Inox India Ltd.,, Baroda vs Assessee

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 2029/Ahd/2011 %नधा)रण वष)/Assessment Year: 2009-2010

Inox India Ltd. DCIT, Cir.1(2) ABS Towers, 4th Floor Vs Vadodara. Old Padra Road Baroda 390 007.

PAN : AAACI 4416 P

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Assessee(s) by : Written Submissions Revenue by : Shri Nimesh Yadav, sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 27/03/2015 घोषणा क तार ख / Date of Pronouncement: 10 /04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This is an appeal filed by

the assessee against the order of the Commissioner of Income-Tax (Appeals)-I, Baroda dated 23.6.2011.

2. The assessee has raised the following grounds of appeal.

1. The Learned Commissioner of Income Tax (Appeals) erred in fact and in law in reducing the claim of deduction u/s 10B in respect of EOU income from Rs.5,88,41,558/- to Rs.67,94,294/-.

2. The Learned Commissioner of Income Tax (Appeals) erred in fact and in law in applying the amended provision of section 10B of the Act, despite the fact that the Appellant was entitled to ITA No.2029/Ahd/2011 2

exemption u/s 10B for AY 2000-01, the AY in which the amended provisions were made effective.

3. The Learned Commissioner of Income Tax (Appeals) erred in fact and in law in rejecting the claim of 100% EOU u/s 10B of the Act, on the ground that no exemption u/s 10B is available to the appellant as the entire sales are in domestic market and also the appellant has not received any sale proceeds in convertible foreign exchange."

3. The assessee's counsel has filed a letter dated 23.3.2015, which reads as under:

"To, The Assistant Registrar/Deputy Registrar Income Tax Appellate Tribunal 4th Floor Abhinav Arcade Pritamnagar, Ellisbridge Ahmedabad

Ref: In the case of M/s.Inox India Ltd.

ITA No.2029/A/2011 - AY.2009-10 Assessee's Appeal Before 'C' Bench, ITAT Ahmedabad.

Sub: Covered Matter - Written submission

1. The hearing of the above matter is fixed on 27-3-2015.

2. Vide Grounds No. 1, 2 and 3, the Appellant has challenged the action of AO / CIT(A) in not allowing / confirming the disallowance of deduction u/s. 10B on the ground that sale proceeds were received in India Rupees.

3. It may be mentioned that the similar issue was involved in AY 2000-01 to 2007-08. The Hon'ble ITAT, Ahd vide order dated 13- 08-2010 had decided the issue against the assessee (refer para 14 to 16 of the order). The order of ITAT for AY 2000-01 to 2007- 08 is attached as Annexure -1.

4. Since the issue is covered by the order of Hon'ble ITAT, Ahd for AY 2000-01 to 2007-08, we are not making any further submission. However, we reserve our right to contest the matter in further appeal.

ITA No.2029/Ahd/2011 3 5. Should the Hon'ble Bench require any other information or explanation we shall be pleased to submit the same on hearing from the Hon'ble Bench.

Thanking you, Yours faithfully, Sd/-

Bhavain Marfatia Chartered Accountant Baroda, 23rd March, 2015"

4. We find that in the assessment years 2000-01 to 2007-08 in ITA No.2765/Ahd/2006 and Others, the Tribunal vide consolidated order dated 13.8.2010 has decided the issue in the case of the assessee itself and has held against the assessee by observing as under:

"14. Ground No.4 relates to rejection of claim of 100% EOU u/s 10B of the Act on the ground that no exemption u/s 10B is available to the assessee as the entire sales are in domestic market and also the assessee has not received any sale proceeds in convertible foreign exchange.

The ld. AR has heavily relied on the proviso contained in section 10B(1). This proviso reads as under :-

Provided that where in computing the total income of the undertaking for any assessment year its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000 the undertaking shall be entitled to the deduction referred to in this subsection only for the unexpired period of aforesaid ten consecutive assessment years.

