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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S. PANNU & SHRI SANDEEP GOSAIN
The captioned appeal by the assessee is directed against the order of the CIT(A)-24, Mumbai dated 18.03.2013, pertaining to the Assessment Year 2009-10, which in turn has arisen from the order passed by the Assessing Officer dated 21.10.2011 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In this appeal, although the assessee has raised multiple Grounds of appeal, but the solitary dispute is with regard to the denial of claim of deduction u/s 10B of the Act with regard to the following components of income :-
Sub head of income Amount (Rs.) Duty Drawback 9,65,956 Exchange Rate fluctuation 33,25,011 Sales Tax refund 5,85,340 Other Income 2,77,382 51,53,689
Briefly put, the relevant facts are that the appellant is a proprietor of a concern, M/s. Raj Chemicals which is engaged in the manufacture and export of basic drugs, fine chemicals, intermediaries, etc. In the return of income, assessee, inter-alia, claimed deduction u/s 10B of the Act with respect to the export profits of its proprietary concern, M/s. Raj Chemicals. In-principle, the Assessing Officer accepted the assessee’s claim for deduction u/s 10B of the Act, but excluded an amount of Rs.51,53,689/- representing the aforestated four elements of income and re-determined the deduction u/s 10B of the Act at Rs.3,17,64,850/-. The CIT(A) has also affirmed the stand of the Assessing Officer. The Assessing Officer as well as the CIT(A) justified their decision on the ground that the aforesaid receipts/incomes do not pertain to exports and, therefore, deduction u/s 10B of the Act was not allowable on such amounts.
Before us, the learned representative for the assessee pointed out that so far as the incomes by way of Duty drawback, Exchange rate fluctuation and sales tax refund are concerned, the Assessing Officer has himself assessed such incomes as ‘business incomes’ and only the ‘other income’ representing interest has been assessed as ‘income from other sources’. Therefore, according to him, the ratio of the decision of the Special Bench of the Tribunal in the case of Maral Overseas Ltd. vs Addl. Commissioner of Income Tax, (2012) 016 ITR (Trib) 0565 (Indore) clearly covers the controversy in favour of the assessee. As per the Special Bench, whatever incomes are assessed as profits of the business of the concerned undertaking, the same would be eligible for the claim of deduction u/s 10B of the Act. To the similar effect is the judgment of the Hon'ble Delhi High Court in the case of Riviera Home Furnishing vs Addl. Commissioner of Income Tax, dated 19.11.2015. In this context, reliance has also been placed on the decision of the Mumbai Bench of the Tribunal in the case of Krupa Trading Company vs Addl. Commissioner of Income Tax, [2017] 77 taxmann.com 177 (Mumbai-Trib.).
On the other hand, the ld. DR appearing for the Revenue has reiterated the stand of the lower authorities, which we have already noted in the earlier paras and is not being repeated for the sake of brevity.
We have carefully considered the rival submissions. Pertinently, insofar as the incomes on account of Duty drawback, Exchange rate fluctuation and sales tax refund are concerned, there is no dispute that the same has been treated by the Assessing Officer as ‘business income’. The said aspect is clearly emerging from the assessment order. In this context, the following observations of the Special Bench of the Tribunal in the case of Maral Overseas Ltd. vs Addl. Commissioner of Income Tax (supra) are quite apt :-
“Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits. The mode of determining the eligible deduction u/s 10B is similar to the provisions of section 80HHC inasmuch as both the sections mandates determination of eligible profits as per the formula contained therein. The only difference is that section 80HHC contains a further mandate in terms of Explanation (baa) for exclusion of certain income from the “profits of the business” which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub-section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the “profits of the business” eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income.”
The aforesaid decision clearly militates against the action of the Assessing Officer inasmuch once he accepts the aforesaid three elements of income as forming part of the ‘business income’ of assessee’s eligible undertaking, the same cannot be excluded for the purpose of computing deduction u/s 10B of the Act. Similarly, the Hon'ble Delhi High Court has also affirmed a similar ratio in the case of Riviera Home Furnishing vs Addl. Commissioner of Income Tax (supra). Following the aforesaid decisions, we direct the Assessing Officer to recompute the deduction u/s 10B of the Act by including the aforesaid three elements of income. Insofar as the amount of other income – Rs.2,77,382/- is concerned, the same has been assessed as ‘income from other sources’ and there is no material before us to distract from the same. Therefore, the said element of income, in our view, is not entitled for claim of deduction u/s 10B of the Act.
In the result, appeal of the assessee is partly allowed, as pronounced in the open court in the presence of both the parties at the conclusion of hearing on 8th March, 2018.