ITO, New Delhi V. M/s. Hritnik Exports (P) Ltd., New Delhi

ITA 2111/DEL/2013

• Counselvise Citation: 211120114 RSA 2013
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S GILL
• Keywords: Business income; Earning of tax free income
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2111/DEL/202013 ASSESSMENT YEAR : 2009-10 ITO, M/S HARITNIK EXPORT (P) LTD., WARD-12 (4), 225-KRISHMA APARTMENTS, NEW DELHI. V. 27-IP EXTENSION, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACH9458 AAACH9458 AAACH9458 AAACH9458- -- -A AA A APPELLANT BY : SHRI R.S. GILL, CIT-DR. RESPONDENT BY : SHRI R.S. SINGHVI, C.A. & SHRI SATYAJEET. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) DATED 15.1.2013. THE GROUNDS RAISED BY THE REVENUE AR E AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER O F CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAD ERRED IN ALLOWING THE CLAIM, OF RECEIPT OF DUTY DRAW BACK OF ` .89,47,217/- UNDER SECTION 10B OF THE INCOME TAX ACT , 1961 TO THE ASSESSEE COMPANY. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DEL ETE OR WITHDRAW ANY GROUND OF APPEAL DURING THE COURSE OF A PPELLATE PROCEEDINGS. ITA NO2111/DEL/2013 2 2. THE REVENUE IN THIS CASE HAD SOUGHT ADJOURNMENT. HO WEVER, WHILE GOING THROUGH THE FILE, WE OBSERVED THAT THE I SSUE IN DISPUTE WAS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY SPECIAL BENCH DECISION OF ITAT IN THE CASE OF MARAL OVERSEAS LTD. V. ACIT IN I.T .A. NOS. 777 & 900/IND/2004, THEREFORE, WE REJECTED THE ADJOURNMEN T APPLICATION AND WITH THE HELP OF LD REPRESENTATIVES OF REVENUE AND AS SESSEE WENT THROUGH THE FACTS OF THE CASE WHICH ARE THAT ASSESSEE IS A N EXPORTER WHO HAD FILED ITS RETURN OF INCOME BY CLAIMING DEDUC TION U/S 10B OF THE ACT. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY TH E ASSESSING OFFICER THAT ASSESSEE HAD INCLUDED IN THE DEDUCTION U/S 10B AN AMOUNT OF ` .89,47,217/- WHICH WAS RECEIVED AS DUTY DRAW BACK FRO M THE GOVT. OF INDIA. THE ASSESSEE WAS ASKED AS TO WHY THIS AMOUNT BE NOT EXCLUDED FROM THE EXEMPT INCOME U/S 10B. THE ASSESSEE IN ITS REPLY SUBMITTED THAT DUTY DRAW BACK WAS NECESSARILY A PART O F EXPORT PROFITS AS IT HAD DIRECT NEXUS WITH THE EXPORTS. HOWEVER, THE ASSESSING OFFICER RELYING UPON THE APPELLANTS OWN CASE IN ASSESSMENT YEAR 2008-09 AND RELYING UPON THE DECISION OF HON'BLE APEX COURT IN L IBERTY INDIA 183 TAXMAN 349 EXCLUDED THE AMOUNT FROM EXEMPT INCOME. 3. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) . THE LD CIT(A) ON THE BASIS OF SUBMISSIONS FILED BY THE ASSESSEE DEL ETED THE ABOVE DISALLOWANCE. WHILE DELETING THE DISALLOWANCE L D CIT(A) HAD RELIED UPON THE SPECIAL BENCH DECISION OF ITAT IN TH E CASE OF MARAL OVERSEAS LTD. (SUPRA). 4. THE LD DR HEAVILY RELIED UPON THE ORDER OF ASSESSING OFFICER WHEREAS THE LD AR RELIED UPON THE ORDER OF LD CIT(A) . ITA NO2111/DEL/2013 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ONLY ISSUE IN DISPUTE IS REGARDING ELIGIBILITY OF DUTY DRAW BACK FOR THE COMPUTATION OF DEDUCTION U/S 10B OF THE ACT. THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE VIDE SPECIAL BENCH DECISIO N IN THE CASE OF MORAL OVERSEAS LTD. (SUPRA). THE ITAT HAS DISCUSSED SIMI LAR SITUATION VIDE PARAS 78 TO 80 OF THE SAID ORDER WHICH IS REPROD UCED AS UNDER:- 78. SECTION 10B SUB-SECTION (1) ALLOWS DEDUCTION IN RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. SECTI ON 10B(4) LAYS DOWN SPECIAL FORMULA FOR COMPUTING THE PROFITS D ERIVED BY THE UNDERTAKING FROM EXPORT. THE FORMULA IS A S UNDER :- PROFIT OF THE BUSINESS OF THE EXPORT TURNOVER UNDERTAKING X TOTAL TURNOVER OF BUSINESS CARRIED OUT BY THE UNDERTAKING 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF T URNOVER TO THE TOTAL TURNOVER. THUS, NOT-WITH-STANDING THE FACT THA T SUB-SECTION (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, YET THE MANNER OF DETERMINING SUCH ELIGIB LE PROFITS HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF SECT ION 10B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIR E PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY T HE RATIO OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BU SINESS. SUB- SECTION (4) DOES NOT REQUIRE AN ASSESSEE TO ESTABLISH A DIR ECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UNDERTAKING, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE UNDERTAK ING. THUS, ITA NO2111/DEL/2013 4 ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIB LE UNDERTAKING, THERE IS NO FURTHER MANDATE IN THE PROV ISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PRO FITS. THE MODE OF DETERMINING THE ELIGIBLE DEDUCTION U/S 10B I S SIMILAR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SEC TIONS MANDATES DETERMINATION OF ELIGIBLE PROFITS AS PER THE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS THAT SECT ION 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 PROVIDI NG THE MECHANISM FOR COMPUTING THE PROFITS OF THE BUSINESS EL IGIBLE FOR DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME F ORMS 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 HIMSEL F, THERE IS NO DISPUTE THAT BOTH THESE INCOMES HAVE BEEN T REATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE CBDT CIRC ULAR NO. 564 DATED 5TH JULY, 1990 REPORTED IN 184 ITR (S T.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECTION 80HHC AND TH E MODE OF DETERMINATION OF PROFITS DERIVED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONAL RESEARCH PARK LABORATORIES VS. ACIT, 212 ITR (AT) 1, AFTER FOLLOWING THE AFORESAID CIRCULAR, HELD THAT STR AIGHT JACKET FORMULA GIVEN IN SUB-SECTION (3) HAS TO BE FOLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE HON'BLE SUPREME COURT IN THE CASE OF P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED THE PRINCI PLE LAID DOWN IN THE SPECIAL BENCH DECISION IN INTERNATIONAL RESEARCH ITA NO2111/DEL/2013 5 PARK LABORATORIES VS. ACIT (SUPRA). IN THE ASSESSEES OWN C ASE THE I.T.A.T. IN THE PRECEDING YEARS, AFTER CONSIDERIN G THE DECISION IN THE CASE OF LIBERTY INDIA HELD THAT PROVISIONS OF SECTION 10B ARE DIFFERENT FROM THE PROVISIONS OF SECTION 80IA WHER EIN NO 77 FORMULA HAS BEEN LAID DOWN FOR COMPUTING THE ELIGIBL E BUSINESS PROFIT. 80. IN VIEW OF THE ABOVE DISCUSSION, QUESTION NO. 2 IS ANSWERED IN AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. ACCORDI NGLY, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPORT IN CENTIVE RECEIVED BY IT IN TERMS OF PROVISIONS OF SECTION 10B(1 ) READ WITH SECTION 10B(4) OF THE ACT. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE BEING SIM ILAR TO THE FACTS OF THE ABOVE TRIBUNAL ORDER, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH DAY O F OCTOBER, 2013. SD/- SD/- (RAJPAL YADAV ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.24.10.2013. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. ITA NO2111/DEL/2013 6 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 10.10.2013 DATE OF DICTATION 21.10.2013 DATE OF TYPING 21.10.2013 DATE OF ORDER SIGNED BY 24.10.2013 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED. ITA NO2111/DEL/2013 7