B RS. 4,62,29,9 16 TOTAL INCOME RS. 7,70,35,124 LESS: DEDUCTION U/S 80C 5,2 4,502 TOTAL INCOME RS. 7,65,10,622 LESS: SET OFF OF UNABSORBED DEPRECIATION RS . 2,29,70,688 TOTAL INCOME RS. 5,35,39,934 TAX THEREON RS.1,60,61,980 SURCHARGE RS. 16,06,198 EDUCATION CESS RS. 3,53, 363 TOTAL PAYABLE RS.1,80,21,541 LESS: TDS & ADVANCE TAX RS. 12,35,270 BALANCE PAYABLE RS.1,67,86,271 ADD: INTEREST U/S 234B RS. 52,94,019 TOTAL PAYABLE RS.2,20,80,290 LESS: TAX PAID U/S 141A RS. 19,16,2 49 BALANCE PAYABLE RS.2,01,64,041 NO DOUBT, THE AO HAS CURTAILED THE CLAIM OF DEDUCTI ON UNDER SECTION 10B SUBSTANTIALLY VIS--VIS THE CLAIM OF THE ASSESSEE. HOWEVER, SET OFF OF DEPRECIATION HAS BEEN DONE AFTER COMPUTING THE TOTA L INCOME AND NOT VICE VERSA. IT IS ALSO NOT CLEAR FROM WHERE THE FIGURE OF RS.2,29,70,688/- HAS BEEN TAKEN BY THE AO, SINCE SET OFF DONE BY THE AS SESSEE WAS RS.1,85,17,875/-. WE ARE THEREFORE, OF THE OPINION , THAT THE ISSUE REQUIRES A FRESH LOOK BY THE AO, KEEPING IN VIEW JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS YOKOGAWA AND CIT V S TATA ELXSI LTD.,(SUPRA). ORDER OF THE LOWER AUTHORITIES ON T HIS ISSUE IS SET ASIDE AND REMITTED BACK TO THE AO FOR CONSIDERATION AFRESH, I N ACCORDANCE WITH LAW. GROUND 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 4 6. VIDE ITS GROUNDS 2 & 3, ASSESSEE IS AGGRIEVED T HAT ITS CLAIM FOR DEDUCTION UNDER SECTION 10B OF THE ACT, CONSIDERING TRADED GOODS AS ALSO PART OF EXPORT TURNOVER, FIRST TIME MADE BEFORE THE LEARNED CIT(A) WAS REJECTED. 7. ASSESSEE HAD WHILE FILING ITS RETURN FOR THE IM PUGNED ASSESSMENT YEARS WORKED OUT ITS DEDUCTION UNDER SECTION 10B WI THOUT CONSIDERING ITS TRADING EXPORTS. HOWEVER, IN ITS APPEAL BEFORE CIT( A) IT RAISED A GROUND, INTER-ALIA CLAIMING THAT EXPORT TURNOVER OF TRADED GOODS ALSO HAS TO BE CONSIDERED WHILE WORKING OUT THE DEDUCTION. MANUF ACTURED GOODS EXPORTED BY THE ASSESSEE CAME TO RS.44,98,80,508/- , EXPORT IN THE NATURE OF TRADING CAME TO RS.10,03,63,764/-, APART FROM DE EMED EXPORTS OF RS.13,20,96,953/-. ARGUMENT OF THE ASSESSEE WAS TH AT MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S T TWO INTERNATIONA L (P)LTD., VS ITO 122 ITD 255, HAD HELD THAT TRADED GOODS WILL ALSO FORM PART OF EXPORT TURNOVER AND THIS DECISION WAS NOT AVAILABLE AT THE TIME OF FILI NG THE RETURN OR WHEN ASSESSMENT ORDER WAS PASSED. 8. HOWEVER, LEARNED CIT(A) WAS NOT IMPRESSED BY THE FRESH CLAIM OF THE ASSESSEE. ACCORDING TO HIM, THE DECISION CITED WAS NOT OF A BANGALORE BENCH AND FURTHER THE INTERPRETATION GIVEN BY THE A SSESSEE WAS INCORRECT IN VIEW OF THE CBDT CIRCULAR NO.1/2005 DATE 06-01-2005 . ACCORDING TO HIM MANUFACTURED GOODS ALONE WAS ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 5 9. NOW BEFORE US LEARNED AR, SUBMITTED THAT APART FROM THE DECISION OF MUMBAI BENCH IN THE CASE OF M/S T TWO INTERNATIO NAL (P)LTD.,(SUPRA), THERE WAS ALSO A SPECIAL BENCH DECISION IN MARAL OV ERSEAS LTD., VS ACIT (2012) 016 ITR (TRIB.)565) WHICH WAS IN FAVOUR OF T HE ASSESSEE. ACCORDING TO HIM THE WORDING OF SECTION 10B WERE SUCH THAT AL L EXPORTS MADE BY AN UNDERTAKING WILL BE ELIGIBLE FOR DEDUCTION, ONCE IT WAS EXPORTING GOODS MANUFACTURED BY IT. 10. PER CONTRA, LEARNED DR SUBMITTED THAT DECISION OF SPECIAL BENCH IN MARAL OVERSEAS LTD.,(SUPRA), WAS ON THE LIMITED ASPECT OF EXPORT INCENTIVES AND NOT TRADED GOODS. AS FOR THE DECISI ON OF MUMBAI BENCH IN THE CASE OF M/S T TWO INTERNATIONAL (P) LTD., WAS C ONCERNED LEARNED AR SUBMITTED THAT IT WAS FOR ASSESSMENT YEAR 2001-02, PRIOR TO AMENDMENT OF DEFINITION OF EXPORT TURNOVER WHICH CAME INTO EFF ECT FROM 01-04-2002. 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT THE CLAIM ON TRADED GOODS TO BE CONSIDERED AS PART OF ITS BUSINESS WAS FIRST MADE BY THE ASSESSEE BEFO RE THE CIT(A). ASSESSEE HAD NEVER MADE SUCH A CLAIM IN ITS RETURN OR BEFORE THE AO. BE THAT AS IT MAY, ASSESSEE IS MAKING THIS CLAIM BASED ON THE DEC ISION OF MUMBAI BENCH IN THE CASE OF M/S T TWO INTERNATIONAL (P) LTD., C LAIM IN THAT CASE WAS ALSO ON DEDUCTION UNDER SECTION 10A ON PROFIT FROM EXPOR T OF TRADED GOODS. IT WAS HELD BY THE CO-ORDINATE BENCH AS UNDER, AT PARA -10 OF ITS ORDER; ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 6 10. THE LEARNED CIT(A) HAS NOT GRANTED DEDUCTION TO THE ASSESSEE INSOFAR AS IT RELATES TO THE PROFIT FR OM EXPORT OF TRADING GOODS. FROM THE ABOVE TABLE, IT CAN BE SE EN THAT THE ASSESSEE MADE EXPORT BY TRADING IN GOODS AT RS. 3.23 CRORES ON WHICH DEDUCTION WAS CLAIMED. THE LEARNED CIT(A) OPINED THAT SINCE SUCH EXPORTS DO NOT RELATE TO THE GOODS MANUFACTURED BY THE ASSESSEE, HENCE THE BENEF IT OF DEDUCTION CANNOT BE ALLOWED. WE ARE NOT CONVINCED WITH THE VIEW CANVASSED BY THE LEARNED CIT(A) BECAUSE SU B- SECTION(1) OF SEC.10A ALLOWS DEDUCTION IN RESPECT O F PROFITS AND GAINS DERIVED BY AN ELIGIBLE UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. THE LATER PART OF THIS SUB-SECTION PROVIDES THAT THIS DEDUCTI ON IS AVAILABLE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMEN T YEARS STARTING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR COMPUTER SOFTWAR E. THE REFERENCE TO MANUFACTURE OR PRODUCTION OF ELIGIBLE ARTICLES IS ONLY FOR THE PURPOSES OF SETTLING THE FIRST YEAR OF THE TEN CONSECUTIVE ASSESSMENT YEARS IN WHICH THE ASSESSEE WILL BE ENTITLED TO DEDUCTION UNDER THIS SECTION. THE QUALIFYING AMOUNT FOR DEDUCTION IS THE PROFITS AND GAINS AS A RE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE. SUCH ELIGIBLE ARTIC LES ARE NOT RESTRICTED TO ONLY THOSE WHICH ARE PRODUCED OR MANUFACTURED BY THE ASSESEE. THE MATERIAL CONSIDER ATION IS THE EXPORT OF THE ELIGIBLE GOODS AND NOT WHETHER THESE ARE MANUFACTURED OR PURCHASED BY THE ASSESSEE. SE C.10A IS AKIN TO S.80HHC IN SOME RESPECTS, AS WILL BE SEE N INFRA AND THE LATER SECTION ALSO PROVIDES FOR DEDUCTION I N RESPECT ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 7 OF PROFITS FROM THE EXPORT OF THE GOODS OR MERCHAND ISE MANUFACTURED BY THE ASSESSEE AS WELL AS TRADING IN GOODS HAVE BEEN MADE ELIGIBLE FOR DEDUCTION IN RESPECT OF PROFITS FROM THE EXPORT OF THE GOODS OR MERCHANDISE MANUFAC TURED BY THE ASSESSEE AS WELL AS FROM THE EXPORT OF TRADI NG GOODS. THUS, PROFITS FROM BOTH THE SELF-MANUFACTUR ED AS WELL AS TRADING IN GOODS HAVE BEEN MADE ELIGIBLE FO R DEDUCTION. IF THE INTENTION OF THE LEGISLATURE HAD BEEN TO RESTRICT THE DEDUCTION ONLY FROM THE MANUFACTURING ACTIVITY, THEN, IT WOULD HAVE BEEN PROVIDED SO IN UNAMBIGUOU S TERMS IN THE SECTION ITSELF. SINCE THE BENEFIT HA S BEEN GRANTED TO THE PROFITS AND GAINS DERIVED FROM THE E XPORT OF ELIGIBLE ARTICLES, WITHOUT FURTHER RESTRICTING IT T O THE ARTICLES MANUFACTURED BY THE ASSESSEE IN ITS INDUSTRIAL UNDERTAKING, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED EXCLUDING THE EXPO RT OF TRADING IN GOODS WORTH RS.3.23 CRORES FROM THE QUAL IFYING EXPORTS. 12 AS FOR THE CLAIM OF LEARNED DR THAT THERE WAS A MENDMENT TO THE DEFINITION OF EXPORT TURNOVER WITH EFFECT FROM 01 -04-2002, WE ARE UNABLE TO FIND ANY, THAT HAS A BEARING ON THE ISSUE BEFORE US. SECOND PROVISO TO SECTION 10B(1) AS IT EARLIER STOOD WAS NO DOUBT OMI TTED BY FINANCE ACT, 2001, WITH EFFECT FROM 01-04-2002. BUT THE EARLIER PROVISO WAS ONLY FOR FIXING A LIMIT OF 25% ON DOMESTIC SALES, FOR COMPUT ING PROFITS AND GAINS DERIVED FROM EXPORTS. HERE ON THE OTHER HAND, CLAI M OF THE ASSESSEE IS NOT ON DOMESTIC SALE, BUT ON EXPORT SALES OF GOODS PURC HASED AS SUCH BY IT. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 8 SECTIONS 10A(I) AND 10B(I) ARE NO DIFFERENT, SINCE THESE ARE SIMILARLY WORDED. LEARNED CIT(A) IN OUR OPINION, FELL IN ERROR IN NOT FOLLOWING THE DECISION OF CO-ORDINATE BENCH. ASSESSEE HAD ALREADY PREFERRED A CLAIM BEFORE AO FOR DEDUCTION UNDER SECTION 10B, THOUGH ONLY ON MANUFAC TURED GOODS. THE CLAIM MADE ON TRADING GOODS EXPORTED WAS ALSO UNDER SAME SECTION. IT CANNOT BE CONSIDERED AS A CLAIM OF DIFFERENT GENIE. IT IS ALSO A FACT THAT THE AO NEVER HAD AN OPPORTUNITY TO VERIFY THIS CLAIM. IN ALL FAIRNESS WE ARE OF THE OPINION THAT THE CLAIM CAN BE LOOKED AFRESH BY THE AO. WE THEREFORE, SET ASIDE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND REMIT IT TO THE AO FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. GROUN DS 2 & 3 OF THE ASSESESE IS ALLOWED FOR STATISTICAL PURPOSES. 13. NOW, WE TAKE UP THE APPEAL OF THE REVENUE. GR IEVANCE OF THE REVENUE IS THAT LEARNED CIT(A) DEEMED EXPORTS OF R S.13,20,96,953/- ALSO AS PART OF EXPORT TURNOVER FOR COMPUTING ELIGIBLE D EDUCTION UNDER SECTION 10B. AS PER THE REVENUE SUCH DIRECTIONS WERE GIVE N DISREGARDING DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S TATA EL XSI LTD VS ACIT 115 TTJ 423. FURTHER, AS PER THE REVENUE THE REASONIN G GIVEN BY THE LEARNED CIT(A) WAS NOT IN ACCORDANCE WITH SECTION 10B(3) AN D DEFINITION OF EXPORT TURNOVER IN EXPLANATION(III). 14. LEARNED DR STRONGLY ASSAILING THE ORDER OF THE LEARNED CIT(A) SUBMITTED THAT CO-ORDINATE BENCH HAD IN THE CASE OF M/S GRANITE MART LTD. VS ITO (ITA NO.22 & 763/BANG/2010 DATED 17-09-2010) HELD THAT NEITHER DEEMED EXPORTS, NOR THIRD PARTIES EXPORT WOULD BE E LIGIBLE FOR A CLAIM OF ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 9 DEDUCTION UNDER SECTION 10B OF THE ACT, THAT TOO, A FTER CONSIDERING THE DECISION OF M/S TATA ELXSI LTD., (SUPRA). RELIANC E WAS ALSO PLACED ON THE DECISION OF HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS BADHRA CONSULTING LTD.,(2010) 134 TTJ 214 AND THE J UDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P) LTD., (2011) 245 CTR 465. 15. PER CONTRA, LEARNED AR PLACING RELIANCE ON A C O-ORDINATE BENCH DECISION DATED 19-0-2010 IN REVENUES APPEAL ITA NO .814/BANG/2009 WHERE ASSESSEE WAS THE RESPONDENT, SUBMITTED THAT F OR ASSESSMENT YEAR 2006-07, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASS ESSEE BY THE LEARNED CIT(A) AND THIS WAS CONFIRMED BY THE TRIBUNAL. REL IANCE WAS ALSO PLACED ON THE DECISION OF CHENNAI BENCH OF THIS TRIBUNAL I N THE CASE OF CIT VS JANANI HOLDING(ITA NO.1094/MDS/2010 DATED 28-02-201 1). 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS. ASSESSEE HAD INCLUDED DEEMED EXPORTS OF RS.13,20,96 ,953/- AS A PART OF ITS EXPORT TURNOVER WHILE CLAIMING DEDUCTION UNDER SECT ION 10B. AO HAD DISALLOWED THIS CLAIM FOR A REASON THAT EXPORTS WER E EFFECTED BY THE MERCHANT EXPORTERS, WHO ALONE HAD RECEIVED THE FORE IGN EXCHANGE. AO ALSO NOTED THAT ASSESSEE HAD RECEIVED THE CONSIDERATION FOR SALE FROM SUCH MERCHANT EXPORTERS ONLY IN INDIAN RUPEE AND THERE W AS NO CONCEPT OF DEEMED EXPORTS IN SECTION 10B OF THE ACT. LEARN ED CIT(A), ACCEPTED THE CLAIM OF THE ASSESSEE, NOTING THAT CO-ORDINATE BENC H DECISION IN TATA ELXSI LTD., CASE (SUPRA), THOUGH A DETAILED AND WELL REAS ONED ONE WAS GIVEN PRIOR ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 10 TO THE DECISION IN ASSESSEES CASE FOR AY: 2006-07. HE PREFERRED TO FOLLOW THE LATTER. OBSERVATION OF THE CO-ORDINATE BENCH I N REVENUES APPEAL FOR AY: 2006-07 (ITA NO.814(B)/2009 DATED 19-03-2010) O N THIS ISSUE READS AS UNDER; THE CIT(A) OBSERVED FROM THE SUMMARY OF YEAR WISE DIRECT