M/s Calico Trends, Kanpur V. Joint Commissioner of Income Tax-I, Kanpur

ITA 584/LKW/2013

• Counselvise Citation: 58423714 RSA 2013
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-11-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 23-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Cost of acquisition
• Section: 80IB; 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.584 /LKW/201 3 A.Y.: 2010 - 11 M/S CALICO TRENDS, 60A, 150FEET ROAD, JAJMAU, KANPUR. PAN:AABFC1787H VS. JT.C.I.T. - 1, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI ALOK MITRA, D.R. DATE OF HEARING 11/11/2013 DATE OF PRONOUNCEMENT 2 3 /12/2013 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT ( A) - II, KANPUR DATED 20 TH MAY, 20013 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE AO IN NOT ALLOWING THE DEDUCTION OF RS.1,55,61,011 / - U/S.80IB OF THE INCOME TAX ACT 1961 CLAIMED BY THE ASSESSEE. 2. BECAUSE THE ORDER OF THE CIT(A) CONFIRMING, THE ORDER OF AO IN RESPECT OF DISALLOWING, DEDUCTION OF RS .1,55,61,011/ - U/S 80 I B IS CONTRARY TO FACTS, BAD IN LAW AND BE VACATED. 3. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN THE ORDER OF AO HOLDING THAT THE AMOUNT OF RS.16,09,220 / - BEING SALE PROCEEDS OF LICENCE AND RS.5,94,52,823 / - BEING [ 2 ] DULY DRAW BACK ARE NOT PART OF INDUSTRIAL ACTIVITY AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S.80 I B OF THE ACT. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT ADMITTEDLY THE ISSUE REGARDING ALLOWABILITY OF DEDUCTION U/S80IB IN RESPECT OF EXPORT INCENTIVE SUCH AS D UTY DRAW BACK AND DEPB IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS COMMISSIONER OF INCOME - TAX [2009] 317 ITR 218 (SC) BUT AS PER THE TRIBUNAL DECISION RENDERED IN THE CASE OF ARVIN D FOOTWEAR PVT. LTD. VS. DCIT IN I.T.A. NO.363/LUCK/2010 AND 435 TO 437/LUCK/2011 DATED 27/08/2013, THE ISSUE WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION WITH SOME DIRECTIONS EVEN AFTER CONSIDERING TH IS JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) AND HENCE, HE SUBMITTED THAT THE ISSUE MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION WITH SAME DIRECTION AS GIVEN BY THE TRIBUNAL IN THE CASE OF ARVIND FOOTWEAR PVT. LT D. (SUPRA). 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDER ED IN THE CASE OF LIBERTY INDIA (SUPRA) AND THE SAME WAS WRONGLY DISTINGUISHED BY THE TRIBUNAL IN THE CASE OF ARVIND FOOTWEAR PVT. LTD. (SUPRA) AND THEREFORE, SUCH A DECISION OF THE TRIBUNAL CANNOT BE CONSIDERED AS A BINDING PRECEDENCE. 5. WE HAVE CONSID ERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENT S CITED BY BOTH THE SIDES. FIRST WE CONSIDER THE RATIO DECIDENDI OF THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA). FOR THIS PURPOSE, WE REPRODUCE THE DISCUSSIONS AND FINDINGS OF HON'BLE APEX COURT AS CONTAINED IN PARA 12 TO 24 [ 3 ] OF TH IS JUDGMENT AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRODUCED BELOW: 12. IN THIS BATCH OF CIVIL APPEALS WE ARE CONCERNED WITH ADMISSIBILITY OF THE AMOUNTS OF DUTY DRAWBACK AND DEPB FOR DEDUCTION UNDER SECTION 80 - IB. 13. BEFORE ANALYSING SECTION 80 - IB, AS A PREFATORY NOTE, IT NEEDS TO BE MENTIONED THAT THE 1961 ACT BROADLY PRO VIDES FOR TWO TYPES OF TAX INCENTIVES, NAMELY, INVESTMENT - LINKED INCENTIVES AND PROFIT - LINKED INCENTIVES CHAPTER VI - A WHICH PROVIDES FOR INCENTIVES IN THE FORM OF TAX DEDUCTIONS ESSENTIALLY BELONG TO THE CATEGORY OF PROFIT LINKED INCENTIVES. THEREFORE, W HEN SECTION 80 - IA/80 - IB REFERS TO PROFITS DERIVED FROM ELIGIBLE BUSINESS, IT IS NOT THE OWNERSHIP OF THAT BUSINESS WHICH ATTRACTS THE INCENTIVES. WHAT ATTRACTS THE INCENTIVES UNDER SECTION 80 - IA/80 - IB IS THE GENERATION OF PROFITS (OPERATIONAL PROFITS). FO R EXAMPLE, AN ASSESSEE - COMPANY LOCATED IN MUMBAI MAY HAVE A BUSINESS OF BUILDING HOUSING PROJECTS OR A SHIP IN NAVA SHEVA. OWNERSHIP OF A SHIP PER SE WILL NOT ATTRACT SECTION 80 - IB(6). IT IS THE PROFITS ARISING FROM THE BUSINESS OF A SHIP WHICH ATTRACTS SUB - SECTION (6). IN OTHER WORDS, DEDUCTION UNDER SUB - SECTION (6) AT THE SPECIFIED RATE HAS LINKAGE TO THE PROFITS DERIVED FROM THE SHIPPING OPERATIONS. THIS IS WHAT WE MEAN IN DRAWING THE DISTINCTION BETWEEN PROFIT - LINKED TAX INCENTIVES AND INVESTMENT - LIN KED TAX INCENTIVES. IT IS FOR THIS REASON THAT PARLIAMENT HAS CONFINED THE DEDUCTION TO PROFITS DERIVED FROM ELIGIBLE BUSINESSES MENTIONED IN SUB - SECTIONS (3) TO (11A) (AS THEY STOOD AT THE RELEVANT TIME). ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. EACH OF THE ELIGIBLE BUSINESS IN SUB - SECTIONS (3) TO (11A) CONSTITUTES A STAND - ALONE ITEM IN THE MATTER OF COMPUTATION OF PROFITS. THAT IS THE REASON WHY THE CONCEPT OF SEGMENT REPORTING STANDS INTRODUCED IN THE INDIAN ACCOUNTING STANDARDS (IAS) BY THE INST ITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). 14. ANALYSING CHAPTER VI - A, WE FIND THAT SECTION 80 - IB/80 - IA ARE A CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTANTIVE AS WELL AS PROCEDURAL PROVISIONS. THEREFORE, WE NEED TO EXAMINE WHAT THESE PROVISIONS PRESCRIBE FOR COMPUTATION OF PROFITS OF THE ELIGIBLE BUSINESS . IT IS EVIDENT THAT SECTION 80 - IB PROVIDES FOR ALLOWING OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS. THE WORDS DERIVED FROM ARE N ARROWER IN CONNOTA TION AS COMPARED TO THE WORDS ATTRIBUTABLE TO . IN OTHER WORDS, BY USING THE EXPRESSION DERIVED FROM , PARLIAMENT INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. IN THE PRESENT BATCH OF CASES, THE CONTROVERSY WHICH ARISES FOR DETERMINATION I S : WHETHER