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Income Tax Appellate Tribunal, BENGALURU BENCH A, BENGALURU
Before: SHRI SUNIL KUMAR YADAV
PER S. JAYARAMAN, ACCOUNTANT MEMBER :
These appeal and cross objection are filed by the Revenue and the Assessee , respectively, against the order of the CIT (A)-III, Bengaluru, dt.08.08.2013, for the assessment year 2009-10.
IT(TP)A.1454/B/2013 & CO.25/B/2016 Page - 2
Facts in brief are that the Assessee , a manufacturer and exporter of parts of wind turbine generator , set up its unit in Padubidri in Udupi district has been granted approval by the Development Commissioner CSEZ dt 21.9.2007. While computing the deduction u/s 10AA, it has excluded the expenditure incurred in foreign currency from both the export turnover and total turnover & added the amount of scrap sales made by it to the total turnover. In the assessment made, the AO while computing the deduction u/s 10AA has included the expenditure incurred in foreign currency towards freight, insurance etc at Rs. 35,46,86,421/- in the total turnover alone and excluded scrap sales made at Rs.130,90,51,434/- from the total turnover. On an appeal, the CIT (A) relying on the ratio of the Jurisdictional High Court, reported in CIT v.
Tata Elxsi Ltd 349 ITR 198, directed the AO to rework the deduction allowable u/s. 10AA after reducing the expenditure incurred in foreign currency from both export turnover and include scrap sales in total turnover. Aggrieved by the order of the Commissioner (Appeals), the Department has filed an appeal which is in with the following grounds of appeal.
IT(TP)A.1454/B/2013 & CO.25/B/2016 Page - 3
The Assessee is also aggrieved by the impugned order of the Commissioner (Appeals) and hence filed its memorandum of cross-objections in No.25/Bang/2016, as under:
1). The Order to the extent it is against the Assessee of the Learned Commissioner (Appeals) is not justified in law and on facts and circumstances of the case . ii) The Learned Commissioner (Appeals) has failed to appreciate that scrap sales cannot be included in the total turnover for the reason that the assessee is not engaged in trading of scrap and his direction is contrary to the decision of the Hon’ble Supreme Court in the case of CIT v. Punjab Stainless Steel Industries(2014) 364 ITR 144 (SC).
We heard the rival submissions. The CIT(A) held that while computing deduction u/s 10 AA, if the export turnover is calculated after excluding certain expenses, then such expenses should also be excluded IT(TP)A.1454/B/2013 & CO.25/B/2016 Page - 4 from the total turnover following the ratio laid by the Jurisdictional High Court in CIT v Tata Elxsi 349 ITR 98 with which we are in agreement. Hence, the grounds of appeal filed by the revenue are treated as dismissed. The assessee makes out a case in its favour. Following the ratio laid by the Supreme Court in CIT v. Punjab Stainless Steel Industries (2014) 364 ITR 144 (SC), the AO is directed to exclude the amount of scrap sales made by the assessee from the total turnover when determining deduction u/s.10AA .Thus, the grounds of cross objection filed by the assessee are treated as allowed.
In the result, Revenue’s appeal is dismissed and the cross objection filed by the Assessee is allowed.
Order pronounced in the open court on 23rd December, 2016.