SARA TRANS CORPORATION,MUMBAI vs. ITO 19(3)(4), MUMBAI

The assessee’s appeal is delayed by one day. The same stands explained by the ld. Authorized Representative (AR), the assessee’s counsel, during hearing, which find as reasonable. The appeal was, accordingly, admitted and proceeded with.

We have heard the parties, and perused the material on record.

(A.Y. 2011-12) Sara Trans Export Corporation vs. ITO 3.1 The sole issue arising in the instant appeal is the correct amount of deduction exigible to the assessee in respect of its’ eligible undertaking u/s. 10AA of the Act, i.e., established in a Special Economic Zone (SEZ). The assessee’s SEZ Unit also admittedly making local sales (at Rs.186.79 lacs) for the current year, the question arose as to the manner of the exclusion of the profit qua the said sales in-as-much as the benefit u/s. 10AA is only in respect of the profit derived from the export (outside India) of articles or things or services. The Act envisaging such a situation, has provided for the same per sub section (7) of section 10AA, which reads as under: ‘Special provisions in respect of newly established Units in Special Economic Zones. 10AA. (1) ……….. (2) – (6) ……….. (7) For the purposes of sub-section (1), the profits derived from the export of articles or things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the undertaking: Provided that the provisions of this sub-section as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009) shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years.’ This, then, explains the Revenue’s case, which has determined the deduction u/s. 10AA by applying the ratio of ‘Export Turnover’ to the ‘Total Turnover’ of the business of the said undertaking (i.e., 0.85446) to the total profit of the said business (Rs.160.75 lacs), on both of which, i.e., the ratio and the total profit, there is again no dispute. The assessee’s case is that the same can be dispensed with in-as-much as it has prepared separate profit and loss accounts for the local and the export turnover. Further, no defect has been pointed out therein by the Revenue, so that the same should be accepted as such. 3.2 The issue is of the proper manner of determining the profit derived by the assessee’s SEZ unit from exports, to which only the deduction u/s.10AA extends. The (A.Y. 2011-12) Sara Trans Export Corporation vs. ITO provision contemplating that the export turnover of a SEZ Undertaking may not agree with its’ total turnover, has prescribed a pro rata formula on the basis of the turnover. The said prescription, which is even otherwise reasonable, is thus the mandate of law, which therefore has to be honored. It provides no saving or exclusion thereto. On the contrary, it is rather the assessee which is obliged to show that the same results in an absurdity – toward which we observe no contention or claim, for the same to be not observed. Mere hardship – which again has not been shown, i.e., even if so, would be no ground for not observing the clear prescription of law. Final accounts are prepared only source and, thus, business-wise (s. 70), to which the law per s. 10AA(7) accords credence. There is, in our view, no scope for any ingenious method for determining the export profit as may be devised by the assessee, in view of the clear and unambiguous language of the provision, which is in sync with the scheme of the Act as well as the accounts are normally prepared. Further, there is no claim of it being anomalous or resulting in any absurdity and, rather, is only reasonable. Tax laws are to be strictly construed; the statute being the edict of the Legislature, representing it’s intent, and toward which the ld. CIT(A) has cited several decisions, and even as reiterated recently once again by the Hon'ble jurisdictional High Court in Humayun Suleman Merchant vs. CCIT [2016] 73 taxmann.com 2 (Bom). We, accordingly, uphold the concurrent findings and the decisions by the Revenue authorities. We decide accordingly.