[CIT v. Lovlesh Jain, 204 Taxman 134 (Del.); 16 Taxman. com 366 (Del.)]
The assessee had received pure gold supplied by ‘R’ Jewellery, Dubai, and the same after conversion into jewellery was ‘exported’ by the assessee to ‘R’ Jewellery, Dubai. In the meantime ‘R’, Jewellery Dubai continued to remain the legal owner of the gold and had not sold the gold to the assessee. The assessee was paid conversion charges or production/ manufacturing charges for converting the gold into jewellery. The Assessing Officer held that the assessee was not manufacturing ornaments/ jewellery and was not an exporter as he was paid making charges for the job work/services for making ornaments as per specification of third parties. Accordingly, the AO held that the assessee was not entitled to deduction u/s.10A. The Commissioner (Appeals) and the Tribunal allowed the assessee’s claim for deduction.
On appeal by the Revenue, Delhi High Court upheld the decision of the Tribunal and held as under:
“(i) Section 10A/10B is applicable when an undertaking manufactures, or is engaged in production of articles or things. The term ‘production’ has a larger magnitude and is more expansive and liberal than the term ‘manufacture’.
(ii) In the present case, manufacture as well as production of goods, articles or things is covered u/s.10A/10B. The activity for converting gold bricks, biscuit or bars, into jewellery amounts to ‘production or manufacture’ of a new article and, therefore, qualifies for deduction u/s.10A/10B.
(iii) Case of the Revenue is that the assessee had not exported jewellery as the assessee was not owner of the imported gold or the exported jewellery and was paid making charges. Thus, the income earned does not qualify for deduction u/s.10A/10B.
(iv) The expressions/terms, ‘importer’ and ‘exporter’ are wide and not restricted to the owner of the goods at a particular point of time. Owner is treated as the importer/ exporter but a person who holds himself out as an importer or exporter is also an importer or exporter. The activity undertaken i.e., export/import is important and the person involved and associated with the said activity is important/relevant, mere ownership is not the sole criteria to determine whether a person is an importer or exporter. Further the expression ‘exported’ or ‘imported’ goods has reference to the nature of the goods as in the case of expressions ‘import’ or ‘export’ and not a person/owner.
(v) In the present case, the standard gold was imported into India and then converted into jewellery or ornaments and was sent out of India i.e., jewellery and ornaments were exported. When the import was made, the assessee was shown as a consignee and an importer and when the export was made the assessee was shown as a consignor i.e., the exporter. The assessee complied with the various formalities, when the standard gold was imported and then again when the jewellery/ornaments were exported. The assessee was in actual physical possession of the gold when it remained in India and would have been liable in case of loss, etc. The concept of and the term ‘ownership’, has various jurisprudential connotations. For all practical purposes, the assessee was in possession of gold and had a right, dominance and dominion over it. They were liable to pay Customs duty, etc. in case export was not made. Keeping in view the nature of transactions in question, it is not possible to hold that the assessee did not ‘export’ the jewellery/ornaments and that the transactions in question cannot be regarded as export for the purpose of section 10A/10B. Thus, when the assessee had exported the ornaments, it was exporting articles or things. The assessee were exporters or had exported articles/things as understood in common parlance.
(vi) Section 10A does not apply to export income earned by an assessee from merely trading the goods and postulates that the assessee must be an undertaking, which manufactures or produces articles or things, which are exported.
(vii) This condition in the present case is satisfied. Accordingly, the contention raised by the Revenue fails and has to be rejected. Appeals are accordingly dismissed.”
