DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD vs. COROMANDEL INTERNATIONAL LIMITED, SECUNDERABAD

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ITA 673/HYD/2019Status: DisposedITAT Hyderabad21 November 2019AY 2010-114 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that excise duty refund is income derived from the undertaking and eligible for deduction under Section 80IB. It distinguished the Liberty India case, stating that excise duty refund is not a transferable commodity like DEPB/Duty Drawback Benefits.

What were the facts?

The assessee claimed deduction under Section 80IB on export incentives. The Assessing Officer disallowed this deduction based on the Liberty India case. The CIT(A) granted relief to the assessee by following a coordinate bench's decision in the assessee's own case.

What were the issues?

Whether excise duty refund received by the assessee is eligible for deduction under Section 80IB of the Income Tax Act. Whether the decision in Liberty India case is applicable to excise duty refunds.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 41(1)(a)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH ‘SMC - A, HYDERABAD

Before: SMT. P. MADHAVI DEVI

For Appellant: Shri Ashish Mittal
For Respondent: Smt. Esther N. Hangal, Shri Ashish Mittal
Hearing: 11/11/2019Pronounced: 21/11/2019

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘SMC - A', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA No. 673/Hyd/2019 Assessment Year: 2010-11 Dy. Commissioner of vs. M/s Coromandel Income-tax, International Ltd., Circle – 1(2), Hyderabad. Secunderabad. PAN – AAACC 7852 Appellant Respondent Revenue by: Smt. Esther N. Hangal Assessee by: Shri Ashish Mittal Date of hearing: 11/11/2019 Date of pronouncement: 21/11/2019 O R D E R

This is an appeal filed by the Revenue against the order of CIT(A) – 1, Guntur, dated 08/02/2019 for the AY 2010-11.

2.

Brief facts of the case are that the assessee, which is engaged in the business of manufacture and sale of fertilizers, filed its return of income for the AY 2010-11 on 12/10/2010 declaring income of Rs. 452,05,02,116/-. Thereafter, the assessee filed a revised return of income on 30/03/2012 declaring income of Rs. 452,46,85,175/- on account of reduction in the claim made u/s 35(2AB) & 80IB of the Act.

2.1 During the assessment proceedings u/s 143(3) pursuant to selection of the case for scrutiny under CASS, the AO observed that the assessee has claimed deduction u/s 80IB on export incentives received by its Jammu Unit. Observing that the Hon’ble Supreme Court in the case of Liberty India, reported in 317 ITR 318 has held that such incentives are not

2 I.T.A. No. 673/H/19 M/s Coromandel International Ltd., Sec’bad. eligible for deduction u/s 80IB and following his earlier years orders in assessee’s own case, the AO held that excise benefits of Rs. 4,31,81,988/- are not to be allowed. u/s 80IB of the Act. He made the addition accordingly. Against this addition, assessee preferred an appeal before the CIT(A), who granted relief to the assessee by following the decision of ITAT in the assessee’s own case for AYs 2008-09 and 2009- 10 by holding that excise duty refund is income derived from the undertaking and is eligible for deduction u/s 80IB of the Act. Against the order of CIT(A), the revenue is in second appeal before the ITAT.

3.

Having regard to the rival submissions and perusing the material on record, I find that the issue is covered in favour of the assessee by the decision of coordinate bench of this Tribunal in assessee’s own case for the AYs 2008-09 and 2009-10 in ITA Nos. 1147 & 1157/Hyd/2014-15, order dated 21/11/2014, For the sake of clarity and ready reference, the relevant paragraphs of the order are reproduced hereunder: “8. Having considered rival submissions and perused the orders of revenue authorities as well as other materials on record and after having applied our mind to the decisions relied upon by the parties, we do not find any infirmity in the order of ld. CIT(A) in allowing benefit u/s 80IB to assessee on excise duty refund for the following reasons.

9.

It is clear from the assessment order that AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking. However, as can be seen from the facts brought on record, there is no dispute that assessee has paid the excise duty on the goods manufactured and sold and as such it forms part of the sale price of assessee. Therefore, payment of central excise duty is integrally connected with the manufacturing and sale of goods produced by assessee. It is also not in dispute that as per the industrial policy resolution declared for the state of J&K and consequent to Central Excise Department Notification, assessee became eligible for refund of excise duty paid after set off of

3 I.T.A. No. 673/H/19 M/s Coromandel International Ltd., Sec’bad. CENVAT credit. Therefore, in sum and substance, it is only a refund of an amount already paid by assessee and reduced from the sale price while computing the profit. Therefore, when assessee gets refund of an expenditure already incurred the same has to be deemed to be the profits and gains of business or profession carried on by assessee in terms of section 41(1)(a) of the Act. In that view of the after, excise duty refund received by assessee has to be treated as part of the business profit, hence, eligible for deduction u/s 80IB of the Act. Otherwise also, as payment of excise duty is directly linked with the manufacturing of goods, refund of excise duty has to be treated as income derived from eligible business as provided u/s 80IB. In the aforesaid view of the matter, assessee will be eligible to claim deduction u/s 80IB on the income accruing from refund of excise duty. So far as the ratio in case of Liberty India Vs. CIT (supra), the facts are clearly distinguishable and do not apply to the facts of the present case. In case of Liberty India, the hon’ble Supreme Court was considering the profits derived from sale/transfer of DEPB/Duty Draw Back Benefits. DEPB/Duty Draw Back Benefits, is given under a scheme framed under the Customs Act and it is transferable, in other words, it is a marketable commodity. Excise duty refund by assessee in the present case is neither a marketable commodity nor transferable. It is only a refund of expenditure already incurred by assessee, hence the decision of the Hon’ble Supreme Court in case of Liberty India (supra) will not apply. In the aforesaid view of the matter, we uphold the order of ld. CIT(A) by dismissing grounds raised.”

Further, the CIT(A) has also relied upon the decision of the Hon’ble Supreme Court in the case of Meghalaya Steels Ltd., (Civil Appeal No. 7622 of 2014, judgment dated 09/03/2016) wherein it was held that the benefit which goes to reimbursement of cost in the production of goods of a particular business is profit of the business. In view of the same, I see no reason to interfere with the order of CIT(A) and the revenue’s appeal is accordingly dismissed.

4 I.T.A. No. 673/H/19 M/s Coromandel International Ltd., Sec’bad.

4.

In the result, appeal of the revenue is dismissed.

Pronounced in the open court on 21st November, 2019.

Sd/- (P. MADHAVI DEVI) JUDICIAL MEMBER Hyderabad, dated 21st November, 2019. kv Copy forwarded to: 1. DCIT, Circle – 1(2), Hyderabad. 2. M/s Coromandel International Ltd., Room No. 513, 5 th Floor, Signature Tower, Opp. Botanical Garden, Kondapur, Hyderabad – 500 084 3. CIT(A) – 1, Guntur 4. Pr. CIT – 2, Hyderabad. 5. The DR, ITAT, Hyderabad 6. Guard File

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