C.I.T. I JODHPUR V. M/S SUNCITY ART EXPORTERS, JODHPUR

ITA/139/2013

AI Insights

The case involves the Commissioner of Income-Tax, Jodhpur, as the appellant, and M/S Suncity Art Exporters, Jodhpur, as the respondent. The primary legal issue revolves around the eligibility of receipts from DEPB (Duty Entitlement Pass Book) and DDB (Duty Drawback) for deduction under Section 10BA of the Income Tax Act. The Tribunal had directed that these receipts be allowed for deduction, which was contested by the Commissioner of Income-Tax. The High Court of Rajasthan at Jodhpur examined whether the Tribunal was justified in its decision, considering the specific conditions laid down in subsections (3) and (4) of Section 10BA, and the interpretations of similar provisions in other sections like Section 80HHC and Section 80IA.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 670721 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 18-02-2015
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Sterling Foods, Liberty India vs. Commissioner of Income Tax, Topman Exports vs. Commissioner of Income Tax, Ranjana Mohari Vs. Commissioner of Income Tax, Circle-6, Jaipur, Angira Art Exports vs. ITO, Arts & Crafts Exports Vs. ITO, Commissioner of Income-Tax Vs. 217 (SC), Commissioner of Income-Tax Vs. Suresh Kumar Bajoria
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: ANIL BHANSALI; BHAGIRATH P J L C
• Assessee Lawyers: K K BISSA
• Keywords: DEPB; Export Incentives; Income from other sources; Income tax appeal; DDB
• Section: 80HHC; 80IA; 80-IC; 80-IA; 80-IA; 10BA; 88F

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 139 / 2013 Commissioner of Income-Tax,-1- Jodhpur Versus M/S Suncity Art Exporters, Jodhpur (Rajasthan) , ., \" %I -s , p 4 1 #+->? ,~ * *,A\" $2. ----Respondent 14,,%,< ~ \" . c l t j!h%vs. e k 1.r- . %._p ,6.sb~ f\"% .& '62. $ &- ,, ~ * , . . . ? * ? > 6 . s.t.. 7r\", s~ qke. , ; 9 6 j v e , a For ~ppellagtcs)' . r 61 : Mr.K.K.Bissa s,&b , & ~. \" $ , ; < : : + ' For R ~ ~ ~ & $ & ~ ~ ( ~ ) : r . \" ; . . * $ ,-y Mr.Anil Bhansali, Mr.Bhagirath P&~$~I$J- .L'.C ,,*~.a \" S *< i*, i -ifJ* & \"?' -:* iallenged the 18.02.2015, of the case, the learn ed.t~n~~ib.u$a/..l$s ?i&uS&~$i,d in directing to ;?$,;i..,.-.\"B$&~.,8.\":..g .p&$lrlP,*ac# .' 13 '' ,*?2>:\" l t r $ $ci.pS ' * , % & 4 *\">$ * allow the dedudion \"ndei ~ecfion IOBA on the receipts of the DEPB and DDB despite the fact that there is no specific proviso in Section 1 OBA like in the case of Section 80 HHC, making the receipts of DEPB and DDB eligible for deduction under Section 1 OBA? , - 2. Whether on the facts and circumstances of the case, the learned 'Tribunal is justified in directing to allow the deduction under Section IOBA on the receipts of the DEPB and DDB ignoring the preliminary conditions laid down in sub-section (3) and (4) of Section 1 OBA ?\" 3. Whether on the facts and circumstances of the case, the learned Tribunal is justified in directing to treat the DEPB and DDB deduction as income from export of eligible articles or things ignoring the ratio laid down by the Hon'ble Apex Court in the case of CIT Vs. Sterling Foods? 