NEEL KANTH GUM & CHEMICALS,JAIPUR vs. ACIT, JHUNJHUNU

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh Hkkxpan] ys[kk lnL; ,oa Jh dqy Hkkjr] U;kf;d lnL; ds le{k BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM

vk;dj vihy la-@ITA No. 285 to 288/JP/2016 fu/kZkj.k o"kZ@Assessment Years : 2006-07, 2007-08, 2010-11 & 2012-13 cuke M/s Neel Kanth Gum & Assistant Commissioner of Vs. Chemicals, near railway Income Tax, station, Sardarshahr, Churu. Jhunjhunu. TAN No.: AAEFN 6786 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.M. Mehta (CA) jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 12/01/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/01/2017 vkns'k@ ORDER

PER: KUL BHARAT,J.M. All these four appeals are filed by the same assessee against the common order dated 27/01/2016 passed by the ld. CIT(A)-III, Jaipur pertaining to the A.Ys. 2006-07, 2007-08, 2010-11 & 2012-13. 2. Since the common issue is raised in all the appeals, therefore, the same are heard together and for the sake of convenience and brevity, a common order is being passed.

2 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

to A.Y. 2006-07. In this appeal, the assessee has raised only one

effective ground, which is as under:-

“1. Ld. CIT(A) has erred in law and on facts in ignoring the legal grounds of appeal taken in original memo of appeal (Form No. 35) in respect of legality of reassessed framed under section 143(3)/148 of IT Act without issuing any statutory notice required under section 143(2) of IT Act within the time allowed under proviso to section 143(2) of IT Act.

(2) Without prejudice to ground No. (1), ld. CIT (A) has seriously erred in:

(i) Without any reason or adverse information in possessing, not admitting the status of the assessee firm as "Industrial undertaking", though it is manufacturer and exporter of Guwar Refined Splits etc., entitled, eligible, recognized as such and had received Rs.19,06,636/- on account of cash assistance in the form of DEPB (Duty Entitled Pass Book) and VKGUY (Vishesh Krishi Gram Udyog Yojana) from Government of India under its Schemes framed to encourage such manufacturers and Exporters.

(ii) Ld. CIT(A) was not justified in denying legally entitled deduction of Rs.4,76,659/- under section 80IB of IT Act, which is equal to 25% of the cash assistance of Rs. 19,06,636/- under DEPB and VKGUY by treating the said receipts as "incentive" though such receipts are specifically categorized under the statute as "profit and gains of business

3 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

or profession" under section 28(iiib)/28(iiid) of IT Act.”

In all the other appeals also, the assessees have taken similar identical

grounds mentioned above.

submitted that he does not wish to press ground No. 1, 2 and 2(i) of the

appeal, therefore, we dismiss the same as not pressed.

was reopened and the assessment U/s 143(3) read with Section 148 of

the Income Tax Act, 1961 (hereinafter referred as the Act) was framed

thereby the Assessing Officer declined the claim of the assessee made

U/s 80IB of the Act.

Similar identical facts have also been mentioned by the A.O. in all

the other appeals.

matter before the ld. CIT(A), who after considering the submissions, has

dismissed the appeal.

By passing the similar identical findings, the ld. CIT(A) have also

dismissed all the other appeals of the assessees for all the other

assessment years.

4 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

assessee has argued that the authorities below were not justified in

rejecting the claim of deduction U/s 80IB of the Act. Ld. AR has

reiterated the submissions as made in the written brief. Ld. Counsel has

drew our attention to provisions of Section 28(iiib)/28(iiid) of the Act. He

submitted that the authorities below have wrongly applied the ratio of

the judgment of the Hon'ble Supreme Court in the case of M/s Liberty

India Vs. CIT (2009) 317 ITR 218. He submitted that Hon'ble Apex Court

in following cases where the matter of sale of DEPB (Duty Entitled Pass

Book) credit was remanded to the Assessing Officer for computation in

accordance with law laid down in the case of Topman Exports (2012)

342 ITR 49 (SC). He placed reliance on the decision in the case of

Nissan Exports Vs. CIT (2014) 360 ITR 93 (SC) and Global Agro

Products Pvt. Ltd. Vs. ITO (2014) 360 ITR 117 (SC). Ld. AR submitted

that in the case of Topman Exports Vs. CIT (2012) 342 ITR 49 (SC), it

was held that DEPB credit is “cash assistance” receivable by a person

against export under the scheme of the Government of India and falls

under clause (iiib) (iiid) of Section 28 of the Act and is chargeable to

income tax under the head “profit and gains from business or

profession”. He submitted that following the judgments of the Hon'ble

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Supreme Court in the cases of Nissan Exports Vs. CIT (supra) and

