M/S RAJ.ARTS and CRAFTS HOUSE vs. I.T.O.WARD-13,JODHPUR

By way of these appeals, the appellants have challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals filed by the assessees.

While admitting the appeals, this Court framed following substantial question of law :- "Whether the Tribunal was justified in holding that assessee is not entitled to claim the benefit of tax exemption under Section 10BA of the Income Tax Act ?" "Whether the Tribunal was justified in holding that the assessee is not entitled to claim the benefit of tax exemption available to them under Section 10BA of the Income Tax Act ?" "Whether the Tribunal was justified in holding that assess is not entitled to claim the benefit of tax exemption available to them under Section 10BA of the Income Tax Act ?" "Whether Tribunal was justified in holding that appellant (assessee) is not entitled to claim reduction under Section 10BA of the Income Tax Act on the account of DEPB/Duty Draw Back Credited ?" "Whether Tribunal was justified in holding that appellant (assessee) is not entitled to claim reduction under Section 10BA of the Income Tax Act on the account of DEPB/Duty Draw Back Credited ?" "Whether Tribunal was justified in holding that appellant (assessee) is not entitled to claim reduction under Section 10BA of the Income Tax Act on the account of DEPB/Duty Draw Back Credited ?" "Whether the Tribunal was justified in holding that assess is (Uploaded on 08/08/2023 at 09:54:19 AM) (Downloaded on 28/10/2026 at 12:23:48 AM) (4 of 7)

Tax, Circle-6, Jaipur (D.B. Income Tax Appeal No.61/2016) decided on 23.10.2017 wherein, it has been held as under :- "

While considering the matter the Tribunal observed as under:-

We have heard rival contentions and perused the material on record. The Hon’ble Supreme Court in the case of Liberty India (supra) has considered the issue of DEPB and duty draw back and with reference to section 80IA/80IB held that DEPB/duty draw back benefit would not form part of the net profit. The section 80IA and 80IB deduction is provided by the Statute for industrial undertaking and profit & gains derived from any business of an industrial undertaking a certain percentage deduction be allowed for number of assessment years specified under the law. Whereas in section 80IB deduction is allowed to certain industrial undertaking other than infrastructure development undertaking from the profit and gains derived from any business referred to in sub section (3) to (11), (11A) and 11B) as such business being referred to as the eligible business on certain percentage basis and for such number of assessment years specified under the law. Section 10BA also provides special deduction of such profit of eligible article or things. This section applies to any undertaking which fulfill the following conditions, namely, (a)It manufactures or produces the eligible articles or things without the use of imported raw materials ; (d) Ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things. Besides these, other conditions provided in clause (b), (c) and (e) are to be fulfilled for claiming deduction. The sub section (4) of section 10BA reads as under :- Sub Section (4) : For the purposes of sub-section (1), the profits derived from export out of India of the (Uploaded on 08/08/2023 at 09:54:19 AM) (Downloaded on 28/10/2026 at 12:23:48 AM) (5 of 7)

However, Hon’ble Supreme Court in the case of Topman Exports (supra) held that entire sale proceeds not to be treated as profits but only difference between sale value and face value of credit – DEPB credit chargeable as income under section 28(iiib) in year in which applied for against exports. Further, profit on transfer of credit chargeable under section 28(iiid) in year in which transferred. The ld AR has also referred the decision of ITAT Jodhpur Bench, Jodhpur in the case of Angira Art Exports and Suraj Exports India and others in ITA No. 360/Jodh/2012 order dated 31/1/2013 and also ITAT Mumbai Bench in the case of Arts & Crafts Exports Vs. ITO 66 DTR 69 (ITAT Mumbai Bench) and claimed that both the ITATs have allowed the assessee’s appeal by considering the Hon'ble Supreme Court decision in the case of Liberty India and Topman Exports (supra). We have considered the assessee’s submission but fact of both the cases are not verifiable from the submissions made by the assessee, therefore the Assessing Officer is directed to considering the order of the Hon’ble Supreme Court in the case of Topman Exports (supra) and case laws referred by the assessee i.e. decision of ITAT Jodhpur Bench, Jodhpur in the case of Angira Art Exports and Suraj Exports India and others and ITAT Mumbai Bench decision in the case of Arts & Crafts Exports Vs. ITO (Uploaded on 08/08/2023 at 09:54:19 AM) (Downloaded on 28/10/2026 at 12:23:48 AM) (6 of 7)

However, the view taken by the Supreme Court in the case of Commissioner of Income-Tax V/s Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC) wherein it has been held as under:- “20. Liberty India being the fourth judgment in this line also does not help Revenue. What this (4 of 5) [ITA- 61/2016] Court was concerned with was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or business itself.”

It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to a business, are under the head “income from other sources”, which is a residuary head of income that can be availed only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head “profits and (Uploaded on 08/08/2023 at 09:54:19 AM) (Downloaded on 28/10/2026 at 12:23:48 AM) (7 of 7)

For the reasons given by us, we are of the view that the Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80- IB and 80-IC. The Himachal Pradesh High Court, having wrongly interpreted the judgments in Sterling Foods and Liberty India to arrive at the opposite conclusion, is held to be wrongly decided for the reasons given by us hereinabove.

The same view was followed by this Court in the case of CIT Jaipur V/s Suresh Kumar Bajoria in D. B. Income Tax Appeal No. 294/2008 decided on 18.05.2017. The said decisions have not been taken into consideration by the authority.

Therefore, the matter is remitted back to the AO to decide the same in the light of aforesaid decisions. It is made clear that we have not expressed anything on merits.

The appeal stands accordingly disposed of. "

In that view of the matter, all the matters are remitted back to the Assessing Officer. It will be open to both the parties to raise all the contentions before the A.O.

The appeals are disposed of accordingly.