EXPORTS AND EXPORTS MADE THROUGH THIRD PARTI ES FURNISHED BY THE ASSESSEE THAT IT HAS BEEN CONSISTE NTLY INDULGING IN EXPORT THROUGH THIRD PARTY MAINLY M/S S.K.INTERNATIONAL AND M/S ELE STONES (IND.) LTD., ON RECEIPT OF CONFIRMED EXPORT ORDERS FROM RESPECTIVE OVERSEAS CUSTO0MERS FOR EXPORT CUT AND POLISHED GRANITE SLAB S, TITLES, SLATES ETC., THE ABOVE PARTIES PLACED PURCHASE ORDE RS ON THE ASSESSEE ALONG WITH DISCLAIMER CERTIFICATES DECLARI NG THAT THEY WILL NOT BE CLAIMING EXPORT BENEFIT ON THE THI RD PARTY EXPORT SALES MADE BY THEM THEREBY TRANSFERRING THE SAME TO THE MANUFACTURERS VIZ., THE ASSESSEE AND ALSO SIMULTANEOUSLY UNDERTAKING TO INDICATE THE ASSESSEE AS THE 100% EOU MANUFACTURER OF THE MATERIALS BEING EXPORTED IN THE SHIPPING BILLS FILED WITH THE CUSTO MS AUTHORITIES. COPIES OF PURCHASE ORDERS, INVOICES, D ISCLAIMER CERTIFICATES, APPLICATION MADE FOR REMOVAL OF EXCIS ABLE GOODS FOR EXPORT (FORM A.R.E 1) & SHIPPING BILLS WE RE PRODUCED BEFORE THE CIT(A) TO SUBSTANTIATE. IN VIE W OF THE FOREGOING ANALYSIS AND IN THE LIGHT OF THE INCONTRO VERTIBLE EVIDENCE FILED ON BEHALF OF ASSESSEE, THE CIT(A) HE LD THAT THE DEEMED EXPORT TOTALING RS.13,05,22,177/- SHOUL D NOT BE EXCLUDED FOR THE PURPOSE OF CALCULATING DEDUCTIO N U/S 10B OF THE IT ACT. WE UPHOLD THE SAME . ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 11 AS AGAINST THIS CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GRANITE MART LTD.,(SUPRA), HELD AS UNDER AT PARA-8 & 9 OF ITS ORDER DATED 17-09-2010. 8. NEXT, WE WILL CONSIDER THE GROUND RAISED BY TH E ASSESSEE IN RESPECT OF THE CLAIM OF EXEMPTION MADE U/S 10B ON THE SALES MADE TO ANOTHER EXPORT ORIENTED UN ITS. THIS ISSUE WAS ALSO CONSIDERED BY THE ITAT A BENCH IN THE CASE MENTIONED ABOVE IE.TATA ELXSI LTD., VS ACIT, 1 15 TTJ 423. AFTER EXAMINING THE SCHEME OF SECTION U/ S 10A WHICH IS IN PARI PASSU TO SEC.10B, THE TRIBUNAL HEL D THAT SUCH DEEMED EXPORT IS ENTITLED ONLY FOR THE BENEFIT S OF DUTY DRAW BACK AND EXEMPTION FROM BASIC EXCISE DUTY. S UCH DEEMED EXPORTS DO NOT GET ENTITLED FOR THE DEDUCTIO N U/S 10A. AS THE ABOVE JUDGMENT SQUARELY APPLIES TO TH E PRESENT CASE, WE HOLD THAT THE ASSESSEE COMPANY IS NOT ENTITLED FOR DEDUCTION U/S 10B IN RESPECT OF SALES MADE TO OTHER EXPORT UNITS. THIS GROUND OF THE ASSESSEE IS REJECTED. 9. THE THIRD ISSUE TO BE CONSIDERED IS WHETHER TH E ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B IN RESPE CT OF THE SALES MADE THROUGH THIRD PARTIES. IT IS THE CASE O F THE ASSESSEE THAT THESE THIRD PARTIES ARE EXPORT HOUSES AND THEY HAVE EXPORTED ALL SUCH GOODS SOLD BY THE ASSES SEE TO THEM FOR THE PURPOSE OF SUCH EXPORT AND AS SUCH THE Y ARE ENTITLED FOR DEDUCTION U/S 10B. IT IS VERY INTER ESTING TO NOTE AS STATED ABOVE THAT EVEN A DEEMED SALE MADE T O ANOTHER EXPORT UNIT IS HELD TO BE NOT ENTITLED FOR DEDUCTION U/S 10A IN THE CASE ALREADY RELIED ON US IN TATA EL XSI LTD., VS ACIT. THEREFORE, THE ANSWER TO THIS G ROUND IS READILY AVAILABLE IN THAT JUDGMENT ITSELF. BY FOLL OWING THE ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 12 RATIO OF THE ABOVE JUDGMENT, WE COME TO THE CONCLUS ION THAT THE ASSESSEE CANNOT CLAIM THE DEDUCTION U/S 10B IN RESPECT OF THE SO-CALLED EXPORTS MADE THROUGH THIRD PARTIES/EXPORT HOUSES. 17. THUS IN THE CASE OF GRANIT MART LTD.,(SUPRA), CO-ORDINATE BENCH DECISION IN TATA ELXSI LTD., (SUPRA)HAS BEEN CONSID ERED. HOWEVER, IN THE FORMER DECISION DATED 19-03-2010, THOUGH IT WAS IN ASSESSEES OWN CASE, AND THOUGH A REFERENCE HAS BEEN MADE AT PARA TWO TO TATA ELXSI LTD., DECISION, THIS WAS IN RELATION TO THE CLAIM OF THE ASSESSEE FOR EXCLUDING TRANSPORT & INSURANCE CHARGES BOTH FROM EXPORT TURN OVER AND TOTAL TURNOVER. 