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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: ShriMahavir Singhand ShriWaseem Ahmed
आदेश/O R D E R
PER Waseem Ahmed, AccountantMember:-
This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)VIII, Kolkata in appeal No.159/CIT(A)-VIII/Kol/2011-12 dated 31.07.2012. Assessment was framed by JCIT(OSD), Circle-8, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.11.2011 for assessment year 2009-10.
At the time of hearing Ld. DR drew our attention that the appeal is barred by 5 days and he prayed for condonation of delay and Ld. AR of the
ITA No.1512/Kol/2012 A.Y. 2009-10 DCIT Cir-8, Kol. v. M/s Natural Products Export Corpn, Ltd. Page 2 assessee conceded that he has no objection if the delay is condoned. Hence, we condone the delay of appeal and proceed to hearing the appeal.
The first issue raised by the Revenue in this appeal is that the Ld. CIT(A) has erred in allowing the deduction under section 10B of the Act for the assessment year 2009-10 whereas the assessment year 2008-09 was the last eligible assessment year of the ten consecutive assessments years for the claim of deduction under section 10B.
Briefly stated facts are that the assessee is a limited company and is into the business of export of dry flowers and dried parts of plants. The assessee is a 100% export unit duly registered by Ministry of Industry, Government of India. The assessee claimed a deduction for an amount of Rs. 5,79,51,627/- under section 10B of the Act. The assessee is entitled to claim deduction in terms of section 10B of the Act for 10 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, as the case may be. In the present case, it was found by the AO from the Form No. 56G where the certificate for deduction u/s 10B of the Act was issued by the Chartered Accountant, that the date of commencement of manufacture or production is 1997. So in the present case the last assessment year i.e. 10th assessment year for claiming deduction under section 10B of the Act was the assessment year 2008-09. So the AO has disregarded the claim of deduction under section 10B of the Act of the assessee and the disallowance was added to the total income of the assessee. The AO has also relied upon the CBDT circular No. 1/2005 dated 06.01.2005 (F. No. 149/194/2004-TPL). Aggrieved assessee preferred an appeal before Ld.CIT(A) who has dismissed the order of the AO and allowed the appeal in favour of the assessee by observing that the assessee got approval from the Development Commissioner on date 21-03-2000 and the production in the new unit located
ITA No.1512/Kol/2012 A.Y. 2009-10 DCIT Cir-8, Kol. v. M/s Natural Products Export Corpn, Ltd. Page 3 in Madras Export Processing Zone (MEPZ for short) is shown to have started in the financial year 2000-01 relevant to the assessment year 2001- 02.Aggrieved Revenue is in appeal before the Tribunal on the following ground of appeal:- “1. That, in the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee company was eligible for deduction u/s. 10B of It Act, 1961, for this assessment year 2009-10, whereas, eligibility for deduction for ten consecutive assessment years ended with AY 2008-09 and therefore, allowance of deduction to the assessee company for A.Y 2009-10 was in contravention of the provisions of section in 10B of the IT Act, 1961.
Mr. Amitabh Chowdhury, Additional CIT appearing on behalf of Revenue and Mr. I. Banerjee and Mr. S. Joshi, Ld. Authorized Representative both are appearing on behalf of assessee.
The LdDR submitted that the production got begun in the year 1997 and accordingly the assessment year 2008-09 was the last assessment year to claim the deduction under section 10B of the Act and he also supported the order of the AO.
The Ld AR supported the order of the CIT(A) and submitted that the commercial production commenced only on dated 21-3-2000. The AR submitted a paper book running from pages no. 1 to 53 and actual date ofregistration for 100% EOU is 21-03-2000 vide registration No. 697/MEPZ. Before us,Ld. AR has also submitted that the letter written to the Development Commissioner- MADRAS EXPORT PROCESSING ZONE for informing the date of commercial production which is placed on page No. 15 of the paper book wherein the date for ‘commercial production’ was mentioned i.e. on 21- 03-2000.
