(Prayer : Tax Case Appeals against the orders of the Income Tax Appellate Tribunal, Chennai D Bench, dated 20th January 2011 in I.T.A.Nos. 687/Mds/2010 and 891 /Mds/2010. )
(Judgment of the Court was made by CHITRA VENKATARAMAN,J)
Tax Case (Appeals) are at the instance of the assessee against the order of the Tribunal by raising following questions of law:-
"(1)Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in remitting the issue of claim of deduction under Section 10B to the file of the Assessing Officer in view of its specific and clear finding that all details have been furnished to the Assessing Officer who was also given an opportunity in regard thereto in the course of appellate proceedings before the Commissioner of Income Tax (Appeals)? "
2. The two appeals relate to assessment years 2006-07 and 2007-08. The appellant is a company registered under the provisions of the Indian Companies Act engaged in the manufacture of food products. The company was initially engaged in the processing and exporting of gherkins, a vegetable product and mango pulp in OTS cans. The company subsequently commenced a new venture from 1.4.2002 involving the processing and exporting of fruits and conversion of fruit products. It is also engaged in Broad Banding of the activity of the company. The assessee is stated to have got the licence from the Development Commissioner, Government of India, Ministry of Commerce and Industry, Visakhapatnam Export Processing Zone on 11.4.2001 for enhancing the existing production capacity on a revised export turnover, import of capital goods, raw materials, components, consumables and packing materials in a period of five years. The assessee was permitted to engage in the manufacture of Mango, Gauva, Banana and Papaya pulp, tomato puree etc. The assessee submitted certificate of approval for 100% EOU dated 16.3.2001 valid upto to 31.3.2007. The approval for additional items such as mango pulp/ guava pulp/ banana pulp/ papaya pulp/ tomato pulp was renewed upto 31.3.2012. The additional items were approved on 14.5.2007. The appellant claimed relief under Section 10B of the Act for the first time in respect of Assessment year 2006-07 and again in 2007-08. The Assessing Officer disallowed the claim of deduction under Section 10B of the appellant on the ground that the factory of the EOU is operating from the same place where the original DTA unit was established, which is catering the domestic market. The other ground is that no additional building was erected to install the new or the additional machinery. The assessee maintained no separate books of accounts for local sales and export sales. In the earlier years, the assessee claimed relief under Section 80 HHC only and the assessee did not produce any material to show that the profit earned for claiming deduction under Section 10B came from the new 100% EOU only. On the above stated grounds, the claim was rejected by the Assessing Officer. Aggrieved by this, the assessee filed an appeal before the Commissioner of Income Tax (Appeals).
3. Evidently, in the course of the appeal before the first Appellate Authority, the assessee produced documents, particularly, with reference to the objection that the assessee was functioning at the very same address where it was originally established. Apart from that, the appellant had also produced certificate of approval as 100% EOU dated 16.3.2001 which was valid upto 31.3.2007. Later on, approval was accorded for Mango pulp, guava pulp, banana, papaya pulp, tomoto puree which was renewed upto 31.3.2012. As regards the allegations that separate books of accounts were not maintained for local and overseas export, the appellant also produced details which had been checked by excise authorities.
4. As regards the specific allegations that deduction under Section 10B of the Act was not claimed in the earlier year, the appellant pointed out that the income was computed under the MAT formula, which would be more than the income computed under normal circumstances. The assessee apparently did not claim any relief in the earlier years. Considering the fact that in respect of the old unit, which had exported vegetable products, deduction under Section 80HHC was claimed, the appellant had claimed deduction under Section 10B for the first time during 2006-07. More so, earlier years the assessee returned loss. In the background of the said facts, the Appellate Authority sought for a report from the Assessing Officer. On considering the report, the Commissioner of Income Tax (Appeals) came to the conclusion that the assessee had furnished the gross turnover relating to the comprehensive area and at the same time, separately identified the turnover relating to EOU and DTA and the claim was only in respect of export sales, for which exclusive invoices were raised and the sale proceeds were received through banking channel. The first Appellate Authority pointed out that the clarification given by the assessee as regards the various entries in Form 56G required no further elucidation. Incidentally, the Commissioner of Income Tax (Appeals) also pointed out that it is not the case of the Assessing Authority that the appellant had not overstated its export or claimed excessive relief. Except for the contention that the units were not different and they were one and the same, there were no other materials on the part of the Assessing Authority to deny their relief.
5. As regards the location of both the units in the same building, the Commissioner of Income Tax (Appeals) pointed out that the exports are governed by Regulations enforced by the Central Excise and Customs Authorities. There was no mix up of the receipts nor any difficulty in finding the export receipts. As regards the sales tax deferral obtained for the old unit, the Commissioner of Income Tax (Appeals) found that it had no application to EOU. Hence, the Sales Tax Department, much less the deferral, had no role to play on 100% EOU status. Since the entire turnover pertained to 100% EOU, there are no materials to deny the relief claimed by the appellant.
