NEEL KANTH GUM & CHEMICALS, Jaipur V. ACIT, JHUNJHUNU

ITA 285/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5646 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Business income
• Section: 143(3); 80HHC; 80IB; 148; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 285 TO 288/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2006-07, 2007-08, 2010-11 & 2012-13 M/S NEEL KANTH GUM & CHEMICALS, NEAR RAILWAY STATION, SARDARSHAHR, CHURU. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU. TAN NO.: AAEFN 6786 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.M. MEHTA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/01/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/01/2017 VKNS'K@ ORDER PER: KUL BHARAT,J.M. ALL THESE FOUR APPEALS ARE FILED BY THE SAME ASSES SEE AGAINST THE COMMON ORDER DATED 27/01/2016 PASSED BY THE LD. CIT( A)-III, JAIPUR PERTAINING TO THE A.YS. 2006-07, 2007-08, 2010-11 & 2012-13. 2. SINCE THE COMMON ISSUE IS RAISED IN ALL THE APPE ALS, THEREFORE, THE SAME ARE HEARD TOGETHER AND FOR THE SAKE OF CONVENI ENCE AND BREVITY, A COMMON ORDER IS BEING PASSED. ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 2 3. FOR THE PURPOSES OF FACTS, WE TAKE ITA NO. 285/JP /2016 PERTAINING TO A.Y. 2006-07. IN THIS APPEAL, THE ASSESSEE HAS R AISED ONLY ONE EFFECTIVE GROUND, WHICH IS AS UNDER:- 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE LEGAL GROUNDS OF APPEAL TAKEN IN ORIGINAL MEMO OF APPEAL (FORM NO. 35) IN RESPECT OF LEGALITY OF REASSESSED FRAMED UNDER SECTION 143(3)/148 OF IT ACT WITHOUT ISSUING ANY STATUTORY NOTICE REQUIRED UNDER SECTION 143(2) OF IT ACT WITHIN THE TIME ALLOWED UNDER PROVISO TO SECTION 143(2) OF IT ACT. (2) WITHOUT PREJUDICE TO GROUND NO. (1), LD. CIT (A ) HAS SERIOUSLY ERRED IN: (I) WITHOUT ANY REASON OR ADVERSE INFORMATION IN POSSESSING, NOT ADMITTING THE STATUS OF THE ASSESSEE FIRM AS 'INDUSTRIAL UNDERTAKING', THOUGH IT IS MANUFACTURER AND EXPORTER OF GUWAR REFINED SPLITS ETC., ENTITLED, ELIGIBLE, RECOGNIZED AS SUCH AND HAD RECEIVED RS.19,06,636/- ON ACCOUNT OF CASH ASSISTANCE IN THE FORM OF DEPB (DUTY ENTITLED PASS BOOK) AND VKGUY (VISHESH KRISHI GRAM UDYOG YOJANA) FROM GOVERNMENT OF INDIA UNDER ITS SCHEMES FRAMED TO ENCOURAGE SUCH MANUFACTURERS AND EXPORTERS. (II) LD. CIT(A) WAS NOT JUSTIFIED IN DENYING LEGALL Y ENTITLED DEDUCTION OF RS.4,76,659/- UNDER SECTION 80IB OF IT ACT, WHICH IS EQUAL TO 25% OF THE CASH ASSISTANCE OF RS. 19,06,636/- UNDER DEPB AND VKGUY BY TREATING THE SAID RECEIPTS AS 'INCENTIVE' THOUGH SUCH RECEIPTS ARE SPECIFICALLY CATEGORIZED UNDER THE STATUTE AS 'PROFIT AND GAINS OF BUSINESS ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 3 OR PROFESSION' UNDER SECTION 28(IIIB)/28(IIID) OF I T ACT. IN ALL THE OTHER APPEALS ALSO, THE ASSESSEES HAVE T AKEN SIMILAR IDENTICAL GROUNDS MENTIONED ABOVE. 4. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE A SSESSEE HAS SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NO. 1, 2 AND 2(I) OF THE APPEAL, THEREFORE, WE DISMISS THE SAME AS NOT PRESSE D. 5. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE CA SE OF THE ASSESSEE WAS REOPENED AND THE ASSESSMENT U/S 143(3) READ WITH SECTION 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TH E ACT) WAS FRAMED THEREBY THE ASSESSING OFFICER DECLINED THE CLAIM OF THE ASSESSEE MADE U/S 80IB OF THE ACT. SIMILAR IDENTICAL FACTS HAVE ALSO BEEN MENTIONED B Y THE A.O. IN ALL THE OTHER APPEALS. 6. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, HAS DISMISSED THE APPEAL. BY PASSING THE SIMILAR IDENTICAL FINDINGS, THE LD. CIT(A) HAVE ALSO DISMISSED ALL THE OTHER APPEALS OF THE ASSESSEES FO R ALL THE OTHER ASSESSMENT YEARS. ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 4 7. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS ARGUED THAT THE AUTHORITIES BELOW WERE N OT JUSTIFIED IN REJECTING THE CLAIM OF DEDUCTION U/S 80IB OF THE AC T. LD. AR HAS REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BR IEF. LD. COUNSEL HAS DREW OUR ATTENTION TO PROVISIONS OF SECTION 28(IIIB) /28(IIID) OF THE ACT. HE SUBMITTED THAT THE AUTHORITIES BELOW HAVE WRONGLY APP LIED THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF M/S LIBERTY INDIA VS. CIT (2009) 317 ITR 218. HE SUBMITTED THAT H ON'BLE APEX COURT IN FOLLOWING CASES WHERE THE MATTER OF SALE OF DEPB (DUTY ENTITLED PASS BOOK) CREDIT WAS REMANDED TO THE ASSESSING OFFICER F OR COMPUTATION IN ACCORDANCE WITH LAW LAID DOWN IN THE CASE OF TOPMAN EXP ORTS (2012) 342 ITR 49 (SC). HE PLACED RELIANCE ON THE DECISION IN THE CASE OF NISSAN EXPORTS VS. CIT (2014) 360 ITR 93 (SC) AND GLO BAL AGRO PRODUCTS PVT. LTD. VS. ITO (2014) 360 ITR 117 (SC). LD. AR SUBMITTED THAT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 34 2 ITR 49 (SC), IT WAS HELD THAT DEPB CREDIT IS CASH ASSISTANCE RECEI VABLE BY A PERSON AGAINST EXPORT UNDER THE SCHEME OF THE GOVERNMENT O F INDIA AND FALLS UNDER CLAUSE (IIIB) (IIID) OF SECTION 28 OF THE ACT AND IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFIT AND GAINS FROM BU SINESS OR PROFESSION. HE SUBMITTED THAT FOLLOWING THE JUDGME NTS OF THE HON'BLE ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 5 SUPREME COURT IN THE CASES OF NISSAN EXPORTS VS. CI T (SUPRA) AND GLOBAL AGRO PRODUCTS PVT. LTD. VS. ITO (SUPRA), THE HONBLE JAIPUR BENCH OF ITAT IN THE CASE OF SARAF EXPORT, CHURU VS. DCIT (2014) 51 TAX WORLD 1 (JP) HAS HELD THAT PROFIT ARISING FROM SALE OF DEPB LICENSE IS LIABLE FOR DEDUCTION U/S 80IB READ WITH SECTION 28(I IID) OF THE ACT. HE FURTHER SUBMITTED THAT IN THE CASE OF M/S HANDICRAF TS VS. ITO, CHURU (2013) 50 TAX WORLD 155 (JD), THE HONBLE JODHPUR BE NCH OF ITAT HAS HELD THAT DEPB, DDB ARE ELIGIBLE FOR EXEMPTION U/S 10BA OF THE ACT AS BUSINESS INCOME. HE SUBMITTED THAT UNDER THE PROVIS IONS OF SECTION (SECTION 28(IIIB) AND (IIID) OF THE ACT), THE JUDGM ENTS OF THE HON'BLE SUPREME COURT AND THE DECISIONS OF THE HONBLE ITAT, THE LD CIT(A) WAS NOT JUSTIFIED IN IGNORING THE PROVISIONS OF LAW IN S USTAINING THE DISALLOWANCES OF DEDUCTION U/S 80IB OF THE ACT ON CA SH ASSISTANCE RECEIVED FROM GOVERNMENT OF INDIA, TREATING THE SAM E AS INCENTIVE AND NOT BUSINESS INCOME. 8. ON THE CONTRARY, THE LD. SR. DR HAS STRONGLY OPP OSED THE SUBMISSIONS OF THE LD. AR AND FURTHER SUBMITTED THA T THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) HAS BEEN RIGHTLY APPLIED BY THE AUTHORITIES BELOW. HE SU BMITTED THAT THE CASE LAWS AS RELIED BY THE LD. COUNSEL OF THE ASSESS EE ARE DISTINGUISHABLE ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 6 AS THESE ARE NOT APPLICABLE ON THE PROVISIONS OF SE CTION 80IB OF THE ACT. HE SUBMITTED THAT THE PROVISIONS ARE CLEAR, AS PER THESE PROVISIONS, WHERE THE GROSS TOTAL INCOME INCLUDE ANY PROFIT AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (3) TO (11) , SUCH BUSINESS BEING AS THE ELIGIBLE BUSINESS. HE SUBMITTED THAT THE ASS ESSEE HAS TO DEMONSTRATE THAT THE PROFIT AND GAINS WHICH IS CLAIM ING AS A DEDUCTION SHOULD BE DERIVED FROM THE ELIGIBLE BUSINESS. HE SU BMITTED THAT WHAT THE ASSESSEE IS CLAIMING IS NOT DERIVED FROM THE ELIGIB LE BUSINESS, THEREFORE, THE AUTHORITIES BELOW WERE JUSTIFIED IN DECLINING THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 9 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER NOTED T HAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 17,38,256/- UNDER THE HEAD V.K.G.U.Y (VISHESH KRISHI GRAM UDHYOG YOJANA) AND RS. 1,68,37 9/- ON ACCOUNT OF DEPB. BOTH THESE AMOUNTS BEING INCENTIVE TO THE ASS ESSEE, DO NOT QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT, WHEREAS T HE ASSESSEE HAS CLAIMED THESE AMOUNTS AS DEDUCTION U/S 80IB OF THE ACT. NOW THE ISSUE TO BE DEICED WHETHER THE ASSESSING OFFICER WAS CORREC T IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTION U/S 80IB IN RESPECT OF ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 7 AMOUNT OF RS. 17,38,256/- UNDER THE HEAD VKGUY AND RS. 1,68,379/- ON ACCOUNT OF DEPB. LD. COUNSEL HAS HEAVILY RELIED ON THE PROVISIONS OF SECTION 28(IIIB) AND 28(IIID) OF THE ACT, FOR THE S AKE OF CLARITY, THE SAME IS REPRODUCED HEREINBELOW:- (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CALLED) R ECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA ; (IIID) ANY PROFIT ON THE TRANSFER OF THE DUTY ENTI TLEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME UNDER THE E XPORT AND IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTIO N 5 OF THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 199 2 (22 OF 1992); THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IND IA VS. CIT (SUPRA) AFTER ADVERTING TO RELEVANT PROVISIONS HAS HELD THA T SECTION 80IB/80IA ARE THE CODE BY THEMSELVES AS THEY CONTAIN BOTH SUB STANTIVE AS WELL AS PROCEDURAL PROVISION. THEREFORE,, WE NEED TO EXAMINE WHAT THESE PROVISIONS PRESCRIBE FOR COMPUTATION OF PROFITS OF THE ELIGIBLE BUSINESS. IT IS EVIDENT THAT SECTION 80IB PROVIDES FOR ALLOWIN G OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGI BLE BUSINESS. IT IS HELD BY THE HON'BLE SUPREME COURT THAT THE WORDS DERIVE D FROM IS NARROWER IN CONNOTATION AS COMPARED TO THE WORDS ATTRIBUTABL E TO. IN OTHER WORDS, BY USING THE EXPRESSION DERIVED FROM, PARLI AMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. AFTER AN ALYZING THE PROVISION, IT WAS HELD BY THE HON'BLE SUPREME COURT THAT THE DE PB IS AN INCENTIVE. ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 8 IT IS GIVEN UNDER DUTY EXEMPTION REMISSION SCHEME. ESSENTIALLY, IT IS AN EXPORT INCENTIVE. NO DOUBT, THE OBJECT BEHIND DEPB IS TO NEUTRALIZE THE INCIDENCE OF CUSTOMS DUTY PAYMENT ON THE IMPORT CON TENT OF EXPORT PRODUCT. THIS NEUTRALIZATION IS PROVIDED FOR BY CRED IT TO CUSTOMS DUTY AGAINST EXPORT PRODUCT. HON'BLE SUPREME COURT HAS H ELD THAT THE DUTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF T HE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTIONS 80I/80IA/80IB OF THE ACT. THE LD AR OF THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F NISSAN EXPORTS VS. CIT (SUPRA), THE DEDUCTION AS CLAIMED FALLS U/S 80HHC OF THE ACT AND ALSO IN THE CASE OF GLOBAL AGRO PRODUCTS PVT. LTD. VS. ITO (SUPRA) PERTAINS TO CLAIM OF DEDUCTION U/S 80HHC OF THE ACT , THEREFORE, THIS WOULD HAVE APPLICATION ON THE FACTS OF THE PRESENT C ASE. ACCORDINGLY, IN THE LIGHT OF THE RATIO LAID DOWN BY THE HON'BLE SUPR EME COURT IN THE CASE OF LIBERTY INDIA VS CIT (SUPRA), WE DO NOT SEE ANY RE ASON TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), THEREFORE, THE O RDER PASSED BY THE LD. CIT(A) IS HEREBY CONFIRMED. GROUND RAISED IN THI S APPEAL OF THE ASSESSEE IS DISMISSED. 10. NOW WE TAKE ITA NO. 286 TO 288/JP/2016 FOR THE A. Y. 2007-08, 2010-11 AND 2012-13. ITA 285 TO 288/JP/2016 M/S NEEL KANTH GUM & CHEMICALS VS ACIT 9 IN ALL THESE APPEALS, THE FACTS ARE IDENTICAL AS WER E IN THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS NOT POINTED OUT ANY N EW FACTS AND CIRCUMSTANCES AND HAS ALSO NOT BROUGHT TO OUR NOTIC E ANY FAVOURABLE BINDING PRECEDENT; THEREFORE, TAKING A CONSISTENT V IEW, WE DO NOT SEE ANY REASON TO DISTURB IN THE ORDER PASSED BY THE LD . CIT(A). THEREFORE, THE SAME IS AFFIRMED. ACCORDINGLY, THE GROUND RAISE D IN APPEALS OF THE ASSESSEE FOR THE A.Y. 2007-08, 2010-11 AND 2012-13 ARE REJECTED. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/01/2017. SD/- SD/- HKKXPAN DQY HKKJR (BHAGCHAND) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH JANUARY, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S NEEL KANTH GUM & CHEMICALS, CHURU . 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 285 TO 288/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR