M/S. SAINT GOBAIN INDIA PVT. LTD.,CHENNAI vs. DCIT, NON CORPORATE CIRCLE-8(1), CHENNAI

The brief facts of the case are that M/s.Saint-Gobain Crystals & Detectors India Limited, which has since merged with the assessee, M/s.Saint-Gobain India Private Limited, pursuant to the order of the Hon’ble High Court of Madras dated 30.11.2015, was engaged in the manufacture and export of scintillation detectors, arrays and array assemblies. Its Unit-II is a 100% Export Oriented Unit (EOU) approved vide Letter of Permission (LOP) No.1/53/2003:PER: EOU:KR:CSEZ dated 26.12.2003. For the AY 2010-11, the assessee filed its return of income on 08.10.2010 declaring an income of Rs.3,81,44,488/-, after claiming deduction u/s.10B of the Act of Rs.2,64,90,636/- in respect of Unit-II, supported by the report in Form No.56G. The assessment was completed u/s.143(3) of the Act on 20.02.2014 by the Deputy Commissioner of Income Tax, Circle-12(3), Bengaluru, determining the total income at Rs.6,51,06,512/-, inter alia, by disallowing the deduction u/s.10B of the Act of Rs.2,64,90,636/- and making a disallowance u/s.14A of the Act of Rs.4,71,388/-.

On appeal, the Ld.CIT(A)-6, Bengaluru, vide order dated 03.08.2016, following the decisions of the Hon’ble High Court of Karnataka and the Bengaluru Bench of the Tribunal in the assessee’s own case for the AYs 2003- 04 to 2009-10, allowed the deduction u/s.10B of the Act, and granted partial relief on the disallowance u/s.14A of the Act. On further appeal by the Revenue, the Bengaluru ‘C’ Bench of the Tribunal, vide order in ITA No.1893/Bang/2016 dated 12.10.2018, set aside the order of the Ld.CIT(A) and restored the matter to the file of the AO for a limited factual verification, as recorded by the AO in the impugned order:

In the set aside proceedings, the assessee, vide submission dated 19.11.2018, contended that the product “Arrays and Arrays Assembly” mentioned in the EOU approval is the same as the “instruments and apparatus for measuring and detecting ionizing radiations” mentioned in Form No.56G. The AO, however, held as under:

Accordingly, the AO, giving effect to the relief granted by the Ld.CIT(A), Bengaluru on the other issue, determined the total income at Rs.6,50,61,028/- vide order dated 16.12.2019 u/s.143(3) r.w.s.254 of the Act, sustaining the disallowance of deduction u/s.10B of the Act of Rs.2,64,90,636/-.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A). Notices u/s.250 of the Act were issued on 27.12.2020, 18.09.2024, 15.04.2025, 24.07.2025 and 30.07.2025, in response to which the assessee only sought adjournments and did not file any submission. The Ld.CIT(A) proceeded to decide the appeal on the basis of the material on record and held as under:

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

At the time of hearing, the ld.AR for the assessee, relying on the written submissions and the paper book filed, submitted that Grounds 1 and 3 are general and the only issue is the disallowance of deduction u/s.10B of the Act. The ld.AR submitted that Unit-II holds a subsisting EOU LOP dated 26.12.2003 for the manufacture and export of “Crystal Arrays and/or Array Assemblies”, which was continued from 10.05.2009 vide letter dated 17.04.2009, and was therefore valid throughout the previous year 2009-10; and that Schedule III to Form No.56G shows that the deduction relates to this very unit. It was explained

The ld.AR further submitted that the AO, in para 4.1 of the impugned order, travelled beyond the limited scope of the remand by re-examining whether the activity of the assessee amounted to manufacture, an issue which was not restored to him and which stands concluded in favour of the assessee by the Hon’ble High Court of Karnataka for the earlier years in the assessee’s own case. Without prejudice, the ld.AR contended that deduction u/s.10B of the Act in respect of the identical activity of the same unit has been allowed for the earlier years, and relied on the decision of the Hon’ble Supreme Court in Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) on the principle of consistency. The ld.AR prayed that, since the relevant material is already on record and was before the AO, the appeal may be decided on merits and the deduction allowed.