3. ~isi.on of this Court . - . % -. @'- *h , . A ' . , d # =* $ >* , rendered . . st3 rz Jaipur Bench, Jaipur in Ranjana,4ohari Vs. .. . - 9 . . & , C & ~ssist@n& *-- Commissioner of Income Tax, Circle-6,,2Jaipur . 2 (D.B. Income 23/f0/20f7), paras \"3. While c observed a 12. We have \" i i . , material on recordi he i'%8n $/~[h:su~reme Court in $ 2 : * i j .ti' pi $ ) $j!> the case of Liberty ~~nni/iala~(~~~;~a)j:'has ; ji;illtB$,28 ,' . . ,( ;%. considered the ,&; j\"*&%&$$ $j &jJ$ issue of D EPB an@fdutfi8,d:a sn~Jd ,&yj9$~ i+..4ekzyt: w.l:ba~k-~a:n,d 56 : : . l ; > ~ ; with reference p.&.$A $*5, &.$?. $ . ; 7 & z 9 . * : > i * ; @ ; ? : i > + 3 ' 2 to section 8 O I A ~ ~ @ $ B - . ~ ~ / ~ < < ~ & $ ~ , ~ D ~ P ~ ~ ~ ~ Q ' ~ dra w back ::.:.a . . ; . i v : : . 3 : c . 4 , ! , , ii : 3 h j k r,$b rxir +pj -\" , %*I,l, ' ,i.i!.& benefit would t q ; ~ & , ~ ; ~ ~ ~ ~ ! . c : p a , ~ i . & &eghet profit, The ;Ij9'kr,~$$$+~&. > : $ . I , ) . % & ? ? 2pt.* P^, t@X6d * * : . < . . : <.-L~2~~~~g*q3~~~~$$~ section 80IA and 88FBid:@&.ct1:o~mi\"1~ pro vided by the ' = % I ' Statute for in d u ~ & ~ ~ a / - i ~ n d e ~ ~ & ~ n n i:.i:~i$h d profit & gains r M q /%.:;?A yn * * m d i c ; Y g s q gl ak, Q q* %j , $ y derived from any business o f ' an industrial undertaking a certain percentage deduction be allowed for number of assessment years specified under the law. Whereas in section 8018 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 (I I), (I IA) and 1 I B) 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 IOBA 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 u s e - ~ ~ i m ~ ~ o H e ~ ; - r a . , & ,! w materials ; : 2 & : k : , . * .* , . : i* ' ,.& .A,. : i.i ??\"I. 1 , ?X,G A 2 ) !%*%$ j;<,,fy (d) Ninety- .-+-- . per S cent or more of ~ t s \"sa.:lesii;during the -,- L r y \"& % L 26F-k p r e v ( p 6 ~ y ~ r r relevant to the assessment ye3ywye % . . : , .. by P, &? wa'y-o f exports of the eligible articles or things. k . f l : & @-&d , T -i J. R Besides these, other conditions provided in clausg (b), (c) and (e) are ,#yJ L o % bg, y.a.,+ fulfilled for claiming 7 e d $ + deduction. The suB'se~t~~oW~ \" . 4 9 .= L - (%9.i3!of -2 h).yct~ ,qction I OBA reads . , , ? as under :- ~ @ - ~ $ ~ ~ ~ ~ c v v p@$:+a .& 2 L $ 2 c g & y { k > . $ & * , * * $-$ \" - $ y j % ? 8 &:?P;5='\"+h% f % - - . ' % % 1;*m2**,s~q LJ vr <.g : + y& A %,yf,yyt+Q** +S~:~ZZ?~.!>;%.,{ ,$- *,2.>z . , -& - 4 : ; s S@Sj- ('5hf> ' P j * c;) ,\":i.g\"rr .. ; , ,s,.;o..t< 4 < @ $ $ - Sub Section ,,(~~i.i;jj~I& .the $p&=poses 0 f sub - l&\"q > , :??, , \" . \" 5 : 4%. : : . : ; . > & ; + & ' ~.'..*:*i , !, i > p ;?%f+)4;j:\",;y.;* ;$v'$$ : , $ $ section (I), the '.vdb ; i.pr~ff~s~&~e~~;~e~df~ffib'm : y , : . t $ . - b . +. . i , , , 4 d , ; ' c : : export out of h. , , :.i2{, ? ; + ,$& + G * . . > ! (,[;;,pe$*N8$~\" . . s 8 ; :/ India of the e/igl~~@:art,~/& , > . . .!=;I T + ( , i 5 + f f , * ;$@&fiihgs -.. i..G-$mg shall be the ',\" {ry Gap$ p -@$ amount which bear!$ * ? to th&*jbr&h& of the business of .