The Jaipur Bench of the Income Tax Appellate Tribunal, recently opined that furnishing of the declaration in terms of Section 10B(8) of the Act is mere declaratory and not mandatory. The appellate Tribunal, on this basis, confirmed the order of the CIT(A) which quashed the original order passed against the assessee.
The highlights of the judgment are below;
The assessee firm is engaged in the business of manufacturing and trading of precious and semi precious stones and studded gold and silver. The assessee was registered as export oriented unit (EOU) from 09/02/2001. The assessee maintains that there were no export sales in export oriented unit in A.Y. 2001-02. They did not claim the deduction U/s 10B of the Act of the year 2001-02 and has filed the audit report in form NO. 56G of the Act.
Return for the year under consideration was e-filed by the assessee on 29/09/2011 declaring total income of Rs. 3,80,100/-. The assessee claimed exemption U/s 10B of the Act for the assessment year 2011-12. However, the ld Assessing Officer declined the benefit of 10B to the assessee on ground that the assessee claimed deduction u/s 10B for the first time w.e.f. in A.Y.2002-03 and ten consecutive years will complete in the assessment year 2011-12. Though, the registration of EOU unit was effective from 09.02.2001.
Being aggrieved by the order of the Assessing Officer, the assessee has approached the CIT(A). The CIT decided the case in favour of the asseessee. Being aggrieved by the Order, the Revenue filed appeal before the Tribunal.
The Division Bench observed that Section 10B of the Act was inserted in the Act with a view to encourage and establish the export oriented unit, so that foreign currency can be earned by the EOU. The provision provides complete deduction of profit and gains derived from export of articles or things on account of manufacturing, producing any articles or things or computer software. The intention to introduce this provision was to encourage the export oriented undertaking and further to exempt the income of such undertaking accrued to them on account of export of the articles manufactured, produce etc., therefore, the soul of the provision is earning of profit and gains on account of export by the export oriented unit. In absence of any profit and gains derived by such undertaking, there is no question of making any declaration by such undertaking in view of Section 10B(8) of the Act.
The Bench further found that “Admittedly, it is the case before the ld Assessing Officer that no export was done in the assessment year 2001-02 and therefore there was no positive income to the assessee. The sole basis of denying the claim to the assessee was the commencement of the manufacturing activity by the assessee and seeking the claim of depreciation of Rs. 10,790/- in the assessment year 2001-02. In our view, the bare reading of Section 10B(1) clearly provides that a deduction of such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things or computer software. Therefore, decisive element for the purposes of claiming the deduction U/s 10B would be (i) There should be 100% export oriented undertaking. (ii) The deduction of profit and gains are derived by the EOU from the export of articles or things or computer software then for the 10 years beginning for the assessment year in which undertaking begins to manufacture or produce things or computer software shall be allowed”.
Further, “the assessee was not having any positive income from the export of articles on account of activities in the export oriented unit, therefore, in our view, there is no occasion for the assessee to claim deduction U/s 10B of the Act. Since there is no positive income, there was no occasion for the assessee to file certificate in terms of Section 10B(8) of the Act. Even otherwise, though, the assessee can withdraw the declaration given at any time in terms of the judgment referred by the assessee during the course of argument, which is duly mentioned hereinabove. Therefore, in our opinion, furnishing of the declaration in terms of Section 10B(8) of the Act is merely a formality and declaratory in nature and is not mandatory. If the assessee is having positive income then only there is occasion to claim the deduction. Admittedly, the positive income accrued to the assessee in the assessment year 2002-03 and from there onward the assessee has claimed the deduction U/s 10B of the Act for a period of 10 years. In view thereof, the order passed by the ld CIT(A) is confirmed and the appeal of the revenue is dismissed”.
Read the full text of the order below.
