THE COMMISSIONER OF INCOME TAX, KOTTAYAM vs. M/S.ALL KOSHYS ALL SPICES BLOCK NO.18/609/6, NATTAKOM, KOTTAYAM

ITA/81/2015HC KeralaKLHC01025482201511 December 2017Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON8 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) concerning the interpretation of Section 10B of the Income Tax Act, 1961. The assessee, M/s. All Koshys All Spices, a sole proprietorship firm, commenced its manufacturing business in 1997-98. It was later converted into a partnership firm and obtained a certificate as a 100% export-oriented unit (EOU) on 24.09.1999, corresponding to the assessment year 2000-2001. The dispute revolves around whether the assessee is entitled to claim exemption under Section 10B from assessment year 2000-2001 (year of EOU certification) or from assessment year 1997-1998 (year of manufacturing commencement). The assessment order under challenge was passed under Section 143(3) of the Income Tax Act, 1961.

What did the High Court hold?

The High Court held that Section 10B(1) provides for a deduction to a 100% export-oriented undertaking for ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. However, the provision is to be read as a whole, meaning the manufacture referred to must be one commenced pursuant to the certification of a 100% export-oriented undertaking. The exemption is conferred only on a 100% export-oriented unit. Therefore, the exemption could commence only from its certification as such a unit, and if there was no manufacture at the time of certification, then from the time of commencement of manufacture. In this case, the assessee was not a 100% export-oriented unit in the year it commenced manufacture. The Court found that the Punjab and Haryana High Court judgment (Annexure-D) did not lay down that the claim could only be from the commencement of operations, but rather that there was no requirement to prove it was newly established. The Court also found that the other cited decisions did not apply to the facts of the case. The Court concluded that the benefit should be applied from the date of commencement of the export-oriented undertaking, which in this case coincided with the manufacturing too. The appeal was rejected in favour of the assessee.

What were the issues?

1. Whether the assessee, a 100% export-oriented undertaking, is entitled to claim exemption under Section 10B of the Income Tax Act, 1961, from the assessment year relevant to the previous year in which it commenced manufacturing or from the assessment year relevant to the previous year in which it obtained the 100% export-oriented undertaking certification. Assessee's Contentions: The assessee relied on the decision in Commissioner of Income Tax v. Shri Renuga Textiles Mills Ltd. [366 ITR 649 (Madras)]. Revenue's Contentions: The Revenue relied on Annexure-D, a judgment of the Punjab and Haryana High Court, and the decision in Sami Labs Ltd. v. Assistant Commissioner of Income-Tax ([2011] 334 ITR 157). The Revenue argued that the exemption under Section 10B should commence from the year the undertaking begins to manufacture or produce articles or things or computer software.

Which sections of the Income-tax Act were involved?

Section 10B,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 11TH DAY OF DECEMBER 2017/20TH AGRAHAYANA, 1939 ITA.No. 81 of 2015 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 456/COCH/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 24-09-2014 APPELLANT(S)/APPELLANT/RESPONDENT/REVENUE: ---------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM

BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT/APPELLANT/ ASSESSEE: --------------------------------------------- M/S.ALL KOSHYS ALL SPICES, BLOCK NO.18/609/6, PAKKIL P.O., NATTAKOM, KOTTAYAM, PIN - 686 012. BY ADV. SRI.S.ARUN RAJ BY ADV. SMT.C.T.SUJA THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA 81/15 APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A : COPY OF ASSESSMENT ORDER U/S 143(3) OF INCOME TAX ACT 1961 DATED 24.12.2010. ANNEXURE-B : COPY OF CIT(A)'S ORDER NO.T-63&64/KTM/CIT(A) 2010- 2011 DATED 11.04.2013. ANNEXURE-C : COPY OF ITAT'S ORDER IN ITA 456/COCH/2013 DATED 24

The order continues below.

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