-' ?&I 4 ! $ $ 2 1 1 $*fg & J 5 i the undertaking, tee same e~ap&$ion Eb;, , I! L‘ as the export ). 5;: . : : ; ; z:.;,>f.r, , . < $ &*J ..!.*.A & turno ver in respe*q$ ~&~gq@b~~>a&@/e%ar things bears to ,' t; .; . $ x ~ ~ % ~ P ~ S ~ X , : * - .,=@*.? . -. ?. ' 3 , . . * ; ' . $is,, j * .J ..set- .-.a . ; : i , L tf~>:' :\", , - i~th the total turno ve :!:' fi 8% $@;e;&&s.~~,e~ ga,rried on by the J - . . + ?Qfi?c. cJ , ; - , 4 3; .. 3 . . 2 ; '\" @ ' : , , , \" < % & $ $ i t th+,rl. $6, % 4 j 1 8 undertaking. .i! f $ $ : F : : a : . . % . , , , GqGA$&$~~>&?s~?fq~[d~~~ T7 . , , , & -~~$~,' ;~~~5gx&;$pf~&2.~*~2>>~~~;: : , ; 5 ~.+p* ' ; _ & $ g f g ; 3 a - 3 y f i i . < : r c r > 2,. ) As per sub-secT1~n--(\"6j-~f-- , = section x% 1 OBA, the - *. .-. . -4zqv7? - \" + - ; * a % + * .%Pnaypsc?:x< :tttt* ,-\"4& , subsection (8) a@.qi:zsU@=,se:~tjo~i g . ' ~.-- '.. f.j . ;)-'of : section 8 OIA also applicable in relation to the undertaking referred to in this section as they apply for the purpose of undertaking referred to in section 80IA. Section 1 OBA was inserted by the Finance Act, 2003 with effect from 1.4.2004 whereas section 80IA was inserted by the Finance Act,l999 with effect from 1.4.2000. Originally section 80IA was inserted by the Finance Act, 1991 with effect from 1.4.1991. The languages of both the sections are same but the effective dates are different. Therefore, findings of IYon'ble Supreme Court in the case of Liberty India squarely are applicable in case of deduction claimed by the assessee under section IOBA and credited duty draw back and DEPB in the Profit & Loss Account, but is not derived income from undertaking. Therefore, we reverse the order of Id. CIT (A) to that extent. Y& \" , . & ' a x F 3 , 4 ,.-, % 0 , & ? j f , * r \" \"BJ$ ....) t 12.1, uo wevery ', B&n7'ble suprems ' ~ & @ t & n ~ t h ~ 4 case of ;;xeii.r::. - 2' 1 TO^ ma $ &w3i~Jp w o rts (supra) h eld tha t n r e sale tL d &, f,. % pro.cAe+eBs not to be treated as profits buf.dnly * l . > 9 . C \"t .;F&$ ,dI\"@erence between sale value and face value@ oG;% % ? $ : . & P 2, credit - DEPB credit chargeable as income under sferred. The Id AR has also assesse e 3 a pp %~&T~Gbbp~Econsii$g~5~~g th e Hon 'ble 6 , > & % , ' i ' \" + .$ < * . y ; '?:,.;a $?'$ Supreme Court de$sto*n m 'the \"cdkb' 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. IT0 (supra)and recalculate the income accordingly. Therefore, this ground of appeal is setaside to the Id Assessing Officer. 4. However, the view taken by the Supreme Court in the case of Commissioner of Income-Tax V/s 217 (SC) wherein 1ine~;a;l;o does not help Revenue. What this ~ o u h > ~ & ~ s P % $ $ t F & 4 3 *c@:erned 2* with was an export incentive, whichn yw ia, very far removed from reimbursement of an element of cost. A D on to export at is after it manufactures or therefore its entitlement, as n e u tra lize th e in c ~ ~ ~ e , ~ ~ c ~ e ~ ~ ~ ~ ~ c u s ~ o m s ~ ~ u y 6G pa ym en t on p p kd& - ~.