NARAYAN INDUSTIRES,NEW DELHI vs. ADDI. CIT SPL. RANGE-19, NEW DELHI

The present appeal has been filed by the assessee against the order of by ld. CIT(A)-19, New Delhi dated 10.06.2019.

The assessee has raised the following grounds of appeal:

The issue of taxability of incentive on Focus products scheme stands adjudicated by the Tribunal and it was held that the incentive received be treated as capital receipt. Reliance is placed on following judgments:

During the year under consideration, the appellant received duty drawback amounting to Rs.1,92,64,540/- which is 3 Narayan Industries in the nature of refund granted under section 75 of the Customs Act, 1962 and section 37 of the Central Excise Act, 1944 to refund the component of custom duty and excise duty paid on materials used in manufacture of exported on goods. It was submitted that since duty draw back received during the year under consideration was less than the amount of duty component embedded as part of purchase price of various materials used in manufacture of the exported goods, there was no profit element in the duty draw back received during the year under consideration. As a necessary corollary, no part of the profits of the appellant from the industrial undertaking included any profit from incentive by way of duty drawback and therefore, the amount of duty drawback received and credited to the Profit & Loss Account was not reduced/ excluded from the eligible profits while computing deduction under section 80-IC of the Act. It was submitted that the assessing officer and CIT(A), without appreciating the aforesaid facts, held that the profits of the industrial undertaking included the amount of duty drawback, which is not eligible for deduction under section 80- IC of the Act as per the decision of the Hon'ble Supreme Court in the case of Liberty India Limited: 317 ITR 218 (SC). It held that the appellant was not eligible for deduction under section 80-IC of the Act on duty drawback to the extent of Rs.1,34,38,482/-.

We have gone through rational given by the AO as under:

The ld CIT(A) concurred with the order of the AO.

We have gone through the record and also the submission of the assessee containing 22 pages. It was submitted that the duty drawback amounting to Rs. 1,92,64,540/- is less than the amount of duty component paid and embedded as part of the purchases debited to the profit and loss account. It was submitted that the assessee purchases various raw-material and packing materials which are subjected to payment of duty in the course of manufacture/ imports and the amount of duty drawback received was merely to reimburse the said duty paid as part of purchase price by the appellant. Tentative working of duty component embedded in various purchases debited during the year under consideration is tabulated hereunder:

It was submitted that duty component embedded in purchases debited in the profit and loss account exceeds the amount of duty drawback of Rs. 1,92,64,540/- received during the year under consideration, thereby not resulting in any profit from the incentive by way of duty drawback. In view of the aforesaid, It was submitted that since there was no profit from the incentive received by the appellant by way of duty drawback, the question of any such profit being included in the eligible profit of the undertaking/ gross total income of the appellant does not arise at all. The AO may verify the purchases and duty paid thereof and examine the net impact of the duty paid and received and take a decision in accordance with the provisions of the Act.