ITO, JODHPUR V. M/s. Kumbhat Exports, JODHPUR

ITA 332/JODH/2013

• Counselvise Citation: 33223314 RSA 2013
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: R R SI NGHVI
• Keywords: Business income; Depreciation
• Section: 80HHC; 10B; 28

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 332/JODH/2013 (A.Y. 2009-10) THE I.T.O., VS. M/S KUMBHAT EXPORTS WARD 1(2), JODHPUR E-5/6, MIA, 2 ND PHASE BASNI, JODHPUR PAN NO. AAEFK1440N (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.A. JOSHI, D.R. ASSESSEE BY : SHRI R.R. SINGHVI DATE OF HEARING : 02/12/2013. DATE OF PRONOUNCEMENT : 10/12/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 13/3/2013 OF LD. CIT(A), JODHPUR. IN THIS APPEAL, THE DEPARTM ENT HAS RAISED AS MANY AS 16 GROUNDS. 2. GROUND NO.16 IS GENERAL IN NATURE, SO DO NOT REQ UIRED ANY COMMENT ON OUR PART AND GROUNDS NO. 1 TO 14 RELATE TO DELETION OF DISALLOWANCE OF RS. 39,74,254/- MADE BY THE ASSESSING OFFICER U/S 10BA OF THE I.T. ACT, 1961 (HEREINAFTER TO BE REFERRED AS THE ACT). 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF MANUFACTURE/PRODUCTION AND EXPORT OF WO ODEN HANDICRAFTS ITEMS. THE ASSESSEE-E FILED THE RETURN OF INCOME ON 29/9/2 009 SHOWING TOTAL INCOME OF RS. 1,72,420/-, WHICH WAS PROCESSED U/S 143(1) O F THE ACT. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHOWN TOTAL SALES OF RS. 2,68,19,167/- AND THE MAJOR PURCHASES AMOUNTING TO RS. 1,57,79,667/- WERE IN RESPECT OF MANUFACTURED GOODS FROM HANDICRAFTS D EALERS AND THE OTHER PURCHASES OF RAW MATERIAL WERE OF ONLY RS. 19,61,86 8/-. THE ASSESSEE CLAIMED DEDUCTION U/S 10BA OF THE ACT FOR A SUM OF RS. 39,74,254/-. IN ORDER TO EXAMINE THE CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER REPRODUCED THE PROVISION OF SECTION 10BA OF THE ACT AND STATED THA T THE PRODUCTION OR MANUFACTURING OF THE ARTICLES OR THINGS WAS AN ESSE NTIAL AND ABSOLUTE CONDITIONS ALONGWITH OTHER CONDITIONS. HE ALSO ASKE D THE ASSESSEE TO PROVIDE THE PURCHASE REGISTER OF ALL THE ITEMS AND FROM THE COPIES OF THE SAID REGISTER FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE PURCHASED FINISHED GOODS FROM HANDICRAFTS DEALERS. THE ASSESSING OFFICER LISTED OUT THE PARTIES FROM WHOM GOODS WERE PURCHAS ED AS MENTIONED IN H- FORM. THE TOTAL PURCHASES FROM SUCH PARTIES WORKED OUT TO RS. 89,63,932/-. THE ASSESSING OFFICER ALSO LISTED OUT PARTIES FROM WHOM MANUFACTURED GOODS WERE PURCHASED AS MENTIONED IN H-FORM. THE TOTAL PU RCHASES FROM SUCH PARTIES WERE AMOUNTING TO RS.18,22,432/-AND IN AGGR EGATE TOTAL PURCHASES 3 WERE AT RS. 1,08,15,014/-. THE CONTENTION OF THE AS SESSEE BEFORE THE ASSESSING OFFICER WAS THAT IT HAD PURCHASED RAW MAT ERIAL SUCH AS TIMBER, HARDWARE, CHEMICALS AND IRON FROM SUCH HANDICRAFT D EALERS. THE ASSESSING OFFICER WAS NOT CONVENIENCE FROM THE EXPLANATION OF THE ASSESSEE AND WAS OF THE VIEW THAT THE ASSESSEE COULD NOT BE CONSIDERED AS PRODUCER OR THE MANUFACTURE FOR THE PURPOSES OF EXEMPTION U/S 10BA OF THE ACT. HE, THEREFORE, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM DE DUCTION U/S 10BA OF THE ACT FOR A SUM OF RS. 39,74,254/-. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND SUBMITTED THAT THE ASSESSEE PURCHASED OLD AND DEFECTIVE WOODEN ITE MS AS WELL AS SKELTON AND HAD GIVEN THE SHAPE BY RECYCLING, ORNAMENTATION OR RESHAPING. IT WAS STATED THAT THE EXEMPTION U/S 10BA OF THE ACT ON TH E SAME ACTIVITY OF THE MANUFACTURING/PRODUCTION HAD BEEN ALLOWED FROM A.Y S. 2004-05 TO 2008-09 AFTER DETAILED EXAMINATION AND SPOT INSPECTION, HOW EVER, IN THE YEAR UNDER CONSIDERATION, IT WAS DENIED. THE OTHER SUBMISSIONS MADE BY THE ASSESSEE AND VARIOUS JUDICIAL PRONOUNCEMENTS RELIED ON, HAD BEEN REPRODUCED BY THE LD. CIT(A) IN PARA 3.2 TO 3.2.2 OF THE IMPUGNED ORD ER. FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY REFERRING TO THE DECISION OF THIS BENCH OF THE T RIBUNAL IN THE CASE OF DCIT VS. MANGLAM ARTS & CRAFTS EXPORTS AND ORS. IN IT.A. NO. 614/JU/2008 FOR THE A.Y. 2005-06 AND THE DECISION OF I.T.A.T. JAIPUR BE NCH IN THE CASE OF 4 GOVERDHAN PRASAD SINGHAL VS. ITO REPORTED IN (2009) 27 DTR (JP)1 ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING IN PARA 3.9 TO 3.11 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 3.9 FURTHER I FIND THAT FOR CARRYING OUT MANUFACT URING PROCESS, THE APPELLANT ENGAGED NUMBER OF LABOURS. THE APPELL ANT HAS ALSO INCURRED VARIOUS EXPENSES FOR PROCESS OF MANUFACTUR ING WOODEN HANDICRAFT WITH ARTISTIC VIEW LIKE WAGE, BONUS, ESI , PF HAVE BEEN INCURRED ABOUT RS. 21 LACS WHICH ALSO RELATES TO SA ID MANUFACTURING ACTIVITY PAID. THE AUTHORITIES LIKE DEPUTY CHIEF IN SPECTOR, FACTORY AND BOILER DEPARTMENT HAD ALSO INSPECTED FACTORY AND FO UND THAT THE LARGE NUMBER OF LABOUR EMPLOYED. ESI AND PF HAVE ALSO BEE N DEDUCTED FOR THE LABOURS. CONSUMPTION AND OTHER SUPPORTING MATER IAL WAS PURCHASED OF RS. 50 LACS. THE ASSESSING OFFICER HAS ALSO EXAMINED THE EXPENSES INCURRED ON THE ABOVE HEADS. HE HAS NO T POINTED/DOUBTED OUT ANY MISTAKE ON ABOVE PURCHASES AND MANUFACTURING EXPENSES IN HIS ASSESSMENT ORDER. THE IMPORTANT FACT IS THAT THE APPELLANT HAS CLAIMED VARIOUS EXPENSES BUT THE ASSESSING OFFICER HAS NOT DOUBTED GENUINENESS NOR GIVING ANY FINDING THAT THE SAME WAS UTILIZED OTHERWISE OR SAME HAVE BEEN SOLD AS IT IS. INFACT, THESE MATERIALS WERE UTILIZED FOR PREPARING THE RAW MATERIAL INTO FINISHED PRODUCTS. THE APPELLANT UNIT IS ESTABLISHE D IN SIZABLE INFRASTRUCTURE FACILITIES SPREADING AND ALSO HAVIN G SUFFICIENT PLANT AND MACHINERY TO CARRY OUT VARIOUS MANUFACTURING ACTIVI TIES. SO ALL THESE FACTS PROVE THAT THE APPELLANT IS ACTIVELY ENGAGED IN THE MANUFACTURING ACTIVITY. IN THIS REGARD, IT IS ALSO NOT OUT OF PLA CE TO MENTION THAT THE ASSESSING OFFICER ONLY DENIED THE CLAIM OF DEDUCTIO N BY HOLDING PURCHASES OF RAW MATERIAL WERE ACTUALLY HANDICRAFTS WHICH THE APPELLANT EXPORTED BESIDES THIS, HE HAS NOT RAISED ANY OBJECTION REGARDING ANY OTHER CONDITIONS GIVEN IN SECTION 10B A FOR TO BE ELIGIBLE FOR DEDUCTION U/S 10BA. 3.10 DURING THE COURSE OF THE APPELLATE PROCEEDIN G, THE APPELLANT HAS POINTED OUT THAT IN THE EARLIER YEARS, THE CLAI M OF THE APPELLANT REGARDING ELIGIBILITY OF DEDUCTION U/S 10BA HAD BEE N ALLOWED AFTER DEEP EXAMINATION IN THE SCRUTINY ASSESSMENT. I FIND THA T IN THE A.Y. 2004-05 5 TO 2008-09 THE APPELLANTS CLAIM HAD BEEN DULY ALLO WED IN THE ASSESSMENT COMPLETED FOR RESPECTIVE YEARS. I FIND T HAT IN THE ASSESSMENT YEAR 2004-05, THE APPELLANT FIRST CLAIME D THE DEDUCTION U/S 10BA WHICH WAS ALLOWED BY THE ASSESSING OFFICER AFT ER CONSIDERING THE ELIGIBILITY CONDITIONS GIVEN IN SECTION 10BA. FURTH ER IN THE SUBSEQUENT FOUR YEARS, THE ASSESSING OFFICER ALSO ALLOWED DEDU CTION U/S 10BA. I FIND THAT THERE IS NO CHANGE IN THE BUSINESS ACTIVI TIES OF THE ASSESSEE AS COMPARED TO THE PAST YEARS. THE ASSESSING OFFICE R ALSO DID NOT POINT OUT ANY INSTANCE OR FACTS WHICH SUGGEST THAT THERE WAS ANY CHANGE IN ACTIVITY OF THE APPELLANT. VARIOUS COURTS HAS DECIDED THAT IF THE CLAIM OF DEDUCTION WAS ALLOWED AFTER DETAILED S CRUTINY AND VERIFICATION, THE SAME CANNOT BE WITHDRAWN UNLESS U NTIL THERE IS CONTRARY DISTINGUISHABLE FACTS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. WESTERN OUTDOOR INTERACTIVE P. LTD. REPORTED IN 349 ITR 309(BOM) HELD THAT WHERE BENEFIT OF DEDUCTION IS AVAILABLE FOR PARTICULAR NUMBER OF YEARS ON SATISFACTION OF CERTA IN CONDITIONS UNDER THE PROVISIONS OF THE INCOME TAX ACT,1961, THEN UNL ESS RELIEF GRANTED FOR THE FIRST ASSESSMENT YEAR IN WHICH THE CLAIM WA S MADE AND ACCEPTED IS WITHDRAWN OR SET ASIDE, THE INCOME-TAX OFFICER CANNOT WITHDRAW THE RELIEF FOR SUBSEQUENTLY YEARS. MORE PA RTICULARLY SO, WHEN THE REVENUE HAS NOT EVEN SUGGESTED THAT THERE WAS A NY CHANGE IN THE FACTS WARRANTING A DIFFERENT VIEW FOR SUBSEQUENT YE ARS. FURTHER IN THE RECENT DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF GRACE EXPORTS VS. ITO REPORTED IN 79 DTR 361, THE Q UESTION NO. 2 WAS BEFORE THE HON'BLE COURT HAVING GRANTED THE BENEFI T TO THE ASSESSEE UNDER SECTION 10B IN THE BASE YEAR, WHETHER IT COUL D BE DENIED TO THE ASSESSEE FOR THE SUBSEQUENT 9 YEARS? AFTER DETAILED DISCUSSION, THE HON'BLE COURT GIVEN FINDING REGARDING QUESTION NO. 2. THAT IF THE BENEFITS HAVE BEEN GRANTED FOR THE ABOVE YEAR 2001- 02 UNDER SECTION 10B OF THE ACT; AND THE BENEFIT IS AVAILABLE FOR A BLOCK OF 10 YEARS, IT CANNOT, ORDINARILY BE WITHDRAWN WHEN THE NATURE OF WORK AND BENEFITS REMAIN THE SAME. IN THE INSTANT CASE, THERE IS NO CHANGE IN THE FACTS AND ACTIVITY NOR ANY CONTRARY FACTS OR ACTIVITY HAV E BEEN BROUGHT BY THE ASSESSING OFFICER TO SUGGEST THAT THERE IS ANY CHAN GE IN FACTS. 3.11 IN VIEW OF THE ABOVE FACTS, DISCUSSION MADE IN THE ABOVE PARA AND SUBMISSION OF THE APPELLANT AND PAST RECOR D AND VARIOUS 6 DECISIONS CITED ABOVE, I HOLD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 10BA. THE ASSESSING OFFICER WAS NOT JUSTIFIED I N REJECTING THE CLAIM OF DEDUCTION/S 10BA TO RS. 39,74,254/-. THE GROUNDS RAISED IN THIS REGARD ARE ALLOWED. 6. THE LD. CIT(A) WHILE DELETING THE ABOVE ADDITION , ALSO OBSERVED IN PARA 4.1 AND 4.2 OF THE IMPUGNED ORDER AS UNDER:- 4.1 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ALSO MENTIONED THAT THE APPELLANT HAS CLAIMED DEDUCTION U/S 10BA OF DEPB AMOUNT OF RS. 12,57,121/- DDB AMOUNT OF RS. 49,12 0/- AND VKUY AMOUNT OF RS. 20,51,871/-. THE ASSESSING OFFICER HA S FURTHER MENTIONED THAT THE DEPB, DDB AND VKUY RECEIPTS DO NOT FORM PA RT OF THE ELIGIBLE PROFIT U/S 10BA IN VIEW OF DISCUSSION MADE IN THE A SSESSMENT ORDER. BUT NO SEPARATE ADDITION WAS MADE ON THIS ACCOUNT BY TH E ASSESSING OFFICER. THE ASSESSING OFFICER CONSIDERED IT IN TOT AL ADDITION OF RS. 39,74,254/-. HOWEVER, I FIND THAT THE ISSUE HAS BEE N DECIDED BY THE HON'BLE I.T.A.T., JODHPUR BENCH. I HAVE GONE THROUG H COMMON ORDER DATED 31/1/2013 OF THE HON'BLE I.T.A.T. JODHPUR BEN CH. THE HON'BLE BENCH, OBSERVED AS UNDER:- WE HAVE COGITATED RIVAL ARGUMENTS VIS A VIS EVIDENC E ON RECORD. WE HAVE EXAMINED THE DECISIONS ON WHICH PARTIES HAV E PLACED THEIR RESPECTIVE RELIANCE. WE HAVE FOUND THAT THE R ATIO OF THE DECISION OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED 225 CTR 233 (HON'BLE SUPREME COURT )IS NOT APPLICABLE TO THE FACTS OF THIS CASE. THE SECTION U NDER INTERPRETATION BEFORE HON'BLE SUPREME COURT WAS 80IA. IN SECTION. 