15. According to the ld. AR this proviso means that if assessee is allowed exemption under section 10B(1) in Asst. Year 2000-01 by virtue of provisions as existing prior to its amendment by Finance Act, 2000 then such undertaking would be entitled to exemption consecutively for next nine unexpired period. In other words, according to the ld. AR if assessee satisfies the conditions of section 10B(1) in Asst. Year 2001-02 then notwithstanding whether it satisfies further conditions in subsequent years, the assessee would be entitled to exemption. Further, in other words, the onus on the assessee that it satisfies the conditions as laid down in section 10B as stood for Asst. Year 2001-02 is discharged in that year then assessee would be entitled to such exemption in ITA No.2029/Ahd/2011 4

all subsequent unexpired years notwithstanding that it satisfies the conditions in those subsequent years, or not. Thus if AO allows exemption to the assessee in one initial year year then assessee will be continued to be granted such exemption for next unexpired period without looking into whether it satisfies such conditions in such subsequent years. The ld. DR on the other hand opposed this contention put forward by the ld. AR and supported the order of CIT(A).

16. We have heard the rival submissions and perused the material on record. In our considered view the interpretation advanced by ld. A.R. is not correct. Income of every Asst. Year has to be computed in accordance with the provisions of the Act as existing for that Asst. Year. The applicability of the amended provisions has to be looked into and is to be seen whether assessee satisfies those conditions or not and whether it falls into charging section relevant to that Asst. Year. In our considered view the AO is duty bound to see whether assessee is satisfying the conditions laid down in the relevant provisions of the Act for that particular Asst. Year before allowing deductions of the exemption or the allowance claimed by the assessee. The only meaning that can be attached to the proviso to section 10B(1) as substituted by Finance Act 2000 is that assessee will be entitled to exemption only for the unexpired period and that its inning cannot be started afresh from subsequent year/years if there is an amendment in the Act. Thus in respect of those assessees who are given exemption for certain number of years prior to amendment in section 10B by Finance Act, 2000 then such assessees will be entitled to exemption after the amendment by Finance Act 2000 in respect of those years only which are still left unexpired as balance out of 10 years.

Thus this proviso in fact restricts the allowability of exemption for only unexpired period out of 10 years and thus disables the assessee to start a fresh inning of 10 years after this amendment by Finance Act 2000. But that does not mean that conditions laid down in section 10B as brought in by Finance Act 2000 or by subsequent amendment in that section are not required to be satisfied by the assessee. The restriction imposed by the 12 proviso is only on number of years for which exemption is allowable and does not provide exemption from condition imposed for allowance of exemption in subsequent years by subsequent amendments in the law. In other words assessee has to satisfy that it fulfills the conditions laid down in the relevant Asst. Year before it claims exemption under section 10B. We reject this argument of assessee that conditions imposed by subsequent amendment are not required to be examined by the AO and assessee has to be allowed exemption in subsequent years only on the basis of its satisfying conditions laid down prior to ITA No.2029/Ahd/2011 5

amendment by Finance Act 2000. Now coming to the question as to what condition assessee has to satisfy, in subsequent years. We note that sub-section (3) of section 10B as amended by Finance Act, 2000 has brought in following new conditions:-

(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in or brought into India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf.

Explanation -1 -For the purposes of this sub-section the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.

Explanation -2 - The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.

Thus it has to be seen that assessee is bringing foreign exchange into India as a result of its export. The argument of the assessee is that other concerns to whom assessee has sold its product in India are bringing convertible foreign exchange in India through export of their product contained in the containers manufactured by the assessee. Thus products of the assessee in fact are exported by the other concerns and convertible foreign exchanges are brought by them into India. We are unable to subscribe to this view. It is because phrase mentioned in sub-section (3) is ".....are received in......., or brought into India by the assessee in convertible foreign exchange..." Thus it is the assessee who has to bring convertible foreign exchange in India out of its own export. If other parties are bringing convertible foreign exchange in India then it will not be the fulfillment of the conditions imposed by sub-section (3). It is admitted position of facts that assessee is not in fact bringing convertible foreign exchange and entire of its products are sold in India in Indian rupees. Therefore, the assessee will not be entitled to exemption under section 10B. Accordingly this ground of assessee is rejected."

Therefore, respectfully following the decision as quoted above, we dismiss the ground no.1 to 3 raised in this appeal.

ITA No.2029/Ahd/2011 6 5. The ground no.4 of the appeal reads as under:

"4. The ld.CIT(A) erred in fact and in law in charging interest u/s.234B of the Income Tax Act, 1961."

6. In the letter quoted above, filed by the assessee's counsel, the assessee has not made any submission on this ground of appeal.

7. In view of the above, we hold that charging of interest under section 234B of the Act is consequential, and accordingly we dispose of this ground of the appeal.

8. In the result, the appeal of the assessee is dismissed.

Order pronounced in the Court on Friday, the 10th April, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 10 /04/2015