We have heard the rival parties and perused the material available on record. We find that the AO has disallowed the claim of the assessee under section 10B of the Act. The reason for the disallowance of the claim was that
ITA No.1512/Kol/2012 A.Y. 2009-10 DCIT Cir-8, Kol. v. M/s Natural Products Export Corpn, Ltd. Page 4 as per Form No.56G the commercial production began in the year 1997 so the deduction under section 10B for the assessment year 2009-10 was time barred. The source of the information for the AO for ascertaining the date of commercial production i.e. year 1997 was form 56G which is certificate issued by the Chartered Accountant for claiming the deduction under section 10B of the Act. There was a letter issued by the Ministry of Industry, Government of India in the year 1997 for registering the assessee with Secretariat for Industrial Assistance(SIA for short) for availing these facilities and privileges admissible under the 100% export oriented scheme, probably, that date has been recorded by the Chartered Accountant as the year of production. However, the date of registration as SIA and the date of commencement of the commercial production for the deduction u/s 10B of the Act are two different things and has no nexus of whatsoever. So on this basis we conclude that the year of production is 2000-01 as per the letter submitted to the Development Commissioner MEPZ and the assessee is entitled for deduction under section 10B of the Act for the present assessment year i.e., 2009-10 under consideration. Hence, this ground or Revenue’s appeal is dismissed.
The second issue raised by the Revenue in this appeal is that Ld. CIT(A) has erred in allowing the relief to the assessee under section 14A of the Act for the exempted income of the assessee.
The Assessee has earned dividend of Rs. 241810/- but failed to make any disallowance of the expenditure accordingly under Section 14A of the Act. The assessee has given the plea that the MAT provisions are applicable to the assessee-company hence no such expenses was computed. Later the assessee submitted the direct expenses in relation to the exempted income for an amount of Rs. 24,527/-and the AO worked out the indirect expenses by applying the rule 8D(2)iii of the Act @ of 50% of the average investment i.e. Rs. 2,29,097/-. So the AO disallowed the expenses for an amount of Rs.
ITA No.1512/Kol/2012 A.Y. 2009-10 DCIT Cir-8, Kol. v. M/s Natural Products Export Corpn, Ltd. Page 5 2,53,624/- (229097+24527). The AO also recorded in his order the disallowance under section 14A of the Act will also be added back in computing the book profit under section 115JB of the Act. Aggrieved assessee preferred an appeal to Ld. CIT(A) who deleted the addition made by the AO by observing that the “disallowance made by the AO u/s 14A of the Act is much more than the actual income earned by the assessee-company. Further, this is not a case that the AO could not ascertain the actual expenditure incurred from the books of account. More so, I have already held that the income of the MEPZ Unit at Chennai is exempt under section 10B of the Income-tax Act. In this background, there is no warrant for any disallowance under sec. 14A of the Act. Therefore, the disallowance as made by the Assessing Officer is hereby deleted.”
Aggrieved Revenue is in appeal before us on the following ground of appeal. “2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing relief to the assessee u/s. 14A of the IT Act whereas AO was correct in computing disallowance u/s. 14A of IT Act, 1961.”
We have heard the rival parties and perused the materials available on record. The AO has invoked the rule 8D of the Act because he disallowed the claim for deduction under section 10B of the Act. So the assessee was to pay the taxes under the normal provisions of the Act rather than under the provisions of MAT under section 115JB of the Act. However Ld.CIT(A) has restored the claim of assessee for the deduction u/s 10B of the Act, so even otherwise, the deduction claim by the assessee is disallowed by the Ld. CIT(A) then the assessee will be entitled to claim the deduction u/s 10B of the Act. Accordingly Ld. CIT(A) has deleted the addition made by AO. From the aforesaid discussion it is revealed that the assessee is entitled for the claim of deduction under section 10B of the Act which will include the disallowance, if any, made under section 14A of the Act. Therefore we are of the view that
ITA No.1512/Kol/2012 A.Y. 2009-10 DCIT Cir-8, Kol. v. M/s Natural Products Export Corpn, Ltd. Page 6 there is no infirmity in the order of CIT(A). Hence we dismiss the ground of appeal of the revenue. 9. In the result, appeal filed by Revenue is dismissed. Order pronounced in the open court 28/09/2015
Sd/- Sd/- (Mahavir Singh) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 28/09/2015कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ� / Appellant-DCIT, Circle-8, Aayakar Bhavan, 5th Floor, Room No.8 P-7, Chowringhee Square, Kolkata – 700 069 2. ��यथ� / Respondent- M/s Natural Products Export Corporation Ltd., 53A Mirza Ghallib Street, Kolkata – 700 016 3. संबं-धत आयकर आयु0त/ Concerned CIT Kolkata 4.आयकर आयु0त- अपील / CIT (A) Kolkata 5. 2वभागीय �5त5न-ध,आयकर अपील�य अ-धकरण,कोलकाता/ DR, ITAT, Kolkata 6. गाड9 फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ-धकरण, कोलकाता ।