THE DEPB CREDIT/DUTY DRAWBACK RECEIPT COMES WITHIN THE FIRST DEGREE SOURCES ? ACCORDING TO THE ASSESSEE(S), DEPB CREDIT/DUTY DRAWBACK RECEIPT [ 4 ] REDUCES THE VALUE OF PURCHASES (COST NEUTRALIZATION), HENCE, IT COMES WITHIN FIRST DEGREE SOURCE AS IT INCREASES THE NET PROFIT PROPORTIONATELY. ON THE OTHER HAND, ACCORDING TO THE DEPARTMENT, DEPB CREDIT/DUTY DRAWBACK RECEIPTS DO NOT COME WITHIN FIRST DEGREE SOURCE AS THE SAID INCENTIVES FLOW FROM THE INCENTIVE SCHEMES ENACTED BY THE GOVERNMENT OF INDI A OR FROM SECTION 75 OF THE CUSTOMS ACT, 1962. HENCE, ACCORDING TO THE DEPARTMENT, IN THE PRESENT CASES, THE FIRST DEGREE SOURCE IS THE INCENTIVE SCHEME/PROVISIONS OF THE CUSTOMS ACT. IN THIS CONNECTION , THE DEPARTMENT PLACES HEAVY RELIANCE ON THE JUDGM ENT OF THIS COURT IN STERLING FOODS [1999] 237 ITR 579. THEREFORE, IN THE PRESENT C ASES , IN WHICH WE ARE REQUIRED TO EXAMINE THE ELIGIBLE BUSINESS OF AN INDUSTRIAL UNDERTAKING, WE NEED TO TRACE THE SOURCE OF THE PROFITS TO MANUFACTURE. (SEE CIT V. KIRLOSKAR OIL ENGINES LTD. REPORTED IN [1986] 157 ITR 762.) 15. CONTINUING OUR ANALYSIS O F SECTION 80 - IA/80 - IB IT MAY BE MENTIONED THAT SUB - SECTION (13) OF SECTION 80 - IB PROVIDES FOR APPLICABILITY OF THE PROVISIONS OF SUB - SECTION (5) AND SUB - SECTIONS (7) TO (12) OF SECTION 80 - IA, SO FAR AS MAY BE, APPLICABLE TO THE ELIGIBLE BUSINESS UNDER S ECTION 80 - IB. THEREFORE, AT THE OUTSET, WE STATED THAT ONE NEEDS TO READ SECTIONS 80 - I, 80 - IA AND 80 - IB AS HAVING A COMMON SCHEME. ON A PER USAL OF SUB - SECTION (5) OF SEC TION 80 - IA, IT IS NOTICED THAT IT PROVIDES FOR THE MANNER OF COMPUTATION OF PROFITS OF AN ELIGIBLE BUSINESS. ACCORDINGLY, SUCH PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THEREFORE, THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFITS OF ELIGIBLE BUSINESS HAVE GOT TO BE REJECTED IN VIEW OF THE OVERRIDING PROVISIONS OF SUB - SECTION (5) OF SECTION 80 - IA, WHICH ARE ALSO REQUIRED TO BE READ INTO SECTION 80 - IB. (SEE SECTION 80 - IB(13)). WE MAY REITERATE THAT SECTIONS 80 - I, 80 - IA AND 80 - IB HAVE A COMMON SCHEME AND IF SO READ IT IS CLEAR TH AT THE SAID SECTIONS PROVIDE FOR INCENTIVES IN THE FORM OF DEDUCTION(S) WHICH ARE LINKED TO PROFITS AND NOT TO INVESTMENT. ON AN ANALYSIS OF SECTIONS 80 - IA AND 80 - IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING, WHICH BECOMES ELIGIBLE ON SATISFYING SUB - SECTION (2), WOULD BE ENTI TLED TO DEDUCTION UNDER SUB - SEC TION (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDER - TAKING AFTER SPECIFIED DATE(S). HENCE, APART FROM ELIGIBILITY, SUB - SECTION (1) PURPORTS TO RESTRICT THE QUANTUM OF DEDUC TION TO A SPECIFIED PERCENTAGE OF PROFITS. THIS IS THE IMPORTANCE OF THE WORDS DERIVED FROM INDUSTRIAL UNDER TAKING AS AGAINST