Per contra, the ld.DR supported the orders of the authorities below and submitted that the assessee did not file any submission before the Ld.CIT(A) despite several opportunities.

We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record. Grounds 1 and 3 are general in nature and require no separate adjudication. The only issue in Ground No.2 is whether the AO, in the set aside proceedings, was justified in sustaining the disallowance of deduction u/s.10B of the Act of Rs.2,64,90,636/-.

At the outset, we note that the assessee did not participate in the proceedings before the Ld.CIT(A), despite being given five opportunities, and the Ld.CIT(A) has affirmed the order of the AO without any assistance from the assessee. The conduct of the assessee before the first appellate authority is not commendable. At the same time, the dispute before us does not turn on any finding of the Ld.CIT(A), who has merely endorsed the conclusion of the AO. The real question is whether the AO, in the set aside proceedings, carried out the verification directed by the Tribunal in its order dated 12.10.2018 and confined himself to it.

The scope of the set aside proceedings was clearly delineated by the Tribunal. The only question restored to the AO was whether the assessee held EOU registration from the CSEZ in respect of the products for which the deduction u/s.10B of the Act was claimed, in view of the difference in the description of the products in the EOU registration (“Arrays & Arrays Assembly”) and in Form No.56G (“instruments and apparatus for measuring and detecting ionizing radiations”). The Tribunal had not restored the question whether the activity of the assessee amounted to manufacture. When the Tribunal restores a matter to the AO for a specific and limited purpose, the AO is bound to confine himself to that purpose and cannot reopen issues that were not restored. The observation of the AO in para 4.1 of the impugned order, that the activity of the

Coming to the limited question that was restored, the finding of the AO in para 4 of the impugned order consists of two sentences. In the first, the AO has accepted that HSN code 903010 describes “instruments and apparatus for measuring and detecting ionizing radiations”. In the second, he has concluded that “Arrays and Arrays Assembly” is not the same as such instruments and apparatus. The AO has not stated why the arrays and array assemblies manufactured and exported by Unit-II do not fall within the description of instruments and apparatus for measuring or detecting ionising radiation, nor has he identified any product exported by Unit-II other than such arrays and array assemblies. He has also not dealt with the material filed by the assessee with its submission dated 19.11.2018, namely the EOU LOP dated 26.12.2003 for “crystal arrays and/or array assemblies” and its continuation vide letter dated 17.04.2009, the technical write-up and flow chart, and the export invoices and shipping bills, one of which describes an “8 element CdWO4 array” as instruments and apparatus for measuring or detecting ionizing radiation under HSN code 90301000. The conclusion of the AO is thus unreasoned and sits uneasily with his own observation on the HSN classification. In other words, the verification directed by the Tribunal has not been carried out in the manner contemplated.

The contentions of the ld.AR, that the description in Form No.56G is only the functional and tariff description of the goods covered by the EOU approval, and that the difference between the two is one of nomenclature, require examination of the export documents and the technical material with reference

Accordingly, we set aside the order of the Ld.CIT(A) and restore the issue in Ground No.2 to the file of the jurisdictional AO for fresh verification, strictly confined to the limited question restored by the Tribunal in its order dated 12.10.2018, namely, whether the EOU registration held by Unit-II covers the products in respect of which the deduction u/s.10B of the Act of Rs.2,64,90,636/- has been claimed. The AO shall examine the EOU LOP and its continuation, Schedule III to Form No.56G, the export invoices and shipping bills for the year, the HSN classification adopted therein, and the technical material furnished by the assessee, and shall record a reasoned finding as to whether the goods described in Form No.56G are the goods covered by the EOU approval. The AO shall not re-examine whether the activity of the assessee amounts to manufacture, that question not having been restored. If the AO finds that the goods covered by the deduction are the goods for which the EOU approval was granted, he shall allow the deduction as claimed. The assessee is directed to produce all the relevant documents and to cooperate in the proceedings without seeking unnecessary adjournments. The AO shall afford a reasonable opportunity of being heard to the assessee before passing the order. Ground No.2 of the assessee is allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.