18. IN ANY CASE, WE FIND THAT HONBLE KERALA HIGH COURT IN THE CASE OF ELECTRONIC CONTROLS & DISCHARGE SYSTEMS (P)LTD., (S UPRA), IN A JUDGMENT RENDERED ON 27 TH JULY, 2011 HAS CONSIDERED THE VERY SAME ISSUE. TH EIR LORDSHIP HELD AS UNDER AT PARA-3 TO 6 OF THE JUDGME NT. 3. THE VERY SHORT QUESTION THAT ARISES FOR CONSIDERATI ON IS WHETHER ASSESSEE IS ENTITLED TO EXEMPTION ON THE PROFITS DE RIVED ON THE SALE OF COMPONENTS TO AN INDUSTRIAL UNIT IN ANOTHER SEZ WIT HIN INDIA UNDER S. 10A(3) OF THE IT ACT, WHICH PROVIDES FOR EXEMPTION ON THE PROFIT DERIVED ON EXPORT SALE PROCEEDS OF ARTICLES OR THINGS OR CO MPUTER SOFTWARE RECEIVED OR BROUGHT TO INDIA IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS Y EAR OR WITHIN SUCH PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW. CONVER TIBLE FOREIGN EXCHANGE AS DEFINED UNDER CL. (II) OF EXPLANATION T O S. 10A(8) MEANS FOREIGN EXCHANGE WHICH IS TREATED BY THE RBI AS CON VERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF FOREIGN EXCHANGE REGUL ATION ACT, 1973 OR ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 13 THE RULES MADE THEREUNDER. ADMITTEDLY ASSESSEE WAS GIVEN FULL EXEMPTION ON THE PROFITS RECEIVED ON ACTUAL EXPORTS FOR WHICH PAYMENT WAS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. DISPU TE IS ONLY WITH REGARD TO THE INTERSTATE SALE OF COMPONENTS MADE TO THE UNIT IN THE MSEZ FOR WHICH THE PAYMENT RECEIVED IS ALSO ADMITTE DLY IN INDIAN RUPEE AND NOT IN CONVERTIBLE FOREIGN EXCHANGE. THE PROVISIONS IN S. 10A ARE COMPREHENSIVE AND EXHAUSTIVE AND THERE IS NO DI SPUTE THAT THE MANDATORY CONDITIONS OF S. 10A(3) HAVE TO BE SATISF IED TO GET EXEMPTION ON EXPORT PROFITS. IN OTHER WORDS, EXEMPTION IS AVA ILABLE ONLY ON ACTUAL EXPORTS AND ONLY IF CONSIDERATION OF EXPORT IS RECE IVED IN CONVERTIBLE FOREIGN EXCHANGE. IN THE CASE IN HAND BOTH THE COND ITIONS ARE NOT SATISFIED BECAUSE ASSESSEES SALES OF COMPONENTS AR E TO ANOTHER INDUSTRIAL UNIT IN INDIA AND THE SALE PROCEEDS ARE RECEIVED IN INDIAN RUPEE. THE QUESTION, THEREFORE, IS WHETHER PROVISIO NS OF ANOTHER STATUTE, THAT TOO, ENACTED AFTER THE END OF BOTH THE ASSESSM ENT YEARS CAN COME TO THE RESCUE OF THE ASSESSEE, WHICH IS THE FINDING OF THE TRIBUNAL. 4. IN ORDER TO CONSIDER THE RIVAL CONTENTIONS WE HAVE TO NECESSARILY REFER TO THE RELEVANT STATUTORY PROVISIONS OF THE S TATUTE WHICH ARE EXTRACTED HEREUNDER : 'SEC. 10A. (1) SUBJECT TO THE PROVISIONS OF THIS SE CTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTA KING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE F OR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASS ESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE : (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF THE 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 CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE EN D OF THE PREVIOUS YEAR OR, WITHIN SUCH FURTHER PERIOD AS THE COMPETEN T AUTHORITY MAY ALLOW IN THIS BEHALF. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 14 EXPLANATION 1.FOR THE PURPOSE OF THIS SUB-SECTION, THE EXPRESSION 'COMPETENT AUTHORITY' MEANS THE RESERVE BANK OF IND IA OR SUCH OTHER AUTHORITY AS AUTHORISED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANG E. EXPLANATION 2.THE SALE PROCEEDS REFERRED TO IN THI S SUB-SECTION SHALL BE DEEMED TO HAVE BEEN RECEIVED IN INDIA WHERE SUCH SALE PROCEEDS ARE CREDITED TO A SEPARATE ACCOUNT MAINTAINED FOR T HE PURPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPRO VAL OF THE RESERVE BANK OF INDIA. (8) EXPLANATION 2.FOR THE PURPOSE OF THIS SECTION, (II) 'CONVERTIBLE FOREIGN EXCHANGE' MEANS FOREIGN E XCHANGE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF INDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF THE FOREIGN EX CHANGE REGULATION ACT, 1973 (46 OF 1973), AND ANY RULES MADE THEREUND ER OR ANY OTHER CORRESPONDING LAW FOR THE TIME BEING IN FORCE; (IV) 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN R ESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER S OFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN COVERTIBL E FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-S. (3), BUT DOES NOT INCLUDE FR EIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA.' SENIOR COUNSEL APPEARING FOR THE REVENUE CONTENDED THAT THE ASSESSEES CLAIM OF EXEMPTION IS THOROUGHLY UNTENAB LE BECAUSE BOTH THE CONDITIONS REQUIRED FOR ALLOWING THE CLAIM CONT AINED IN S. 10A(3) ARE NOT SATISFIED INASMUCH AS SALE IS ONLY AN INTERSTAT E SALE AND NOT AN EXPORT SALE AND THE CONSIDERATION RECEIVED IS IN IN DIAN RUPEE AND NOT IN CONVERTIBLE FOREIGN EXCHANGE. REFERENCE IS ALSO MAD E TO THE TECHNICAL WORDS USED SUCH AS 'FOREIGN EXCHANGE' AND 'EXPORT T URNOVER' USED IN S. 10A(3) AND COUNSEL CONTENDED THAT NOWHERE IN THE PROVISIONS OF S. 10A AN ARTIFICIAL MEANING IS GIVEN TO 'EXPORT' OR ' EXPORT TURNOVER' TO ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 15 ENABLE THE ASSESSEE TO CLAIM EXEMPTION ON SO-CALLED DEEMED EXPORT WHICH IS THE SALE OF COMPONENTS BY THE ASSESSEE TO ANOTHER UNIT IN THE MSEZ. ACCORDING TO STANDING COUNSEL FOR THE REVENUE , ASSESSEES CLAIM IS THOROUGHLY MISCONCEIVED AND IF EXEMPTION WAS TO BE PROVIDED FOR THE SALES MADE BETWEEN INDUSTRIAL UNITS IN THE EXPORT P ROCESSING ZONE, THE ACT WOULD HAVE EXPRESSLY PROVIDED SO. THE FURTHER C ONTENTION RAISED BY THE REVENUE IS THAT THE PROVISIONS OF SEZ ACT, 2005 RELIED ON BY THE ASSESSEE WHICH FOUND ACCEPTANCE WITH THE TRIBUNAL W AS ENACTED AFTER THE END OF BOTH THE ASSESSMENT YEARS TO WHICH ASSES SMENTS RELATE IN THESE APPEALS. 5. SENIOR COUNSEL SRI A.K. GANGULY APPEARING FOR THE R ESPONDENT- ASSESSEE MADE ELABORATE ARGUMENT WITH REFERENCE TO THE PROVISIONS OF THE SEZ ACT, 2005 AND THE RULES MADE THEREUNDER AND THE FOREIGN TRADE POLICY GUIDELINES ISSUED BY THE DIRECTOR GENE RAL OF FOREIGN TRADE AND CONTENDED THAT THE CLAIM WAS RIGHTLY ALLO WED BY THE TRIBUNAL AS THE INTER-UNIT SALE IS A DEEMED EXPORT WITHIN THE MEANING OF SEZ ACT, 2005. RELIANCE IS ALSO PLACED ON JUDGME NT OF THIS COURT IN TATA TEA LTD. VS. ASSTT. CIT (2010) 42 DTR (KER) 25 1 : (2010) 234 CTR (KER) 90 : (2010) 189 TAXMAN 303 (KER). ASSESSEES COUNSEL RELIED ON THE DEFINITION OF 'EXPORT' CONTAINED IN S. 2(M)(III ) OF THE SEZ ACT, 2005 WHICH IS AS FOLLOWS : '(M) 'EXPORT' MEANS (I) TAKING GOODS, OR PROVIDING SERVICES, OUT OF IND IA, FROM A SEZ, BY LAND, SEA OR AIR OR BY ANY OTHER MODE, WHETHER PHYS ICAL OR OTHERWISE; OR (II) SUPPLYING GOODS, OR PROVIDING SERVICES, FROM T HE DOMESTIC TARIFF AREA TO A UNIT OR DEVELOPER; OR (III) SUPPLYING GOODS, OR PROVIDING SERVICES, FROM ONE UNIT TO ANOTHER UNIT OR DEVELOPER, IN THE SAME OR DIFFERENT SEZ,' ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 16 REFERENCE IS ALSO MADE TO FOREIGN TRADE POLICY 2004 -2009 ISSUED BY THE DIRECTOR GENERAL OF FOREIGN TRADE WHEREIN 'DEEM ED EXPORT' IS EXPLAINED IN CL. 8.1 AS FOLLOWS : 'DEEMED EXPORTS REFERS TO THOSE TRANSACTIONS IN W HICH THE GOODS SUPPLIED DO NOT LEAVE THE COUNTRY AND THE PAYMENT F OR SUCH SUPPLIES IS RECEIVED EITHER IN INDIAN RUPEES OR IN FREE FOREIGN EXCHANGE.' SPECIFIC REFERENCE IS MADE TO NOTIFICATION ISSUED B Y THE MINISTRY OF FINANCE, CENTRAL BOARD OF EXCISE AND CUSTOMS, NEW D ELHI, ON 30TH JULY, 2003 WHEREIN THERE IS A STATEMENT THAT SEZ WI LL BE CONSIDERED AS FOREIGN TERRITORY FOR PURPOSES OF DUTIES AND TAXES. COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON DECISION OF THE SUPREME COURT IN SATYAWATI SHARMA VS. UNION OF INDIA (2008) 5 SCC 28 7. EVEN THOUGH THIS DECISION IS ON RENT CONTROL ACT, ASSESSEES CO UNSEL SUBMITTED THAT THE PRINCIPLE LAID DOWN THEREIN HAS APPLICATION INA SMUCH AS THERE CAN BE NO DISCRIMINATION IN REGARD TO TAXATION ON THE P ROFITS ON EXPORTS AND PROFITS ON DEEMED EXPORTS. SO FAR AS THE DECISION O F THIS COURT ABOVE REFERRED, THE CONTENTION OF ASSESSEES COUNSEL IS T HAT THE PROVISIONS OF THE ACT SHOULD BE LIBERALLY CONSTRUED TO ACHIEVE TH E OBJECT I.E., TO GRANT EXEMPTION ON EXPORT PROFIT. ON THE FACTUAL POSITION , THE ASSESSEE CONTENDED THAT THE INDUSTRIAL UNIT AT MSEZ AFTER PU RCHASING THE COMPONENTS FROM THE ASSESSEE, MANUFACTURE THE FINAL PRODUCTS AND EXPORT WHICH QUALIFIES FOR EXEMPTION FROM TAX AND A SSESSEE BEING THE COMPONENT SUPPLIER IS A CONTRIBUTOR FOR RECEIPT OF FOREIGN EXCHANGE WHICH IS THE BASIS FOR GRANTING EXEMPTION. 6. AFTER HEARING BOTH SIDES AND AFTER GOING THROUGH TH E ABOVE REFERRED PROVISIONS OF THE IT ACT AND THE PROVISIONS OF THE SEZ ACT, 2005, WE ARE UNABLE TO UPHOLD THE ORDER OF THE TRIBUNAL BECAUSE THE CONCEPT OF DEEMED EXPORT UNDER THE SEZ ACT IS NOT INCORPORATED IN THE SCHEME OF EXEMPTION UNDER S. 10A OF THE IT ACT AND IT IS THE SETTLED POSITION THAT THE IT ACT IS A SELF-CONTAINED CODE AND THE VALIDIT Y OR CORRECTNESS OF THE ASSESSMENT HAS TO BE CONSIDERED WITH REFERENCE TO S TATUTORY PROVISIONS. IT IS NOT AS IF THE SEZ ACT, 2005 OR TH E FOREIGN EXCHANGE REGULATION ACT OR THE FOREIGN EXCHANGE MANAGEMENT A CT ARE NOT REFERRED TO IN THE IT ACT. THE IT ACT REFERS TO SEV ERAL STATUTES IN DIFFERENT ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 17 PLACES AND WHEREVER REQUIRED, PROVISIONS OF SUCH ST ATUTES ARE INCORPORATED IN THE ACT THROUGH REFERENCE OR BY INC ORPORATION. IT IS NOT AS IF THE PARLIAMENT IS UNAWARE OF OTHER STATUTES W HICH HAVE SPECIFIC PURPOSES. INTER-UNIT TRANSFERS IN ECONOMIC ZONES AR E TREATED AS EXPORTS FOR THE PURPOSE OF CUSTOMS ACT AND THE CENTRAL EXCI SE ACT. HOWEVER, WHEN S. 10A, PROVIDES FOR EXEMPTION ONLY ON PROFITS DERIVED ON EXPORT PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE, THE LEGISLATURE NEVER INTENDED THE BENEFIT TO BE EXTENDED TO LOCAL SALES MADE BY THE UNITS IN THE SEZ, WHETHER AS PART OF DOMESTIC TARIFF AREA SA LES OR INTER-UNIT SALES WITHIN THE ZONE OR UNITS IN OTHER ZONES. IN F ACT ALL SEZS ARE ALLOWED TO MAKE 25 PER CENT SALES TO DOMESTIC TARIF F AREA AND THE PROFIT DERIVED FROM SUCH SALES ARE NOT ENTITLED TO EXEMPTI ON. EXEMPTION UNDER S. 10A(3) IS SPECIFICALLY GEARED TO PROFITS ON ACTU AL EXPORTS, THAT TOO, MADE AGAINST RECEIPT OF CONVERTIBLE FOREIGN EXCHANG E. WE ARE OF THE VIEW THAT IF THE PROVISIONS OF THE SEZ ACT, 2005, A RE BROUGHT IN TO EXTEND THE EXEMPTION ON PROFITS DERIVED ON INTER-UN IT SALE MADE BY INDUSTRIES WITHIN THE EXPORT PROCESSING ZONE, THE C OURT WILL BE RE- WRITING THE LEGISLATION WHICH IS EXACTLY WHAT THE T RIBUNAL HAS DONE. IN FACT, THE UNIT WHICH PURCHASED COMPONENTS FROM THE ASSESSEE MUST BE MANUFACTURING FINAL PRODUCTS AND BEING A UNIT IN TH E SEZ WILL BE EXPORTING THE FINAL PRODUCT, ON WHICH THAT UNIT WIL L GET EXEMPTION ON THE ENTIRE PROFITS WHICH INCLUDE THE VALUE OF THE COMPO NENTS SUPPLIED BY THE ASSESSEE. PROBABLY THE LEGISLATURE DID NOT WANT DUPLICITY IN EXEMPTION ON EXPORT PROFIT. THAT IS WHY INTER-UNIT SALES IN THE EXPORT PROCESSING ZONE ARE NOT TREATED AS EXPORT WITHIN TH E MEANING OF S. 10A OF THE IT ACT, NO MATTER SUCH TRANSFERS ARE TREATED AS EXPORTS FOR THE PURPOSE OF CUSTOMS AND EXCISE DUTY EXEMPTION. WHEN THE EXEMPTION IS ONLY ON ACTUAL PROFITS DERIVED ON EXPORTS MADE AGAI NST RECEIPT IN CONVERTIBLE FOREIGN EXCHANGE, THE TRIBUNAL, IN OUR VIEW, HAS NO JUSTIFICATION TO EXTEND IT TO PROFITS RECEIVED ON L OCAL SALES WITHIN INDIA AGAINST PAYMENT RECEIVED IN INDIAN RUPEES. FOR THE ABOVE REASONS, WE ARE UNABLE TO SUSTAIN THE ORDERS OF THE TRIBUNAL AN D WE, THEREFORE, ALLOW THE APPEALS BY REVERSING THE ORDERS OF THE TR IBUNAL AND BY RESTORING THE ORDERS CANCELLED BY THE TRIBUNAL. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 18 19. ONCE A HIGH COURT HAS GIVEN A JUDGMENT, THOUGH A NON- JURISDICTIONAL ONE, WE ARE BOUND TO FOLLOW IT, UNLE SS ASSESSEE IS ABLE TO SHOW A CONTRARY JUDGMENT FROM THE JURISDICTIONAL HI GH COURT. DECISIONS OF LOWER AUTHORITIES WOULD PALE INTO INSIGNIFICANCE. ASSESSEE HERE HAS NOT BEEN ABLE TO BRING ANY DECISION FROM THE JURISDICT IONAL HIGH COURT, WHICH GO IN ITS FQAVOUR. WE THEREFORE, ARE INCLINED TO FOLLOW THE VIEW TAKEN BY THE KERALA HIGH COURT. WE SET ASIDE THE ORDER OF T HE LEARNED CIT(A) AND RESTORE THE ORDER OF THE LEARNED AO AND DIRECT THAT DEEMED EXPORTS SHALL NOT BE CONSIDERED AS PART OF EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT, 1961. 20. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR AY: 2008-09. FIRST GROUND RAISED BY IT IS SIMILAR TO ITS GROUND NUMBER ONE FOR AY: 2007- 08. SIMILAR DIRECTION AS GIVEN IN PARA - 5 ABOVE IS GIVEN HERE ALSO. 21. SECOND GROUND IS ON THIRD PARTY/DEEMED EXPORTS FOR WORKING OUT 10B DEDUCTION WHICH WAS DISALLOWED BY THE LEARNED C IT(A). FOR AY: 2007- 08, ON THE VERY SAME ISSUE CIT(A) HAD GONE IN FAVOU R OF THE ASSESSEE. REVENUES APPEAL IN THIS REGARD HAS BEEN ALLOWED BY US AT PARAS 16 TO 19 ABOVE. ACCORDINGLY, THIS GROUND RAISED BY THE AS SESSEE IS DISMISSED. 22. VIDE ITS GROUND NUMBER 3, ASSESSEE IS AGGRIEVE D THAT EXPENDITURE ON FREIGHT AND INSURANCE WAS EXCLUDED FROM EXPORT T URNOVER. ACCORDING TO ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 19 THE ASSESSEE, IF AT ALL IT IS EXCLUDED IT SHOULD AL SO BE EXCLUDED FROM TOTAL TURNOVER. 23. WE FIND THAT DEFINITION OF EXPORT TURNOVER I N EXPLANATION(III) TO 10B(2) SPECIFICALLY REQUIRE EXCLUSION OF FREIGHT, T ELECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO DELIVERY OF THINGS OUTSID E INDIA. ASSESSEE HAS NO CASE THAT SUCH EXPENSES WERE NOT ATTRIBUTABLE TO IT S EXPORT SALES. HENCE EXCLUSION OF SUCH EXPENSES FROM EXPORT TURNOVER CAN NOT BE FAULTED. HOWEVER, ITS CLAIM THAT SUCH AMOUNTS SHOULD BE ALSO BE EXCLUDED FROM TOTAL TURNOVER, WHILE WORKING OUT ELIGIBLE DEDUCTIO N UNDER SECTION 10B IS ON STRONG WICKET, IN VIEW OF DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS TATA ELXSI LTD.,349 ITR 98. WE TH EREFORE, DIRECT THE AO TO EXCLUDE THE ITEMS EXCLUDED FROM EXPORT TURNOVER ALS O FROM TOTAL TURNOVER, WHILE WORKING OUT THE DEDUCTION UNDER SECTION 10B O F THE ACT. GROUND 3(B) OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PUR POSES. 24. VIDE ITS GROUND 4, ASSESSEES GRIEVANCE IS THA T TRADING GOODS EXPORTS WAS NOT CONSIDERED ELIGIBLE FOR DEDUCTION U NDER SECTION 10B. THESE ARE SIMILAR TO GROUNDS 2 & 3 OF THE ASSESSEE IN ITS APPEAL FOR AY: 2007-08. WE HAVE ALREADY HELD AT PARAS 11 & 12 A BOVE THAT THE CLAIM OF THE ASSESSEE IN THIS REGARD IS ACCEPTABLE. SIMILA R DIRECTIONS ARE GIVEN HERE ALSO. GROUND NO.4 IS THUS ALLOWED. ITA NOS.1130(B)/11 & 888 & 893(BANG)2010 20 TO SUMMARISE THE RESULTS APPEALS OF THE ASSESSEE F OR AY: 2007-08 IS ALLOWED PRO-TANTO, WHEREAS ITS APPEAL FOR AY: 2008- 09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. APPEAL OF THE REVENUE FOR A Y: 2007-08 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-09-2014. SD/- (RAJPAL YADAV) SD/- (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 05-09-2014 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE