Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, A.M :
This is an appeal filed by the assessee against the order dated 25.03.2015 passed by the Commissioner of Income Tax (Appeals)-13, New Delhi, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2010-11.
Brief facts of the case are that during the year under consideration, the assessee firm was engaged in the business of export of handicraft items. It had filed its return of income declaring taxable income of Rs.1,78,879/-. The Assessing Officer noticed that assessee had shown net profit of Rs.80,36,343/- and claimed exemption u/s 10B to the extent of Rs.78,51,415/-. He noted that assessee firm had received duty draw back amounting to Rs.19,93,742/-, which was credited in the Profit & Loss Account. Relying on the decision of Hon’ble Supreme Court in the case of Liberty India, 183 Taxman 349 (SC), wherein, duty draw back was not considered as eligible profit for computing deduction u/s 80I and 80IB of the Act, disallowed the assessee’s claim. The assessee, in its reply, relied on the decision of Hon’ble Delhi High Court in the case of PAL Enterprises vs. CIT (IT Appeal No.1191 of 2011 March 26, 2012), wherein, the Hon’ble Delhi High Court relied on the decision of the Hon’ble Supreme Court in the case of Topman Exports vs. CIT (2012) 205 Taxman 119, wherein, it has been held that the DEPB credit falls under clause (iiib) of section 28 of the Act, whereas, the premium received thereon, on transfer, will represent profits chargeable under clause (iiib) and the deduction u/s 80HHC had to be computed accordingly. The Assessing Officer did not accept the assessee’s contentions observing that since the exemption u/s 10B was on identical lines as sections 80-I/80-IA/80-IB with identically similar spirit and wordings, therefore, duty draw back will not eligible for deduction 10B of the Act, ld. CIT(A) dismissed the assessee’s appeal.
3. Being aggrieved with the order of ld. CIT(A), assessee is in appeal before the Tribunal and has taken following grounds of appeal :-
“1. On the facts and circumstances of the case and in law the ld. CIT(A)'s has erred in upholding the act of AO in denying appellant deduction of section 10B on duty drawback amount of Rs 19,93,742/ - received by the appellant.
2. On the facts and circumstances of the case and in law ld. CIT(A) has acted against the principles of judicial propriety by ignoring the binding decision of the jurisdictional High Court on similar issue in the case of M/s XLNC FASHIONS.
On the facts and circumstances of the case and in law the ld. CIT(A) has acted against the principles of judicial propriety by ignoring the decisions of Delhi Benches of ITAT on the similar issues.
4. On the facts and circumstances of the case and in law the ld. CIT(A) has acted against the principles of judicial propriety and rule of consistency by taking contrary view from the decisions of Ld. CIT(A)'s in appellant own case both in immediately and succeeding assessment years on similar issue.
5. The above grounds are independent and without prejudice to each other.
6. Appellant craves for grant of permission to add, amend, modify, delete or withdraw any ground of appeal at or any time before the hearing of the appeal.”
Ld. counsel submitted that this issue is covered by the decision of the Tribunal in the case of ITO vs. Smt. Shashi Sadh vide order dated 30.12.2014, wherein, the Tribunal, after considering the decision of ITAT Special Bench, Indore, in the case of Maral Overseas Ltd. vs. ACIT, (2012)-TIOL-197-ITAT-Indore-Special Bench dated 28.03.2012, has observed as under :-
“17. From vigilant perusal and careful consideration of the ratio of decision of ITAT Special Bench, Indore we observe that the Special Bench after considering the ratio or decision in the case of Liberty India (Supra), International Research Park Laboratories vs. ACIT 212 ITR (AT) I and relevant Circular of the CBDT has held that while working out the deduction u/s 10B( I) of the Act the calculation of eligible profits has to be made by including the claim of export incentives, therefore, the claim ultimately allowed by the AO was found to be justified which was also endorsed by Special Bench in that case.
On careful consideration of factual matrix of the present case, we are of the considered opinion that the issue in question related to allowability of the duty drawback stand squarely covered in favour of the assessee by the order of the jurisdictional High Court of Delhi in the case of CIT vs. Hritnik Export (P)
Ltd. (Supra), wherein their lordships speaking for the Jurisdictional High Court of Delhi after considering and approving the ratio of the decision of Special Bench in the case of Maral Overseas Ltd., (Supra) have held that as per section 28, (clause (iiic) of the Act any duty of Custom and Excise repayable as drawback to a person against export under Custom and Central Excise Duty drawback Rules 1971 is deemed to be the profits and gains of business or profession. Their lordship further held that the said provision has to be given full effect to and this means that the duty drawback or duty benefits would be deemed to be a part of business income and this will be treated as profit derived from business of the undertaking and the same cannot be excluded.
In the present case, from operative part of the impugned order as reproduced hereinabove, we observe that before granting relief for the assessee the ld. CIT(A) has held that the decision of Hon’ble Apex Court in the case of Liberty India relates to the claim of deduction u/s 80I, 80IA & 80IB of the Act which have a common scheme and the said sections provide for incentives in the form of deductions which are linked to profit derived from industrial undertaking. We may also note that in the case of Maral Overseas Ltd., (Supra) the Special Bench of the ITAT has held that in the case of Liberty India the Hon'ble Apex Court has dealt with the provisions of section 80IA of the Act for which no formula was laid down for computing the profits derived by the undertaking which has specifically been provided under sub section (4) of section 10B of the Act, for computation of the profits derived by the undertaking from the export business. Under these facts and circumstances, we respectfully held that the ld. CIT(A) was right in holding that the benefit of the ratio of decision of Hon'ble Apex Court in the case of Liberty India (Supra) is not allowable for the Revenue in determining the claim of the assessee u/s 10B of the Act. The ld. CIT(A) was right in holding that section 10B(4) of the Act is a complete code which provides a formula/mechanism for computing the profits of the business eligible for deduction u/s 10B of the Act and in view of the decision of Special Bench in the case of Maral Overseas Ltd. (Supra) the present assessee was rightly held to be eligible for the claim of deduction on the export incentive received by it as per provision of section 10B (I) r.w.s. 10B(4) of the Act.
On the basis of foregoing discussion, we reach to logical fortified conclusion that the AO misinterpreted the ratio or decision of Hon’ble Apex Court in the case of Liberty India (Supra) while denying claim of the assessee u/s 10B of the Act.
On the other hand we are inclined to hold that the ld. CIT(A) was right in following the decision of Special Bench of ITAT Indore in the case of Maral Overseas Ltd. (Supra) while granting relief for the assessee in the impugned order. We also respectfully note that the Hon'ble Jurisdictional High Court of Delhi in the recent decision dated 13.11.2013 in the case of CIT vs. Hritnik Export (P) Ltd., (Supra) have upheld the ratio of the decision of Special Bench of ITAT Indore in the case of Maral Overseas Ltd. (Supra) and the ld. CIT. DR has miserably failed to point out any specific and direct judgment on the issue which may compel us to take deviated view of stand from the Special Bench order (Supra).
To sum up, we hold that the ratio of the decision of the Special Bench of the Tribunal is binding on the all Division Benches of the Tribunal until and unless there is a different view either of Hon’ble Supreme Court or by Hon’ble Jurisdictional High Court of any other High Court on the issue. We also hold that the AO was not justified in disallowing the claim of the assessee on the basis of decision of Hon’ble Apex Court in the case of Liberty India (supra).”
Respectfully following the decision of Special Bench of ITAT, Indore Bench in the case of Smt. Shashi Sadh (supra), we allow the assessee’s claim
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 09th day of December, 2016.