80IA, NO FORMULA FOR COMPUTATION OF PROFIT DERIVED BY THE UN DERTAKING IS LAID DOWN, WHEREAS IN SECTION 10BA AND SECTION 80HHC FOR MULA IS PRESCRIBED FOR THE PURPOSE. THEREFORE, IN OUR CONSI DERED OPINION, SECTION 10BA AND 80HHC ARE MORE NEARER TO EACH OTHE R, AND WHATEVER INTERPRETATION OF DERIVED FROM IS GIVEN IN ANY DECISION IN WHICH SECTION 80HHC IS INVOLVED, WOULD ALSO MUTATIS MUTANDIS TO THE INTERPRETATION OF SECTION 10BA. THE HON'BLE A PEX COURT IN THE CASES OF TOPMAN EXPORTS VS. CIT REPORTED IN 67 DTR 185 (S.C.) AND ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT REPOR TED IN 67 DTR 205 HAS RECENTLY HELD THAT DEPB IS CHARGEABLE AS IN COME AND CASE LAWS. (IIIB) OF SECTION 28 IN THE YEAR IN WHIC H THE ASSESSEE APPLIES FOR DEPB CREDIT AGAINST THE EXPORTS WHERE A S THE PROFIT ON 7 TRANSFER OF DEPB BY THE ASSESSEE IS CHARGEABLE AS I NCOME UNDER CASE LAWS. (IIID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAKES THE TRANSFER. THE MUMBAI BENCH OF HON'BLE INC OME TAX APPELLATE TRIBUNAL IN THE CASE OF ARTS AND CRAFTS E XPORTS VS. INCOME TAX OFFICER REPORTED IN 66 DTR 69 (MUMBAI), AFTER CONSIDERING THE DECISION OF LIBERTY INDIA (SUPRA) H AS TAKEN A CLEAR CUT DECISION IN FAVOUR OF THE ASSESSEE. FURTHER, HON'BLE ITAT BENCH HAS OBSERVED THAT IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE IS E NTITLED TO DEDUCTION U/S 10BA ON DEPB AS IN ACCORDANCE WITH SE CTION 28 OF THE ACT THESE ARE BUSINESS INCOME. 4.2 SINCE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT THAT FACTS OF LIBERTY INDIA IS NOT APPLICABLE WHERE THE ISSUE OF DEPB/DDB/VKUY FROM PART OF THE ELIGIBLE PROFIT DERI VED U/S 10BA. SO RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL ITAT JODHPUR BENCH, I HOLD THAT THE APPELLANT IS ELIGIBL E FOR DEDUCTION ON ACCOUNT OF DEPB/DDB/VKUY, WHICH ARE PART OF THE ELI GIBLE PROFIT DERIVED U/S 10BA. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DI RECTED TO ALLOW THE CLAIM OF THE APPELLANT U/S 10BA. NOW THE DEPARTMENT IS IN APPEAL. 7. THE LEARNED D.R. SUPPORTED THE ORDER OF THE ASS ESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE IS SUE UNDER CONSIDERATION IS SQUARELY COVERED BY VARIOUS DECISIONS OF THIS BENCH OF THE TRIBUNAL INCLUDING THE DECISION IN THE CASE OF THE ASSESSEE, THEREFORE , THE LD. CIT(A) WAS FULLY JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALL OW THE CLAIM OF THE ASSESSEE BY FOLLOWING DECISION OF THIS BENCH OF THE TRIBUNAL . IT WAS FURTHER SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED VIDE COMMON ORD ER DATED 21/02/2013 IN ASSESSEES OWN CASE IN I.T.A. NOS. 24 & 25/JODH/20 11 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 DECIDED ALONGWITH OTHER CASES. 8 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE PRESENT CASE, IT IS NOTICED THAT A SIMILAR ISSUE HAVING IDENTICAL FACTS HAS ALREADY BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE VIDE AFORESA ID REFERRED TO ORDER DATED 21/2/2013 IN I.T.A. NO. 24 & 25/JODH/2011 WHEREIN R ELEVANT FINDINGS HAS BEEN GIVEN AT PAGE NOS. 5 TO 11 IN PARA 4, WHICH READ AS UNDER:- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AS PUT FORT H BY THEIR RESPECTIVE AUTHORIZED REPRESENTATIVES. WE HAV E ALSO GONE THROUGH THE RECORDS OF THE CASES AS WELL AS WRITTEN SUBMISSIONS FILED BY THEM. FOR THE SAKE OF CONVENIENCE, WE WOUL D NARRATE THE FACTS OBTAINING IN THE CROSS APPEALS IN ITA NO. 596 & 628/JU/2007. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE- FIRM DERIVES INCOME FROM MANUFACTURING MAINLY OF WOODEN HANDICRAFT ARTICLES. THE ASSESSEE HAS BEEN TREATED AS ELIGIBL E FOR THE DEDUCTION U/S 80HHC OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFE RRED TO AS 'THE ACT', FOR SHORT] FOR ITS EXPORT PROFIT. THE ASSESSEE CALCULAT ES ITS PROFIT FROM EXPORT BUSINESS PERTAINING TO THE HANDICRAFTS ON THE BASIS OF DIRECT AND INDIRECT COST/EXPENSES, ETC. IN TERMS OF THE PROVISIONS OF S ECTION 80HHC. THE INCOME FROM OTHER SOURCES ARE SEPARATELY CALCULATED AS PER THE ACT. AS WE HAVE CARVED OUT DIFFERENT COMMON ISSUES WHICH WILL BE REPEATED IN OTHER APPEALS, WE WOULD LIKE TO DISCUSS AND DECIDE THEM U NDER DIFFERENT HEADINGS. A. DEDUCTION U/S 10BA ITSELF AND WITH REFERENCE T O DEPB, DDB ETC. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10BA IN RESP ECT OF SUCH PROFITS AND GAINS AS ARE DERIVED FROM THE EXPORT OUT OF IND IA ARE ELIGIBLE ARTICLES FROM ITS TOTAL INCOME THE ASSESSEE HAS ALSO RECEIVED DUTY DRAWBACK, BROKE RAGE, RENT, DEPB CLAIMED, INTEREST, AS INCOME OF THE YEAR. THE A.O. HAS ALLOWED THIS CLAIM OF THE ASSESSEE BY HOLDING THAT IT IS ELIGIBLE FOR DEDUCTION U/S 10BA. BUT HE 9 HAS NOT ALLOWED SOME OF THE INCOME FROM THE PROFIT ELIGIBLE FOR DEDUCTION U/S 10BA ON THE PREMISE THAT THESE ARE NOT THE PART OF THE EXPORT PROFIT. THESE INCOMES ARE AS UNDER: (I) DUTY DRAWBACK [DDB] (II) DEPB RECEIPTS (III) BROKERAGE ON EXPORT SHIPPING FREIGHT (IV) INTEREST NETTING [INTEREST RECEIVED VIS-A-VIS INTEREST PAID APART FROM THE ABOVE, TWO MORE ADDITIONS ONE TRAD ING AND TWO ON ACCOUNT OF DISALLOWANCE OF EXPENSES UNDER THE HEAD PROFIT AND LOSS ACCOUNT HAVE BEEN MADE. THE LD. CIT(A) HAS ALLOWED THE INC OME IN RESPECT OF DDB AND DEPB U/S 10BA OF THE ACT. HE HAS ALSO DELETED T HE TRADING ADDITION. BUT HE HAS NOT ALLOWED THE CLAIM IN RESPECT OF BROK ERAGE AND INTEREST NETTING. THE CASE OF THE ASSESSEE IS THAT THE BROK ERAGE RECEIVED ON EXPORT SHIPPING FREIGHT IS NOTHING BUT A PART OF EXPORT PR OFIT. IN RESPECT OF THE INTEREST-INCOME, IT IS PLEADED THAT THE INTEREST PAID IS MORE THAN THE INTEREST RECEIVED AND, THEREFORE, THE INTEREST RECEIVED CA NNOT BE TREATED AS INCOME OTHER THAN THE EXPORT-PROFIT. IT IS PLEADED THAT IN TEREST RECEIPTS, UNDER IDENTICAL CIRCUMSTANCES, HAVE BEEN ALLOWED BY THE R EVENUE IN ASSESSEES OWN CASE. APART FROM THIS, THE LD. A.R. HAS SOUGH T SUPPORT FROM THE DECISION OF HON'BLE ORISSA HIGH COURT IN THE CASE O F TATA SPONGE IRON LTD. 292 ITR 175 [ORISSA] INTER-ALIA. AGAINST THE RELIE F ALLOWED QUA DDB/DEPB, THE CASE OF THE REVENUE, AS PUT FORTH BY THE LD. CI T(A), IS THAT THESE RECEIPTS BEING NOT A PART OF EXPORT PROFIT, ARE NOT ELIGIBLE FOR DEDUCTION U/S 10BA OF THE ACT. HE HAS FURTHER CITED THE FACTS, LAW AND R ELEVANT PRECEDENTS IN SUPPORT OF A.OS FINDINGS. IN RESPECT OF THIS VERY ISSUE WE HAVE RECENTLY TAKEN A VIEW WHILE DECIDING THE CASE OF M/S SURAJ E XPORTS INDIA VS. ITO IN ITA NO. 336/JODHPUR/2011 FOR A.Y. 2008-09 DECIDED O N 31.01.2013. THE FOLLOWING PARAGRAPHS OF THE ABOVE ORDERS ARE BEING EXTRACTED FOR READY REFERENCE, TO DECIDE THIS ISSUE, AS UNDER: 8. WE HAVE COGITATED RIVAL ARGUMENTS VIS-A-VIS EVI DENCE ON RECORD. WE HAVE EXAMINED THE DECISIONS ON WHICH PARTIES HAVE PLACED THEIR RESPECTIVE RELIANCE. WE HAVE FOUND THAT THE RATIO OF THE DECIS ION OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS. CIT REPOR TED 225 CTR 233 (HON'BLE SUPREME COURT) IS NOT APPLICABLE TO THE FACTS OF TH IS CASE. THE SECTION UNDER INTERPRETATION BEFORE HON'BLE SUMMIT COURT WAS 801 A. IN SEC 80IA, NO FORMULA FOR COMPUTATION OF PROFITS DERIVED BY THE UNDERTAKING IS LAID DOWN, 10 WHEREAS IN SECTION 10BA AND SECTION 80HHC FORMULA IS PRESCRIBED FOR THE PURPOSE. THEREFORE, ; IN OUR CONSIDERED OPINION, SECTION 10BA AND 80HHC A RE MORE NEARER TO EACH OTHER, AND WHATEVER INTERPRETAT ION OF 'DERIVED FROM' IS GIVEN IN ANY DECISION IN WHICH SECTION 80HHC IS INV OLVED, WOULD ALSO MUTATIS- MUTANDIS TO THE INTERPRETATION OF SECTION 10BA. THE HON'BLE APEX COURT IN THE CASES OF TOPMAN EXPORTS VS. CIT REPORTED IN 67 DTR 185 (S.C.) AND ACG ASSOCIATED CAPSULES PVT. LTD. VS. CIT REPORTED IN 6 7 DTR 205 HAS RECENTLY HELD THAT DEPB IS CHARGEABLE AS INCOME AND CL. (IIIB) OF SECTION 28 IN THE YEAR IN WHICH THE ASSESSEE APPLIES FOR DEPB CREDIT AGAINST THE EXPORTS WHEREAS THE PROFIT ON TRANSFER OF DEPB BY THE ASSESSEE IS CHARGEABLE A S INCOME UNDER CL. (IIID) OF SECTION 28 IN HIS HANDS IN THE YEAR IN WHICH HE MAK ES THE TRANSFER. THE MUMBAI BENCH OF HON'BLE INCOME TAX APPELLATE TRIBUNAL IN T HE CASE ARTS AND CRAFTS EXPORTS VS INCOME-TAX OFFICER REPORTED IN 66 DTR 69 (MUMBAI), AFTER CONSIDERING THE DECISION OF LIBERTY INDIA (SUPRA) HAS TAKEN A C LEAR CUT DECISION IN FAVOUR OF THE ASSESSEE. THE HELD PORTION OF THE MUMBAI BENCH IS AS UNDER: 'PARA-11.14-AS REGARDS DEDUCTION U/S 10 BA IN RESPE CT OF DEPB, WE FIND THAT SUB-SECTION (4) OF SECTION 1OB A DEFIN ES PROFITS DERIVED FROM ELIGIBLE ARTICLES. SECTION 28 (IIIC), (IIID) AND (IIIE) PROV IDES THAT THESE INCOME ARE PROFITS AND GAINS OF BUSINESS. THE SAID SUB-SECTION (4) OF SECTION 1O B A IS REPRODUCED BELOW: FOR THE PURPOSES OF SUB-SECTION (1), THE PROFITS DE RIVED FROM EXPORT OUT OF INDIA OF THE ELIGIBLE ARTICLES OR THINGS SHALL BE T HE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAM E PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS BEAR S TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. THE RELEVANT PART OF SECTION 28 READS AS UNDER: 28. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INC OME-TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. (IIIC) ANY DUTY OF CUSTOMS OR EXCISE RE-PAID OR RE- PAYABLE AS DRAWBACK TO ANY PERSON AGAINST EXPORTS UNDER THE CUSTOMS AND CE NTRAL EXCISE DUTIES DRAWBACK RULES, 1971; (IIID) ANY PROFIT ON THE TRANSFER OF THE DUTY ENTIT LEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME UNDER THE EXPORT AN D IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOR EIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992); 11 (IIIE) ANY PROFIT ON THE TRANSFER OF THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME UNDER THE EXPORT AN D IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992); IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10BA ON DEPB AS IN ACCORDANCE WITH SE CTION 28 OF THE ACT THESE ARE BUSINESS INCOME. 10. THIS DECISION HAS BEEN APPROVED BY HON'BLE BOMB AY HIGH COURT AND THE DECISION IS REPORTED IN 66 DTR 85 (BOMBAY) I.T.A.T. INDORE SPECIAL BENCH IN THE CASE OF M/S. MARAL OVERSEAS LIMITED VS ACIT REPORTED IN 136 ITD 177 HAS HELD THIS ISSUE IN FAVOUR OF THE ASSESSEE. SIMILARLY, THE AHMEDABAD BE NCH IN THE CASE OF KADEN EXPORTS (SUPRA), HAS TAKEN A SIMILAR VIEW OF THE MATTER. TH E HELD PORTION OF BOTH THESE DECISIONS HAVE BEEN EXTRACTED IN THE EARLIER PORTIO N OF THIS ORDER. THE WRITTEN SUBMISSION OF ID. CIT (DR), HAVE BEEN CAREFULLY CON SIDERED. ALL THE RELEVANT DECISIONS AND THE LINE OF ARGUMENTS TAKEN BY HIM, HAVE BEEN C ONSIDERED AND DECIDED IN THE CASES REFERRED TO AS ABOVE. THEREFORE, WE DON'T FIN D ANY MERIT WORTH DISSUADING BY US, FROM THE CONSIDERED AND SETTLED VIEW TAKEN BY THE H ON'BLE APEX COURT AND VARIOUS HIGH COURTS AND THE TRIBUNAL. ALL THE ARGUMENTS RAI SED BY LD. CIT(DR) STAND EXPLAINED IN OUR ABOVE FINDING. 