6. As regards the range of products both under DTA and EOU, the Commissioner of Income Tax (Appeals) referred to the Assistant Development Commissioner VEPZ's clarification dated 22.1.2009 that all exemptions / concessions available to the main product would automatically be applicable to the additional products that had been approved under the broad banding from the date of approval by the Commissionerate and pointed out that the documents furnished corroborated the broad branding and approval for the manufacture of additional products were accorded to the assessee. Regarding the location of both the units in the same building, the Commissioner of Income Tax (Appeals) pointed out that the physical demarcation, as claimed by the assessee, was also relevant because the Development Commissioner, VEPZ had accorded separate approval to the 100% EOU as a new unit and hence not an extension of the old unit. Thus, the claim of existence of two different units, one under DTA and the other as EOU was supported by various documents. The DTA and EOU units are physically distinguishable and certified by Customs and Excise Authorities and the Development Commissioner VEPZ, Vizag and that there is also a Government road bisecting DTA and EOU units.
7. Referring to the Board's circular 1/2005, the Appellate Authority pointed out that there are enough materials available on record to uphold the claim of the appellant that exemption under Section 10B was admissible, since the appellant had satisfied all the conditions laid down in the provisions of Section 10B of the Act. Thus, going by the above reasoning, the Appellate Authority allowed the appeal.
8. The Revenue took the matter on appeal before the Income Tax Appellate Tribunal. In paragraph 3 of its order, the Income Tax Appellate Tribunal observed that the Commissioner of Income Tax (Appeals) had given relief to the assessee on the basis of fresh evidences filed before him and these evidences were given for consideration by the Assessing Officer. Having thus found that the Revenue was given sufficient opportunity to file a report on the material furnished by the assessee, surprisingly, the Income Tax Appellate Tribunal, however, remanded the assessment once again to the Assessing Authority to decide the issue after considering the entire evidences produced before the Commissioner of Income Tax (Appeals) or to be produced afresh by the assessee.
9. A perusal of paragraph 4 of the order of the Tribunal shows that the said order was passed on the basis of Rule 46A of the Income Tax Rules, 1962 on a specific ground taken by the Revenue that the Commissioner of Income Tax (Appeals) had not followed the requirement of Rule 46A. We do not find that there exists any justification for the Tribunal to take a view that Rule 46A had not been followed to warrant a remand.
10. Learned Standing Counsel appearing for the Revenue pointed out that subsequent to the order of the Tribunal, notice had been issued to the assessee, and the assessee in turn, also sought for time. Hence, no grievance is made out by the assessee. It is admitted that in the course of the appeal proceedings before the Commissioner of Income Tax (Appeals), all the issues raised by the assessee were placed before the Assessing Authority for his remarks and report. On the facts thus admitted, we do not find any justification in the order of the Tribunal remanding the case to the Assessing Officer for fresh consideration, which, in the context of the above admitted facts would amount to nothing but an empty ritual.
11. As already pointed out, a reading of the order of the Commissioner of Income Tax (Appeals) would show the specific contention of the appellant that the Assessing Authority had not looked into the columns provided in the annexure to Form 56G, which gives the details of turnover for export sale as well as on the domestic sale. On being satisfied about this material available on record, the Assessing Officer was directed to file a report on the said evidences produced. After hearing the assessee and the Revenue, the Commissioner of Income Tax (Appeals) passed a detailed order on every objection raised.
12. As far as Rule 46A of the Income Tax Rules, 1962, which has been referred to by the Tribunal, is concerned, it deals with production of additional evidence before the Deputy Commissioner (Appeals) and Commissioner (Appeals). Under Sub Rule (3) of Rule 46A of the Rules, the Deputy Commissioner (Appeals), or as the case may be, the Commissioner (Appeals), shall not take into account any evidence produced under Sub-Rule (1), unless the Assessing Officer has been allowed a reasonable opportunity-
(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or
(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.
13. As far as these two aspects are concerned, there is no denial of the fact that the documents that were placed before the Commissioner of Income Tax (Appeals) related to Form 56G. Secondly, with reference to the documents pertaining to local sale and export sale, the appellant produced a certificate granted by the Export Commissioner as regards the separate location of the export unit. A perusal of the assessment order passed clearly shows that the assessee has placed the certificate issued by the Joint Development Commissioner, Government of India, Ministry of Commerce & Industry, Visakhapatnam Export Processing Zone. The materials thus produced were thus verified by the Assessing Officer and the report was also filed before the Commissioner of Income Tax.
14. Learned coun
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sel for the appellant submits that they had not placed any new documents, which had not been dealt with by the Assessing Officer. Even in the course of the appeal before the Commissioner of Income Tax (Appeals), details in support of the various columns in Form 56G were placed before the Assessing Authority for his remarks and report. Thus, even if the documents produced on the details of Form 56G very much available before the Assessing Officer amounted to fresh materials, yet, we find that the requirement of the Rule are finally complied with. The Revenue cannot now deny this aspect, particularly in the context of the report filed by the Assessing Officer before the Commissioner of Income Tax (Appeals). 15. In view of the absolute compliance of the provisions of Rule 46A (3), we do not find that there exists any further ground for the Revenue to insist on remand. The order of the Tribunal shows that there is hardly any reference as to the fresh material which went unnoticed or which had not been placed before the Officer for offering his comments. 16. In the circumstances, we agree with the submission of the learned counsel for the assessee and we do not find any justification in granting the order of remand. Consequently, the order of the Tribunal is set aside and the appeals are allowed. No costs.