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October 2015

Export oriented undertaking – Exemption u/s. 10B – A. Y. 2007-08 – Part of manufacture outsourced but under control and supervision of assessee – Assessee entitled to exemption

By K. B. Bhujle Advocate
Reading Time 2 mins
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MKU (Armours) P. Ltd. vs. CIT; 376 ITR 514 (All):

The assessee is a 100% export oriented unit. For the A. Y. 2007-08 the Assessing Officer disallowed the assessee’s claim for exemption u/s. 10B on the ground that the assessee had got the manufacture outsourced. The Commissioner (Appeals) found that only a part of the manufacturing activity was got done by the assessee from outside agency and that too under the direct control and supervision of the staff of the assessee. After the job work, the product was returned to the assessee’s factory, where the final product was assembled, packed and dispatched to the overseas buyers. He allowed the claim of the assessee. However, the Tribunal restored the order of the Assessing Officer.

On appeal by the assessee, the Allahabad High Court reversed the decision of the Tribunal and held as under:

“A new product had come out at the final stage. It was not a case of changing the label or the cover of the product. Only a part of the manufacturing activities was got done by the assessee from the outside agency and that too under the direct control and supervision of the managerial and technical staff available with the assessee. The assessee was entitled to exemption u/s. 10B.”

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