Global Agro Products Pvt. Ltd. Vs. ITO (supra), the Hon’ble Jaipur Bench

of ITAT in the case of Saraf Export, Churu Vs. DCIT (2014) 51 Tax

World 1 (JP) has held that profit arising from sale of DEPB license is

liable for deduction U/s 80IB read with Section 28(iiid) of the Act. He

further submitted that in the case of M/s Handicrafts Vs. ITO, Churu

(2013) 50 Tax World 155 (Jd), the Hon’ble Jodhpur Bench of ITAT has

held that DEPB, DDB are eligible for exemption U/s 10BA of the Act as

business income. He submitted that under the provisions of Section

(section 28(iiib) and (iiid) of the Act), the judgments of the Hon'ble

Supreme Court and the decisions of the Hon’ble ITAT, the ld CIT(A) was

not justified in ignoring the provisions of law in sustaining the

disallowances of deduction U/s 80IB of the Act on cash assistance

received from Government of India, treating the same as incentive and

not business income.

submissions of the ld. AR and further submitted that the decision of the

Hon'ble Supreme Court in the case of Liberty India Vs. CIT (supra) has

been rightly applied by the authorities below. He submitted that the

case laws as relied by the ld. Counsel of the assessee are distinguishable

6 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

as these are not applicable on the provisions of Section 80IB of the Act.

He submitted that the provisions are clear, as per these provisions,

where the gross total income include any profit and gains derived from

any business referred to in Sub-section (3) to (11), such business being

as the eligible business. He submitted that the assessee has to

demonstrate that the profit and gains which is claiming as a deduction

should be derived from the eligible business. He submitted that what the

assessee is claiming is not derived from the eligible business, therefore,

the authorities below were justified in declining the claim of deduction

U/s 80IB of the Act.

9 We have heard the rival contentions of both the parties, perused

the material available on the record and also gone through the orders of

the authorities below. The Assessing Officer noted that the assessee has

claimed an amount of Rs. 17,38,256/- under the head V.K.G.U.Y

(Vishesh Krishi Gram Udhyog Yojana) and Rs. 1,68,379/- on account of

DEPB. Both these amounts being incentive to the assessee, do not

qualify for deduction U/s 80IB of the Act, whereas the assessee has

claimed these amounts as deduction U/s 80IB of the Act. Now the issue

to be deiced whether the Assessing Officer was correct in holding that

the assessee was not entitled for deduction U/s 80IB in respect of

7 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

amount of Rs. 17,38,256/- under the head VKGUY and Rs. 1,68,379/- on

account of DEPB. Ld. Counsel has heavily relied on the provisions of

Section 28(iiib) and 28(iiid) of the Act, for the sake of clarity, the same

is reproduced hereinbelow:-

“(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ; (iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);” The Hon'ble Supreme Court in the case of Liberty India Vs. CIT (supra)

after adverting to relevant provisions has held that Section 80IB/80IA

are the code by themselves as they contain both substantive as well as

procedural provision. Therefore,, we need to examine what these

provisions prescribe for “computation of profits of the eligible business”.

It is evident that Section 80IB provides for allowing of deduction in

respect of profits and gains derived from the eligible business. It is held

by the Hon'ble Supreme Court that the words “derived from” is narrower

in connotation as compared to the words “attributable to”. In other

words, by using the expression “derived from”, Parliament intended to

cover sources not beyond the first degree. After analyzing the provision,

it was held by the Hon'ble Supreme Court that the DEPB is an incentive.

8 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT

It is given under Duty Exemption Remission Scheme. Essentially, it is an

export incentive. No doubt, the object behind DEPB is to neutralize the

incidence of customs duty payment on the import content of export

product. This neutralization is provided for by credit to customs duty

against export product. Hon'ble Supreme Court has held that the duty

drawback receipt/DEPB benefits do not form part of the net profits of

eligible industrial undertaking for the purposes of Sections

80I/80IA/80IB of the Act. The ld AR of the assessee has relied upon the

judgment of the Hon'ble Supreme Court in the case of Nissan Exports

Vs. CIT (supra), the deduction as claimed falls U/s 80HHC of the Act and

also in the case of Global Agro Products Pvt. Ltd. Vs. ITO (supra)

pertains to claim of deduction U/s 80HHC of the Act, therefore, this

would have application on the facts of the present case. Accordingly, in

the light of the ratio laid down by the Hon'ble Supreme Court in the case

of Liberty India Vs CIT (supra), we do not see any reason to interfere in

the order passed by the ld. CIT(A), therefore, the order passed by the

ld. CIT(A) is hereby confirmed. Ground raised in this appeal of the

assessee is dismissed.

2010-11 and 2012-13.

9 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT In all these appeals, the facts are identical as were in the assessment

year 2006-07. The assessee has not pointed out any new facts and

circumstances and has also not brought to our notice any favourable

binding precedent; therefore, taking a consistent view, we do not see

any reason to disturb in the order passed by the ld. CIT(A). Therefore,

the same is affirmed. Accordingly, the ground raised in appeals of the

assessee for the A.Y. 2007-08, 2010-11 and 2012-13 are rejected.

Order pronounced in the open court on 30/01/2017.

Sd/- Sd/- ¼Hkkxpan½ ¼dqy Hkkjr½ (BHAGCHAND) (Kul Bharat) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30th January, 2017 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- M/s Neel Kanth Gum & Chemicals, Churu. 1. izR;FkhZ@ The Respondent- The ACIT, Jhunjhunu. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 285 to 288/JP/2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत