The second proviso to section 10B(1) cannot be construed to be a qualifying condition for claiming deduction. It just permits additional benefit which may be allowed provided domestic profit is within the limit prescribed in the proviso. On the panoply of this proviso deduction cannot be denied. The assessee would be entitled to partial deduction proportionately on export turnover in view of the provisions of sub-section(4) of section 10B of the Income-tax Act, 1961.
IN THE INCOME TAX APPELLATE TRIBUNAL, CHENNAI
I.TA. No. 12(Mds)/2006
Assessment Year: 2001-02
| M/s. Tube Investments of India Ltd.,‘Dare House’ III Floor, 234, NSC Bose Road, Chennai-1.PAN AAACT1249H. |
Vs. |
The Assistant Commissioner of Income-tax, Company Circle 111(2), Chennai. |
|---|---|---|
|
(Appellant) |
(Respondent) |
O R D E R
Per M. K. Chaturvedi (Vice-President):
This appeal came before me as Third Member to express my opinion on the following question:-
“Whether on the facts and circumstances of the case, when the assessee had domestic sales of more than 25% of the total sale value during the relevant assessment year, i.e. 2001-02, is the assessee still entitled to partial deduction proportionately on export turnover in view of the provisions of sub-section(4) of section 10B of the I. T .Act?”
2. I have heard the rival submissions. Deduction under section 10B of the Income-tax Act, 1961 was claimed as under:-
1. Deduction under section 10B on exports Rs.2,20,00,984/-
2.Deduction on domestic sales deemed to be Rs. 68,83,343/-
from exports [2nd proviso to s. 10B( 1)]
Total deduction claimed under section l0B Rs.2,88,84,327/-
Hundred per cent export-oriented units get special treatment by virtue of the fact that they export their entire products. However, in order to provide economic flexibility to them and allow them to dispose of the export-rejects and byproducts they were allowed to sell 25% of the entire products in the domestic market. In the facts of the present case I find that the export-oriented unit of the assessee had domestic sale to the extent of 28.8% as computed by the Assessing Officer. As such claim of deduction on domestic sales amounting to Rs. 68,83,343/- was denied to the assessee. On that there is no difference of opinion.
3. The difference crept on the’ question that once the domestic sales exceed the limit of 25% whether the assessee can be allowed proportionate deduction on export turnover as per the provisions of sub-section(4) of section 10B of the Act.
4. The eligibility criteria is contained in section 10B(1) by which deduction can be claimed on such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things…. The words ‘hundred per cent export-oriented undertaking’ is defined under Explanation 2(iv) to section 10B. It means an undertaking which is approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the Rules framed under that Act. It is not the case of the department that approval as required under the statute is not being accorded to the assessee.
5. Deduction is available in respect of profits and gains as derived by a hundred per cent export-oriented undertaking from the export of articles. The next condition is that such hundred per cent export-oriented undertaking must derive profits from the export of articles or things, etc. In this context sub-section (4) of section 10B is relevant. It prescribes that for the purpose of sub-section (1) the profits derived from the export of articles or things shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to the total turnover of the business carried on by the undertaking. As per-the CBDT Circular No. 794 dated 9th August, 2000 the working formula for arriving at the export profits will be as under:-
Export profits = Profits of the undertaking x Export turnover
Total turnover
The export turnover and the total turnover for the purposes of section 10B shall be of the hundred per cent export-oriented undertaking and this shall not have any material relationship with the other business of the assessee outside the unit for the purpose of this provision.
6. Profit of domestic sales if it is within the limits of 25% is deemed as profit of export for the purpose of computation of deduction under section 10B. This amount is worked out separately on a proportionate basis and added to the amount of export profits. The relief available on export profit rests on the bedrock of the eligibility criteria laid down under section 10B(1). If the assessee derives profits and gains from hundred per cent export-oriented undertaking from the export of articles or things it can claim the benefit of section 10B. The second proviso is an additional incentive which has been granted to the assessee to provide economic flexibility and to allow it to dispose of the export-rejects and byproducts, etc. This proviso in no way governs the eligibility criteria. The eligibility conditions for getting the deduction under section 10B is enshrined in sub-section(2). No interdict is laid down in the statute to withdraw the total benefit of section 108 in the eventuality of domestic sales being exceeded the 25 per cent limit. There is absolutely no ambiguity in the language of the statute. As such purposive theory should not be resorted to.
7. Interpretation postulates the search for the true meaning of the words used in the statute. If the language of the statute is plain, obvious meaning is to be applied. Rules of interpretation are applied only to resolve the ambiguities. The object and purpose of interpretation is to ascertain the mens legis, i.e. the intention of the law, as evinced in the statute. The freedom for the search of the “Spirit of the Act” or the mischief at which it is aimed opens the possibility of liberal interpretation. This finer aspect cannot be narrowly watched. It is that delicate- and important branch of judicial power, the concession of which is dangerous but the denial is disastrous. At one stream stands Lord Denning who said: “We do not sit here to pull the language of the Parliament to pieces and make nonsense of it. That is an easy thing to do. We sit here to find out the intention of Parliament and carry it out. We do this better by filling in the gaps and making sense of the enactment than by opening to destructive analysis. Viscount Simonds called it ‘a naked usurpation of the legislative function under the thin guise of interpretation.” The intention of legislature is a very slippery phrase. When the, language of the statute is transparently plain, it is wrong to give it colour according to the temper of time. When the language implied by the enactment is clear, there is no question of interpreting the provisions in any manner except by giving them their plain and obvious meaning.
8. I have perused the Exim Policy for the relevant period. It is clearly laid down in it that domestic tariff area sale up to 50% of the FOB value of exports may be made sunject to payment of applicable duties and fulfillment of minimum net foreign exchange proceeds. This makes it abundantly clear that an export-oriented undertaking can have domestic sales. In the Income-tax Act there is no statutory provision mandating denial of domestic sales to the export-oriented undertaking.
9. Section 10B(4) envisages that an assessee could have export turnover and also local turnover. To find out the export profits the profits of the business must be multiplied by export turnover and divided by the total turnover. If we take the interpretation that the benefit of section 10B is not available in the eventuality of domestic sales then the provisions of section 10B(4) would become otiose. It is the cardinal principle of law that there is nothing superfluous in the statute. The Hon’ble Supreme Court in the case of CIT v. Distributors(Baroda) P. Ltd., 83 ITR 377 has held that no part of a provision of a statute can be just ignored by saying that the Legislature enacted it not knowing what it was saying. Where an expression is used by the legislature the court must assume that the legislature deliberately used that expression and that it intended to convey some meaning thereby. In my humble opinion the second proviso to section 10B(1) cannot be construed to be a qualifying condition for claiming deduction. It just permits additional benefit which may be allowed provided domestic profit is within the limit prescribed in the proviso. On the panoply of this proviso deduction cannot be denied. The assessee would be entitled to partial deduction proportionately on export turnover in view of the provisions of sub-section(4) of section 10B of the Income-tax Act, 1961.
10. I have perused with due care both the conflicting orders on his point. I concur with the decision of the learned Accountant Member.
11. The matter will now go before the Regular Bench for deciding the appeal in accordance with the opinion of majority.
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH “C” CHENNAI
(Before Dr. O.K. Narayanan, Accountant Member and Shri Vijay Pal Rao, Judicial Member)
I.T.A. No. 12/Mds/2006
Assessment Year: 2001-02
M/s. Tube Investments of India Ltd.,
Vs.
The Assistant Commissioner of Income-tax
—-
I.T.A. No. 874/Mds/2006
Assessment Year: 2001-02