PROFITS ATTRIBUTABLE TO INDUSTRIAL UND ERTAKING 16. DEPB IS AN INCENTIVE. IT IS GIVEN UNDER THE 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 CONTENT OF EXPORT PRODUCT. THIS NEUTRALIZATION IS PROVIDED FOR BY CREDIT TO CUSTOMS DUTY AGAINST EXPORT PRODUCT. UNDER [ 5 ] DEPB, AN EXPORTER MAY APPLY FOR CREDIT AS A PERCENTAGE OF THE FOB VALUE OF EXPORTS MADE IN FREELY CON VERTIBLE CURRENCY. CREDIT IS AVAILABLE ONLY AGAINST THE EXPORT PRODUCT AND AT RATES SPECIFIED BY THE DGFT FOR IMPORT OF RAW MATERIALS, COM PONENTS, ETC.,DEPB CREDIT UNDER THE SCHEME HAS TO BE CALCULATED BY TAKING INTO ACCOUNT THE DEEMED IMPORT CONTENT OF THE EXPORT PRODUCT AS PER BASIC CUSTOMS DUTY AND SPECIAL ADDITIONAL DUTY PAYABLE ON SUCH DEEMED IMPORTS. THEREFORE, IN OUR VIEW, DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOMS ACT, 1962, HENCE, INCENTIVES PROFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS UNDER SECTION 80 - IB. THEY BELONG TO THE CATEGORY O F ANCILLARY P ROFITS OF SUCH UNDERTAKINGS. 17. THE NEXT QUESTION IS WHAT IS DUTY DR AWBACK ? SECTION 75 OF THE CUS TOMS ACT, 1962, AND SECTION 37 OF THE CENTRAL EXCISE ACT, 1944, EMPOWER THE GOVERNMENT OF INDIA TO PROVIDE FOR REPAYMENT OF CUSTOMS DUTY AND EXCISE DUTY PAID BY AN ASSESSEE. THE REFUND IS OF THE AVERAGE AMOUNT OF DUTY PAID ON MATERIALS OF ANY PARTICULAR CLASS OR DESCRIPTION OF GOODS USED IN THE MANUFACTURE OF EXPORT GOODS OF SPECIFIED CLASS. THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN I NDIVIDUAL IMPORTER - CUM - MANUFAC TURER. SUB - SECTION (2) OF SECTION 75 OF THE CUSTOMS ACT REQUIRES THE AMOUNT OF DRAWBACK TO BE DETERMINED ON A CONSIDERATION OF ALL THE CIRCUMSTAN CES PREVALENT IN A PARTICULAR TRADE AND ALSO BASED ON THE FACTS SITUATION RELEVANT IN RESPECT OF EACH OF VARIOUS CLASSES OF GOODS IMPORTED. BASICALLY, THE SOURCE OF THE DUTY DRAWBACK RECEIPT LIES IN SECTION 75 OF THE CUSTOMS ACT AND SEC TION 37 OF THE CENTR AL EXCISE ACT. 18. ANALYSING THE CONCEPT OF REMISSION OF DUTY DRAWBACK AND DEPB, WE ARE SATISFIED THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/SCHEME(S) FRAMED BY THE GOVERNMENT OF INDIA. IN THE CIRCUMSTANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION 80 - IB. 19. SINCE RELIANCE WAS PLACED ON BEHALF OF THE ASSESSEE(S) ON AS - 2 WE NEED TO ANALYSE THE SAID STANDARD. 20. AS - 2 DEALS WITH VALUATION OF INVENTORIES. INVENTORIES ARE ASSETS HELD FOR SALE IN THE COURSE OF BUSINESS ; IN THE PRODUCTION FOR SUCH SALE OR IN THE FORM OF MATERIALS OR SUPPLIES TO BE CONSUMED IN THE PRODUCTION. 21. INVENTORY SHOULD BE VALUED AT THE L OWER OF COST AND NET REALIZABLE VALUE (NRV). THE COST OF INVENTORY SHOULD COMPRISE ALL COSTS OF PURCHASE, COSTS OF CONVERSION AND OTHER COSTS INCLUDING COSTS [ 6 ] INCURRED IN BRINGING THE INVENTORY TO THEIR PRESENT LOCATION AND CONDITION. 22. THE COS T OF PURCHASE INCLUDES DUTIES A ND TAXES (OTHER THAN THOSE SUB SEQUENTLY RECOVERABLE BY THE ENTERPRISE FROM TH E TAXING AUTHORITIES), FREIGHT INWARDS AND OTHER EXPENDITURE DIRECTLY ATTRIBUTABLE TO THE ACQUISITION. HENCE, TRADE DISCOUNTS, REBATE, DUTY DRAWBACK , AND SUCH SIMILAR ITEMS ARE DEDUCTED IN DETERMINING THE COSTS OF PURCHASE. THEREFORE, DUTY DRAWBACK, REBATE, ETC., SHOULD NOT BE TREATED AS ADJUSTMENT (CREDITED) TO THE COST OF PURCHASE OR MANUFACTURE OF GOODS. THEY SHOULD BE TREATED AS SEPARATE ITEMS OF REVENUE OR INCOME AND ACCOUNTED FOR ACCORDINGLY (SEE PAGE 44 OF THE INDIAN ACCOUNTING STANDARDS AND GAAP BY DOLPHY DSOUZA). THERE FORE, FOR THE PURPOSES OF AS - 2, CENVAT CREDITS SHOULD NOT BE INCLUDED IN THE COST OF PURCHASE OF INVENTORIES. EVEN TH E INSTIT UTE OF CHARTERED ACCOUN TANTS OF INDIA (ICAI) HAS ISSUED GUIDANCE NOTE ON ACCOUNTING TREATMENT FOR CENVAT/MODVAT UNDER WHICH THE INPUTS CONSUMED AND THE INVENTORY OF INPUTS SHOULD BE VALUED ON THE BASIS OF PURCHASE COST NET OF SPECIFIED DUTY ON INPUTS (I.E. , DUTY RECOVERABLE FROM THE DEPARTMENT AT A LATER STAGE) ARISING ON ACCOUNT OF REBATES, DUTY DRAWBACK, DEPB BENEFIT, ETC. PROFIT GENERATION COULD BE ON ACCOUNT OF COST CUTT ING, COST RATIONALIZATION, BUSI NESS RESTRUCTURING, TAX PLANNING ON SUNDRY BALANCES B EING WRITTEN BACK, LIQUIDATION OF CURRENT ASSETS, ETC. THEREFORE, WE ARE OF THE VIEW THAT THE DUTY DRAWBACK, DEPB BENEFITS, REBATES, ETC., CANNOT BE CREDITED AGAINST THE COST OF MANUFACTURE OF GOODS DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR PUR POSES OF SE CTION 80 - IA/80 - IB AS SUCH REMISSIONS (CREDITS) WOULD CONSTITUTE INDEPENDENT SOURCE OF INCOME BEYOND THE FIRST DEGREE NEXUS BETWEEN PRO FITS AND THE INDUSTRIAL UNDERTAKING. 23. WE ARE OF THE VIEW THAT THE DEPARTMENT HAS CORRECTLY APPLIED AS - 2 AS COULD BE SE EN FROM THE FOLLOWING ILLUSTRATION : NOTE : IN THE ABOVE EXAMPLE, THE DEPARTMENT IS ALLOWING DEDUCTION ON PROFIT OF RS.100 UNDER SECTION 80 - IB OF THE 1961 ACT. EXPENDITURE AMOUNT (RS.) INCOME AMOUNT (RS.) OPENING STOCK 100 SALES 1,000 PURCHASES (INCLUDING CUSTOMS DUTY PAID) 500 DUTY DRAWBACK RECEIVED 100 MANUFACTURING OVERHEADS 300 CLOSING STOCK 200 ADMINISTRATIVE, SELLING AND DISTRIBUTION EXP. 200 NET PROFIT 200 1,300 1,300 [ 7 ] 24. IN THE CIRCUMSTANCES, WE HOLD THAT DUTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTION 80 - I/80 - IA/80 - IB OF THE 1961 ACT. 5.1 IN THE CASE OF ARVIND FOOTWEAR PVT. LTD. (SUPRA), THE TRIBUNAL HAS NO DOUBT CONSIDERED TH IS JUDGMENT OF HON'BLE APEX COURT. WHILE WORKING OUT THE RATIO DECIDENDI OF THE JUDGMENT OF HON'BLE APEX COURT, WE FIND THAT THE SAME IS CONTAINED IN PARA 17 AND 18 OF THIS JUDGMENT. IN PARA 17 IT IS OBSERVED BY THE HONBLE APEX COURT THAT THE RULES DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER - CUM - MANUFACTURER . THEREAFTER, IN PARA 18 IT IS DECIDED THAT ANALYSING THE CONCEPT OF REMISSION OF DUTY DRAWBACK AND DEPB, WE ARE SATISFIED THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STATUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/SCHEME(S) FRAMED BY THE GOVERNMENT OF INDIA. IN THE CIRCUMSTANCES, WE HOLD THAT PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION 80 - IB . THEREAFTER IN PARA 19 TO 24, HONBLE APEX COURT HAS DEALT WITH ANOTHER OBJECTION RAISED BY THE COUNSEL OF THE ASSESSEE ALTHOUGH FOR THE SAME ISSUE THAT AS 2 SHOULD BE CONSI DERED AND EVEN AFTER THAT, THE DECISION REMAINED THE SAME. HENCE, IT IS SEEN THAT THE RATIO OF THE JUDGMENT IS IN PARAS 17 & 18 WHICH IS FURTHER SUPPORTED BY PARA 19 TO 24. IT IS A SETTLED LAW THAT EVEN OBITER DICTA IN THE JUDGMENT OF HONBLE APEX COURT IS BINDING. 5.2 FOR THIS, WE FIND SUPPORT FROM THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (A) JAIN BROTHERS VS UNION OF INDIA [1970] 77 ITR 107 (SC) (B) DY. CIT VS. ASHWIN C. SHAH [2002] 82 ITD 573 (MUM) (C) SHREE B HARAKHA SYNTHETICS LTD. VS. ACIT [2002] 83 ITD 714 (JD) [ 8 ] HENCE, THE RATIO LAID DOWN IN PARA 17 & 1 8 CANNOT BE OVERLOOKED. IT IS ALSO WORTH MENTIONING THAT IF AS PER JUDGMENT OF HON'BLE A PE X COURT , AN ISSUE IS DECIDED AGAINST THE ASSESSEE ON SEVERAL ASPEC TS , THEN TO TAKE A DIFFERENT VIEW, IT IS NECESSARY TO COME OUT ON ALL THE ASPECTS AND EVEN IF ON ONE OR MORE ASPECTS , THIS JUDGMENT IS NOT APPLICABLE IN A PARTICULAR CASE, EVEN TH EN THE ULTIMATE DECISION CANNOT BE DIFFERENT FROM HON'BLE SUPREME COURT DECISION UNLESS IT IS FOUND THAT ON ALL ASPECTS, THE JUDGMENT IS NOT APPLICABLE. MEANING THEREBY THAT IF EVEN ON ONE ASPECT , THE ASSESSEE COULD NOT COME OUT OF SUCH SUPREME COURT DECIS ION , THE ULTIMATE DECISION OF HONBLE APEX COURT WILL HOLD GOOD. THIS WE CAN UNDERSTAND FROM THIS VERY JUDGMENT OF HONBLE APEX COURT RENDERED IN LIBERTY INDIA (SUPRA). IN THIS JUDGMENT, THE FIRST ASPECT ON WHICH THE ISSUE OF ALLOWABILITY OF DEDUCTION U /S 80IB IN RESPECT OF EXPORT INCENTIVE WAS DECIDED AGAINST THE ASSESSEE WAS THIS THAT IN THE FACTS OF THAT CASE, THE EXPORT INCENTIVE RECEIVED BY THE ASSESSEE WAS NOT ARITHMETICALLY EQUAL TO THE DUTY PAID BY THE ASSESSEE. THE SECOND ASPECT WAS ALSO RAISED BY THE REVENUE BEFORE HONBLE APEX COURT FOR THE SAME ISSUE THAT AS PER AS - 2 ALSO, SINCE DUTY PAID IS DEDUCTED FROM PURCHASE IN DETERMINING THE COST OF PURCHASE, THE DUTY DRAWBACK CANNOT BE CONSIDERED AS REDUCTION IN COST BUT HAS TO BE TREATED AS INDEPEND ENT INCOME. WHILE DEALING WITH THIS ASPECT, HONBLE APEX COURT CONSIDERED AN ILLUSTRATION IN WHICH TOTAL PROFIT WAS RS. 200 AND DUTY DRAW