Rialto Exim Vs ITO (ITAT Mumbai)
ITAT Mumbai held that exemption u/s 10AA of the Income Tax Act available in case imported goods are re-exported by a unit duly approved by development commissioner of concerned SEZ.
Facts-
The assessee is a partnership firm and filed its return of income on 13.10.2010 declaring total income at Rs. Nil by claiming deduction under section 10AA of the Income Tax Act, 1961 amounting to Rs. 13,13,66,314/-. Assessee’s case was selected for scrutiny under section 143(2) of the Act.
During the assessment proceeding, a show-cause was issued in respect of rejection of claim of deduction under section 10AA of the Act. The total turnover for the year under consideration has been shown at Rs. 239, 83, 80,927/- and Net Profit (NP) at Rs. 13, 13, 66,314/- (GP @ 5.47%). The entire NP claimed to be exempted under section 10AA of the Act.
Conclusion-
Held that not only profits and gains of manufactured goods but also trading of goods are allowed for getting the exemption us 10AA of the I.T. Act, 1961 if imported goods are re-exported by a unit duly approved by development commissioner of concerned SEZ. The assessee company’s entire purchases are import in SEZ unit. The entire goods are exported to foreign country. Further the assessee company also fulfils all other terms & conditions laid down in section 10AA of the I.T. Act, 1961 and as such deduction is claimed as per provisions of law and allowable as such.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals by assessee and the Revenue are directed against the order of Ld. Commissioner of Income Tax (Appeals)-25, Mumbai [hereinafter referred to as the [‘Ld. CIT (A)’] vide common order dated 30.01.2014 for the Assessment Year (AY) 2010-11. We are taking ITA No. 2316/Mum/2014 for A.Y. 2010-11. The assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in law as well as on facts in allowing the income u/s 10AA by estimating the Net Profit at 8% against 9.16% of net profit as shown in the books of accounts of the Appellant without finding any faults in the financial records and/or rejecting the books of accounts as per provisions of section 145 of the Income Tax Act so as to estimate Net Profit and as such direction be given to restore the Net Profit as shown in the regular books of accounts.
2. on the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in law treating the income from Fixed Deposit as income from other source where in the nexus of business transaction was already proved.
3. on the facts and in the circumstances of the case and in law, the Learned CIT (A) erred not allowing the expenditure from the income which was incurred solely for the purpose of earring the same.
4. Appellant reserves the right to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings.”
2. Brief facts of the case are that the assessee is a partnership firm, filed its return of income on 13.10.2010 declaring total income at Rs. Nil by claiming deduction under section 10AA of the Income Tax Act, 1961 (for short ‘the Act’) amounting to Rs. 13,13,66,314/-. Thereafter a survey action under section 133A of the Act was conducted in this case on 21.09.2010. Assessee’s case was selected for scrutiny under section 143(2) of the Act.
3. During the assessment proceeding, a show-cause was issued in respect of rejection of claim of deduction under section 10AA of the Act. The total turnover for the year under consideration has been shown at Rs. 239, 83, 80,927/- and Net Profit (NP) at Rs. 13, 13, 66,314/- (GP @ 5.47%). The entire NP claimed to be exempted under section 10AA of the Act. In the immediate preceding year which was the first year of business assessee achieved turnover of Rs. 92,33,44,065/-and NP at Rs. 10,13,80,418/- (GP @ 11% and NP @ 10.89%) this issue is pending before ITAT against the order of Ld. CIT (A).
4. Ground Nos. 1, 2 and 3 are substantive in nature and ground no 4 is general ground raise .Hence our adjudication is limited up to ground no 1, 2 and 3.
5. Ground no -1 we have gone through the order of the A.O which is against the assessee, order of Ld. CIT (A)-25 (Mum) in response to assessee’s appeal and various workings and judicial precedents submitted by the assessee in the form of paper-book.
a) In this year of appeal under consideration, there are 4 (four) main grounds of appeal and over and above the income derived from manufacturing activity, there are two more sources of income for which the appellant have claimed as deduction u/s. 10 AA of the Act but the AO has rejected the total income and made additions in respect of the total income of the appellant.
b) The total consolidated taxable income of the appellant in respect of the above three sources as shown in the P & L Account is Rs.13,13,55,314/- The Id. ARs have bifurcated the said consolidated taxable income from the three sources of income as under:
Income from manufacturing activity in SEZ Zone. …Rs.6,05,38,408/-
Income from Trading activity in SEZ Zone…………………. Rs.7,37,03,040/-
Interest Income from Fixed Deposits in SEZ treated as Business income. … (-28, 75,133/-)