$,*3 v*{ 4 % * , $ 3 pa the import c~nt&nt'~oP M e \" expbtf 'p\"roduct which is provided for by credit to customs duty against the export product. I n 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. \" 28. 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 , , \"., \"'\". ,<*-%~% ! / &P3--%?; tk & ? + -.k$ l \" ~ 2 1 B 8 2 . , , - p. .& on the incu~~i'n4 t ! > of-costs re7araliI.e. .fi~+q - 8 b usin ess, are I' 3 $ - I. . < , - ? . .;':- under @&de;d \"income from other souhce~~~\";., which ,* ~V xh&uL\";Pm'*l;c* is ,a,.'>$&duary ,-. - . > . + head of income that can be availed 'I.<* k2k J'.. ,,$ J , un1pif income does not fall under any of the o.ttiefik k - --- '.. , 9 f j. four heads of income. Section 28(iii)(b) specifically W?.. ?- - , ---c . . 1 states that income gffi@:mi$$cash assistance, by ,.+-2k .*~k25>~;~ 4&$8 A$%&y A? <.. $;2&-$ yx-,. *.>@ $2 , + - , /$ 3%. whatever nam~gq${l$@j~$$ge~~~~ao:r ~ e ~ e i v a ble by any ~;$~d~2~4fl~k-&?&w*4: (\"*:$ t.*d&\"vy-?, t::n~?: ) * - $ : . : ~ - * & * $ : , . + i\"^a . i * r : person againutgexp o@s%!u~~de$'~~~pjgS;gh em e of th e \"$1 4 $ ,$?$--J&~$%& h 4~ r i. I T , . r 5 , . i : q + / p& 2 .+ I,&:'$.!j\"\"$l; -. 'I' 6 . ' ; \" : <\" && \" Government of Igdt~~~~$il~~$;t2A'C:0.me <<. .-,?2,cy$ chargeable to -2.\" s&,i ,:,>.- (2 ?. .Jdj 2&>,*a , : . a $ . ,\"' ~ ~ P Y i * & ~ P ~ $ l t * ,{* ' * 6 income tax un d e , ~ ,~ +&&,?y#$ j;,,p,'4y$ -,,3?..,>& . . <.* $*&JL ,*, \"$;*$<*>'% fin :( J'P business or p r o f e ~ s ~ ~ F ~ ; ~ 3 ~ ~ ~ r : ~ ~ ~ ~ j p ~ f l > ~ z a ~ ~ i ~ t a j , ' , ; 9 ‘ \" , w( ! n ce received * 'r\"\"'.* \" , 8 . , P'y p . , or receivable agai$$t !$x@b~$s'sbsc$emes I\"i .!:! are included fi , Q . / 'l \" <% > , ? . < 3, a zk \" E : t 4 &\"d$>>&<(&i *:?:efqi$-p<' { . $ which go to reig@i.@s~n.e~:&~~o~ $,?:$) , - . . . ;iq@ p-~pth e pro duction $ j ' ~ ' . \" ~ ' . ~ , <% .%,?# 5 . f i * C : G: qT*;!i: a$ tgn ; .;':<;p:%.i\"\"r, * % 5. $ / ? of goods of a pa@t~g&~&b;bs1~es~.~i~6&ld --\"-& , & & 4 . 3 g i 2 . - ? 2 ~ . . k.j~.~~+Ge also have to :* c ~ $ ~ ~ > y $ 2 y = cs:ji j * ? ? & @ j > - = ' - - - \" . . . . \" be included under treyhead \"profits and gains of \" . , i T : ~ \" ~ ' = ' ~ S ' ~ > ~ ~ ~ , ~ ~ * g w!:i*~&-~%-%'%:~s z. i& , , $ s : i : , p b p- business or p r o ~ s s ~ o ~ + ~ ' % ., , ? f@~nd3?ii48$~inder the head \"income from other sources\". 29. For the reasons given by us, we are of the view that the Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80- I 5 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 0 5 us hereinabove. 4. 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. 5. Therefore, the matter is remitted back to the A 0 to decide the saqe ?;n 1igh.t 6f:af~~esaid decisions. , 4 : . 4 ' i a $~< 8% , f M $ % * ; p It is made:clear:that cz-2& : * b we have not exprgss.gd,anything ii L ' i - , ; p - on m:g6ts;;d 8 & > '&,,An;.' 9- ,/#\" , ; : ' b . 6. ?hecappeal stands accordingly disposed of.\"\" , = \" > A 'a . * . , . . ' E .+~ %*-. Q -2 - ' p . 4. ent, the present appeal stands dispo while remitting the matter back to the he light of aforesaid decisions. It is ma expressed anything on merits. (DR. PUSHPEND Skant/-64 "