DCIT, CIRCLE - 3, KOLKATA, KOLKATA vs. M/S. AL QAISER TOBACCO PVT. LTD., KOLKATA

The only issue to be decided in this appeal of revenue is as to whether the assessee is entitled for claim of deduction u/s. 10B of the Act in respect of profits derived from its export business as 100% export oriented unit [EOU] in the facts and circumstances of the case.

The brief facts of this issue are that the assessee company is engaged in the business of manufacturer and exporter of Hookah Tobacco Paste and filed its return of income for the assessment year 2004-05 showing total income of Rs.9,34,120/- under 1 -C-AM M/s. Al Qaiser Tobacco P.Ltd the head ‘capital gains’ and income from business, which was subjected to claim of deduction u/s. 10B of the Act. The ld. AO observed that the assessee had claimed deduction of Rs.37,77,413/- u/s. 10B of the Act. The assessee was asked by the ld.AO for submission of copy of approval from the Board granting the assessee’s status of 100% EOU. The ld. AO also found that the assessee company has been engaged in business from FY 1990-91 and has been claiming deduction u/s. 80HHC of the Act in respect of its export profits. The ld.AO also observed that the State Government had directed the assessee to re-locate its existing unit at Topsia to Bhojerhat. According to the ld.AO the assessee merely shifted its existing unit to Bojerhat and continued the same business of manufacturing and exporting of Hookah Tobacco Paste. The unit was formed by the transfer to a new business of machinery and plant previously used for any purpose. Accordingly, he denied the deduction u/s. 10B of the Act as claimed by the assessee. On 1st appeal, the ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the ld.AO on this count. Aggrieved, the revenue is in appeal before us on the following grounds :- 1. "That in the facts and circumstances of the case the order of the CIT (A) is erroneous in allowing the exemption in favour of the assessee because the assessee violates the provision of section 10B(2)(iii) of the Act."

The ld.DR vehemently supported the order of the ld.AO in making disallowance/addition on this count. In response to this, the ld.AR argued that there was no violation of provisions of section 10B(2)(iii) of the Act as per ground raised by the revenue. He further argued that the conditions stipulated in section 10B(2)(iii) of the Act is applicable only for new undertakings or establishments and not for conversion of existing domestic tariff area(DTA) unit due to 100% EOU. He further argued that the assessee was forced to shift its existing unit from Topsia to Bojerhat at 2 -C-AM M/s. Al Qaiser Tobacco P.Ltd the instance of the State Government, who provided land and other facilities to the assessee. Accordingly, he pleaded before us for confirmation of impugned order of the ld.CIT(A) in deleting the addition on this issue.

We have heard the rival submissions and perused the material available on record including the paper book of the assessee as filed by the assessee before us containing copy of letter of Ministry of Commerce & Industry granting permission the assessee as 100% EOU status and copy of Export Promotion Council for SEZ Units (EPCES) Circular no.22 dated 10-01-2015, among other documents. We find from correspondence of Ministry of Commerce and Industry vide letter dated 31-03-2003/ 02-4-2003 addressed to the assessee granting permission for EOU status vide page no.7 of the paper book. The same is reproduced herein below for the sake of convenience:- “ Letter no.2(1)/A-20/2003/298 Date: 31/Mar/2003 02.04 To M/s. AL QAISER TOBACCO PVT. LTD UNIT-II 18, HARIN BARI LANE KOLKATA Pincode: 700 073 Dear Sir, Sub : Sub :-- Your export oriented unit application for permission under me EOU Scheme for the manufacture of Hookah Tobacco Paste

We also find that the assessee has been engaged in the business of manufacture and export of Hookah Tobacco Paste from the year 1990-91 and claimed deduction u/s.80HHC of the Act as per records available. We find lot of force in the arguments of the ld.AR that shifting of unit from Topsia to Bojerhat was done at the instance of the State Government, which the assessee does not have any control. We find from the correspondence from Ministry of Commerce and Industry (supra) that a certificate to this effect has been issued by the Development Commissioner approved the assessee’s unit as 100% EOU, which is sufficient for allowing exemption u/s. 10B of the Act. We find that the Development Commissioner is duly authorized for the purpose of issuing approval upto the period 2002-2007 in the matter of converting the existing DTA unit into 100% EOU in certain places. The assessee has started manufacturing the article, which is permissible as per the provisions of the Act, commencing from AY 2004-05 in its 100% EOU pursuant to its conversion. The ld. CIT(A) had observed that reconstitution of old business as stated by the ld.AO has not at all taken place. In the instant case the assessee had merely proceeded to commence production of articles following the certificate issued by the Development Commission, who is a delegated authority for granting approval of 100% EOU. We find that the approval was granted by the Development Commissioner and status of 100% EOU of the assessee for production of articles for claiming deduction is permissible as per the Act. Admittedly, the manufacture and export of Hookah Tobacco Paste is a permissible article as per provisions of the Act. 4 -C-AM M/s. Al Qaiser Tobacco P.Ltd 6.1 In view of the aforesaid facts, we do not find any infirmity in the impugned order of ld. CIT(A) in allowing exemption. We uphold the same. The grounds raised by the revenue are dismissed.

In the result, the appeal of the revenue is dismissed.