CIT Vs. ARTS BEAUTY EXPORTS

JUDGEMENT

(1.) These are two appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 ("Act" for short). They relate to the assessment years 2006-07 and 2007-08 and are directed against a common order passed by the Income Tax Appellate Tribunal ("Tribunal? for short) on 3rd June, 2011 in ITA Nos. 2955 & 2956/Del/2010.

(2.) The brief facts leading up to the filing of the present appeals may be noted. The assessee is a partnership firm engaged in the business of export of handicrafts items. We may first refer to the facts relating to the assessment year 2006-07 since the assessment order for that year was passed earlier on 15th December, 2008. In the return of income filed for that year, the assessee declared business income of Rs. 57,42,645/- and claimed the entire business income to be exempt under Section 10B of the Act. The Assessing Officer examined the claim and noted that the claim was made for the first time. He further noted that the firm came into existence under a partnership deed dated 1st October, 1993 with two partners and later on another partner was taken in under a fresh partnership deed dated 18th may, 2005 which was given effect from 1st April, 2005. This firm continued the same name and style and the same business, accounts etc. The assessee had applied, prior to the reconstitution, to the Development Commissioner, SEZ, Noida for setting up of a 100% Export Oriented Unit(EOU). A letter of permission ("LOP") was granted to the assessee by the Development Commissioner on 5th May, 2005 subject to certain conditions which are as under:-

(3.) In accordance with the aforesaid terms, the agreement for fulfilling the terms and conditions was signed on 13th April, 2006. On this basis, the competent authority issued green card No. 95 dated 24th April, 2006 thereby according approval under the special scheme of the Government of India as "100%" Export Oriented Unit". The letter dated 25th April, 2006, which conveyed the acceptance of the agreement, also stated that the unit will be treated as working under the scheme from the date from which its starts functioning under a custom bond. Since one of the conditions was that the unit should be custom bonded, the Assessing Officer made enquiries with the Central Excise Department in response to which he received a letter dated 27th August, 2008 from the Assistant Commissioner, Central Excise Division-II, Karampura, New Delhi saying that the assessee has not approached them till that date for custom bonding of the unit.