PRANESH S. VORA,MUMBAI vs. ITO WD 18(1)(2), MUMBAI

The present appeal has been preferred by the assessee against the order dated 06.05.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2005-06.

The assessee has taken the following grounds of appeal: “i) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.17,46,662/- being Duty Draw Back as export incentive claimed U/s. 80IB(4).

The case was called several times but none has appeared on behalf of the assessee. It is observed from the order sheet of this file that earlier notice was 2 M/s. Pranesh S. Vora served upon the assessee to appear on 17.02.15 vide order dated 18.11.14, however, 17.02.15 was declared closed holiday on account of Mahashivratri and the case was adjourned to 25.05.15. On 25.05.15, no one appeared on behalf of the assessee and a RPAD notice was served on the assessee to appear on 18.08.15. Again on 18.08.15 none appeared on behalf of the assessee and a notice by RPAD was ordered to be served again for 07.12.15. Again no one appeared on behalf of the assessee and another RPAD notice was issued vide order dated 17.12.15 for hearing for today i.e. 07.03.16. But today again no one has appeared on behalf of the assessee. Hence, the above narrated facts reveal that the assessee is not interested in prosecuting his appeal. Hence, we proceed to decide the appeal on merits after hearing the Ld. D.R.

The Ld. D.R. has submitted that the issue involved in this appeal is squarely covered by the decision of the Hon’ble Supreme Court in the case of “M/s. Liberty India vs. CIT” civil appeal No.5271 of 07 and others vide order dated 31.08.09.

We have perused the order of the Hon’ble Supreme Court in the case of “Liberty India (supra)”. We find on the identical issue relating to incentives received by way of duty draw back/DEPB, whether eligible for deduction under section 80IB; the Hon’ble Supreme Court has held that duty draw back/DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the P&L account for the purpose of section 80IA/80IB. Such remissions would constitute independent source of income beyond the first degree nexus between profit and the industrial undertaking. The Hon’ble Supreme Court has observed that DEPB/duty draw back are incentives which flow from the schemes framed by Central Government or from section 75 of Customs Act, 1962, hence, such incentives/profits are not profits derived from the eligible business under section 80IB. They belong to the category of ancillary profit of such undertakings and as such do not form part of the net profits of eligible industrial undertaking for the purpose of 3 M/s. Pranesh S. Vora section 80IA/80IB. The issue before us is directly covered by the above decision of the Hon’ble Supreme Court in the case of “Liberty India” (supra). Therefore, there is no merit in the appeal of the assessee and the same is accordingly dismissed.