11. WE HAVE NOTICED THAT SECTION 10BA(4) TAKES ITS SHAPE AND FORM FROM ERSTWHILE SECTION 10B(4) WHICH WAS AMENDED VID E THE FINANCE ACT, 2001 W.E.F. 01.04.2001. PRIOR TO 01.04.2001, THIS S ECTION 10B(4) READ AS UNDER :- 10B(4) FOR THE PURPOSE OF S.S. (1), PROFITS DER IVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE TH E AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE . CLARIFICATIONS ON NOTES OF CLAUSES OF THE FINANCE ACT, 2001 CLARIFIES THE PURPOSE OF THIS AMENDMENT THAT UNDER THE EXISTING PROVISION CONTAI NED IN S.S. (4), THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFIT OF TH E BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE ASSESSEE. SUB CLAUSE (B) SEEKS TO CLARIFY TH AT SUCH PROPORTIONS SHALL BE CALCULATED WITH REFERENCE TO THE PROFITS A ND GAINS OF THE BUSINESS OF THE UNDERTAKING AND NOT FROM ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE. THUS PRIOR TO AMENDMENT THE PROFIT S DERIVED FROM EXPORT OF ARTICLES WAS MEANT THE AMOUNT WHICH BORE TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES BEAR TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE 12 ASSESSEE, WHEREAS, AFTER THE AMENDMENT, THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THING MEANS THE AMOUNT WHICH BEARS TO THE PROFITS AND GAINS OF THE BUSINESS OF THE UNDERTAKING AND NO T FROM ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE. SO, BY THIS AM ENDMENT ONLY THE PROFITS OF THE BUSINESS OF THE UNDERTAKING ONLY IS TO BE CONSIDERED FOR WORKING OUT THE PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM EXPORT OUT OF INDIA OF ELIGIBLE ARTICLES OR THINGS. THE PROFITS AND THE GAINS OF THE BUSINESS OF THE UNDERTAKING IS TO BE W ORKED OUT AS PER THE PROVISIONS OF SECTION 28(I). THIS DOES NOT INCLUDE THE PROFITS OF ITEMS DOES NOT INCLUDE THE PROFITS OF ITEMS UNDER S.S. (I IIA), (IIIB), (IIIC), (IIID) AND (IIIE) ETC. DUTY DRAW BACK AND ANY PROFIT ON TR ANSFER OF DEPB. SECTION 28 ITSELF MAKES IT ABUNDANTLY CLEAR THAT TH E PROFIT ON ACCOUNT OF DUTY DRAW BACK OR ON TRANSFER OF DEPB WILL NOT FORM PART OF PROFIT AND GAINS OF THE BUSINESS OR PROFESSION WHICH WAS CARRI ED ON BY THE ASSESSEE AS DISCUSSED ABOVE. THE PLAIN READING OF S ECTION 10BA WHICH DEALS WITH EXPORT OF CERTAIN ARTICLES OR THINGS WIL L MAKE IT CLEAR THAT SUCH PROFITS AS ARE DERIVED FROM THE EXPORT OUT O F INDIA SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. SUB SECTION (1) OF SECTION 10BA IS SUBJECT TO THE PROVISIONS OF S.SS. 2, 3, 5, 6 AND 7 BUT S.S. 4 LAYS DOWN A METHOD OF COMPUTATION FOR THE PU RPOSE OF SUB SECTION (1). LIKEWISE, THE SALE PROCEEDS OF DEPB CANNOT BE CONSIDERED AS PART OF TURNOVER AS IT IS NOT THE SALE PROCEEDS OF THE A RTICLES OR THINGS MANUFACTURED AND SOLD BY THE ASSESSEE, THEN THE PRO FITS FROM SALE OF DEPB CANNOT APPORTIONED ON TREATED ON PROFIT DERIVE D BY THE UNDERTAKING FROM EXPORT OUT OF INDIA. THE EXEMPTION PROVISIONS IN 10BA HAVE TO BE LIBERALLY INTERPRETED UNLESS THE CREDIT OF DEPB AND DDB IS EXPRESSLY TAKEN AWAY. 12. ACCORDINGLY, WE ARE LEFT WITH NO OPTION BUT TO DECIDE THE IMPUGNED COMMON ISSUE, IN FAVOUR OF THE APPELLANT/ASSESSEE. AS A RESULT, WE HOLD THAT THE MANUFACTURING ACTIVITIES OF THE ASSESSEE ARE ELIGIB LE FOR DEDUCTION PROVIDED U/S 10BA OF THE ACT. THEREFORE, BY RESPECTFULLY, FOLLOWING THE ABOVE FIN DING, WE DECIDE THE ISSUE OF ALLOWABILITY OF DDB/DEPB RECEIPTS AGAINST EXPORT PROFIT U/S 10BA OF THE ACT; IN FAVOUR OF THE ASSESSEE AND CONFIRM THE FIND ING OF LD. CIT(A). THIS FINDING WILL APPLY TO OTHER APPEALS IN A SIMILAR MA NNER. RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE ALLOW THIS CLAIM U/S 10BA OF THE ACT. 13 SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION A RE SIMILAR TO THE FACTS INVOLVED FOR THE A.YS 2007-08 AND 2008-09. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 21/2/2013 IN ASSESSEES OWN, WE DO NOT SEE ANY MERIT IN THESE GROUNDS OF THE ASSESSEE S APPEAL. 9. THE NEXT ISSUE VIDE GROUND NO. 15 RELATES TO DEL ETION OF ADDITION OF RS. 2,50,000/- OUT OF THE VARIOUS EXPENSES MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PERSONAL USE. 10. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT T HE ASSESSING OFFICER MADE THE IMPUGNED ADDITION BY OBSERVING IN PARA 2 OF THE ASSESSMENT ORDER DATED 20/12/2011 AS UNDER:- 2. ON GOING THROUGH THE EXPENSES OF PROFIT & LOSS A/C, IT HAS REVEALED THAT THE ASSESSEE HAS CLAIMED VARIOUS EXPE NSES LIKE TRAVELING EXPENSES I.E RS. 3,26,427/-,TELEPHONE EXPENSES I.E. RS. 1,10,740/-, PETROL EXPENSES I.E. RS. 1,57,815/-,.VEHICLE INSURANCE I.E . RS. 80,186/-, DEPRECIATION EXPENSES I.E. RS. 4,99,611/- TO THE TUNE OF RS. 11, 74,779/- IN WHICH INVOLVEMENT OF PERSONAL ELEMENT IN SUCH EXPENSES CA NNOT BE RULED OUT UNDER THE GIVEN CIRCUMSTANCES. ACCORDINGLY KEEPING IN VIE W THE INVOLVEMENT OF PERSONAL NATURE OF EXPENSES AND NON MAINTENANCE OF PROPER COMPLETE VOUCHERS, A LUMP SUM ADDITION OF RS. 2,50,000/- IS MADE ON ACCOUNT OF EXPENSED DEBITED IN PROFIT AND LOSS A/C AND ARE ADD ED BACK IN THE TOTAL INCOME OF THE ASSESSEE. 11. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A), WHO DELETED THE ADDITION BY OBSERVING IN PARA 5.1 OF TH E IMPUGNED ORDER AS UNDER:- 5.1. THE ASSESSING OFFICER MENTIONED THAT ON VERIFICATIO N OF THE P&L ACCOUNT, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIM ED VARIOUS EXPENSES LIKE TRAVELING EXPENSES OF RS. 3,26,427/-, TELEPHONE EX PENSES OF RS. 1,10,740/-, 14 PETROL EXPENSES OF RS. 1,57,815/-,VEHICLE INSURANC E RS. 80,186/-, DEPRECIATION RS. 4,99,611/-. THE ASSESSING OFFICER FURTHER MENTIONED THAT THE PERSONAL ELEMENT IN SUCH EXPENSES CANNOT BE RULED O UT. HE ACCORDINGLY MADE THE LUMP SUM ADDITION OF RS. 2,50,000/-. I FIND THA T ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR DISALLOWANCE. AS AGAINST THIS, THE APPELLANT HAS STATED THAT ALL THE ABOVE EXPENSES ARE RELATE TO WHOLLY AND EXC LUSIVELY FOR THE BUSINESS PURPOSE. THE DISALLOWANCE IS CANNOT BE SUSTAINED BE ING TOTALLY BASED ON PRESUMPTION. THE ADDITION OF RS. 2,50,000/- IS DELE TED. THE GROUND IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY INSTANCE WHERE THE EXPENSES IN QUESTION WERE INCURRED BY THE ASSESSEE FOR NON-BUSINESS PURPOSES. IT, THEREFORE, APPEARS THAT THE IMPUGNED ADDITION WAS MADE WITHOUT ANY BASIS, SO THE LD. CIT(A) RIGHTLY DELETED THE SA ME. WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE. 13. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. (ORDER PRONOUNCED IN THE COURT ON 10.12.2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10.12.2013 RANJAN* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASS ISTANT REGISTRAR, ITAT, JODHPUR.