BACK WAS RS. 100. HONBLE APEX COURT HELD THAT ON THIS ASPECT ALSO, DEDUCTION U/S 80IB IS ALLOWABLE ON TOTAL PROFIT MI NUS DUTY DRAW BACK. IN OUR CONSIDERED OPINION MERELY BY DISTINGUISHING THE FACTS ON THE SECOND ASPECT THAT IN A GIVEN CASE, THE PROPORTION OF EXPORT INCENTIVE TO TOTAL PROFIT IS ALMOST 100 % AND THEREFORE , THE RATIO OF THIS JUDGMENT IN RESPECT OF THE SECOND ASPECT IS NOT APPLICABLE BECAUSE OF DIFFERENCE IN FACTS, WE CANNOT SAY THAT DEDUCTION U/S 80IB IS ALLOWABLE IN RESPECT OF EXPORT INCENTIVE UNLESS WE FIND [ 9 ] THAT EXPORT INCENTIVE IS ARITHMETICALLY EQUAL TO DUTY PAID BY THE ASSESSEE. WHEN WE GO THROUGH THE TR IBUNAL DECISION CITED BY THE LEARNED AR, W E FIND THAT I N PARA 10 OF THE TRIBUNAL DECISION, IT IS NOTED BY THE TRIBUNAL THAT IN THE ILLUSTRATION GIVEN BY THEIR LORDSHIPS IN THAT JUDGMENT, IT WAS NOTED THAT IN A SITUATION IN WHICH OVERALL PROFIT OF THE ASSESSEE WAS RS.200/ - AND DUTY DRAWBACK RECEIPT OF THE ASSESSEE WAS RS.100/ - , THE REVENUE WAS JUSTIFIED IN GRANTING DEDUCTION U/S 80IB O F THE ACT ONLY IN RESPECT OF RS.100/ - . IT APPEARS THAT THE TRIBUNAL GOT CARRIED AWAY BY THESE FACTS NOTED BY HON'BLE APEX COURT IN THAT JUDGMENT AND ULTIMATELY IT WAS HELD BY THE TRIBUNAL IN PARA 17 THAT I N A CASE WHERE AFTER EXCLUDING D UTY DRAW BACK (DDB ) , THERE IS VIRTUALLY NO PROFIT THEN THE DDB RECEIPT COULD AS WELL HAVE THE NEXUS SINCE THESE CANNOT BE VIEWED AS INCIDENTAL OR ANCILLARY PROFITS OR STANDALONE INCOME. FROM THESE OBSERVATIONS OF THE TRIBUNAL, IT COMES OUT THAT THE BASIS OF THE TRIBUNAL DE CISION IS THAT IF THE DDB RECEIPT IS FORMING SUBSTANTIAL PART OF THE OVERALL PROFIT OF THE ASSESSEE AND THE REMAINING PROFIT AFTER REDUCI NG DDB/DEPB IS ONLY MARGINAL THEN DDB/DEPB RECEIPT SHOULD BE CONSIDERED AS HAVING FIRST DEGREE NEXUS AND THE SAME CANNO T BE VIEWED AS INCIDENTAL OR ANCILLARY PROFITS OR STANDALONE INCOME. THIS GOES TO SHOW THAT PARA 17 & 18 OF THE JUDGMENT OF HONBLE APEX COURT HAS ESCAPED THE ATTENTION OF THE TRIBUNAL IN THIS TRIBUNAL ORDER. HENCE, THIS TRIBUNAL ORDER CANNOT BE ACCEPTED A S A TRIBUNAL ORDER LAYING DOWN A BINDING PRECEDENCE. 5. 3 IN THE LIGHT OF ABOVE ANALYSIS OF THE TRIBUNAL DECISION AND OF THE ACTUAL RATIO DECIDENDI OF JUDGMENT OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) OF WHICH THE OPERATING PORTION HAS BEEN REPRODUCED BY US HEREIN ABOVE , W E FIND THAT THE MATTER WAS DECIDED BY THE HON'BLE APEX COURT AS PER PARA 18 ITSELF WHEREIN IT WAS HELD THAT PROFITS DERIVED BY WAY OF SUCH EXPORT INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION80 - IB. THEREAFTER, IN PARA 19 TO 24, THE HON'BLE APEX COURT HAS DISCUSSED REGARDING THE SECOND ARGUMENT OF LEARNED [ 10 ] A.R. OF THE ASSESSEE, AS PER WHICH THE RELIANCE WAS PLACED BY LEARNED A.R. OF THE ASSESSEE ON AS2 AN D IN THIS CONTEXT , THE HON'BLE APEX COURT HAS NOTED THIS ILLUSTRATION OF OVERALL PROFIT OF RS.200/ - AND DDB RECEIPT OF RS.100/ - AND IT WAS HELD THAT EVEN AFTER CONSIDERING AS2 ALSO, DDB RECEIPT/DEPB DID NOT FORM PART OF THE NET PROFIT OF ELIGIBLE INDUSTRIA L UNDERTAKING FOR THE PURPOSE OF SECTION 80 - IB OF THE ACT. HENCE, IT IS CLEAR THAT THIS IS NOT THE ONLY BASIS OF THE JUDGMENT OF HON'BLE APEX COURT THAT SINCE THE DDB RECEIPT IS ONLY 50% OF THE OVERALL PROFITS, THE SAME IS NOT FORMING PART OF THE NET PROF IT OF THE ELIGIBLE INDUSTRIAL UNDERTAKING AND IF SUCH DDB RECEIPTS ARE SUBSTANTIAL LEAVING ONLY MARGINAL PROFIT AFTER EXCLUDING DDB THEN DDB/DEPB BENEFITS HAS TO BE CONSIDERED FORMING PART OF PROFIT OF ELIGIBLE INDUSTRIAL UNDERTAKING. IN OUR CONSIDERED OP INION, THE MAIN BASIS I.E. OF HON'BLE APEX COURT IS THIS THAT RULES OF CENTRAL EXCISE AND CUSTOMS DUTY ACT DO NOT ENVISAGE A REFUND OF AN AMOUNT ARITHMETICALLY EQUAL TO CUSTOMS DUTY OR CENTRAL EXCISE DUTY ACTUALLY PAID BY AN INDIVIDUAL IMPORTER CUM MANUFAC TURER. WE ARE ALSO OF THE CONSIDERED OPINION THAT IF AN ASSESSEE IS HAVING ONLY MARGINAL PROFIT OR LOSS AFTER REDUCING EXPORT INCENTIVE FROM OVERALL PROFIT, IT HAS TO BE ACCEPTED THAT THE ASSESSEE IS LESS EFFICIENT AND SUCH ASSESSEE CANNOT BE REWARDED BY ALLOWING DEDUCTION U/S 80IB OF THE ACT FOR EXPORT INCENTIVES WHEN THOSE ASSESSEES WHO ARE HAVING MORE PROFITS AFTER REDUCING EXPORT INCENTIVE FROM OVERALL PROFIT, ARE TO BE PUNISHED BY REFUSING DEDUCTION U/S 80IB OF THE ACT TO THEM FOR SUCH RECEIPTS ONLY BECAUSE THEY ARE MORE EFFICIENT AND THEREFORE, EARNING HANDSOME PROFIT FROM THEIR INDUSTRIAL ACTIVITY EVEN AFTER EXCLUDING EXPORT INCENTIVE . THE QUESTION IS NOT THIS AS TO HOW MUCH PROFIT IS BEING EARNED BY AN ASSESSEE AFTER REDUCING EXPORT INCENTIVE FROM OVERALL PROFITS AND THE QUANTUM OF SUCH RESIDUAL PROFIT CANNOT BE A BASIS TO DETERMINE AS TO WHETHER THE EXPORT INCENTIVE IS PART OF THE NET PROFIT OF THE ELIGIBLE INDUSTRIAL UNDERTAKING OR NOT . IN THE LIGHT OF THESE ANALYSIS AND DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY [ 11 ] COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) AND SIMPLY BECAUSE IN ONE CASE , AN IMPORTANT PORTION OF TH E JUDGMENT OF HON'BLE SUPREME COURT WAS NOT NOTICED BY THE TRIBUNAL BECAUSE IT ESCAPED ITS ATTENTION AND THE ISSUE WAS DECIDED IN A DIFFERENT MANNER, SUCH TRIBUNAL DECISION CANNOT BE CONSIDERED AS LAYING DOWN A BINDING PRECEDENCE TO IGNORE THE LAW OF LAND BEING BINDING JUDGMENT OF HON'BLE SUPREME COURT. IT IS ALSO WORTH MENTIONING THAT IT WAS HELD BY THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. KAUTILYA MONETARY SERVICES (P) LTD. 31 CCH 373 (DEL, I.T.A.T.) THAT TO PERPETUATE A MISTAKE IS NO H EROISM A ND TO RECTIFY IT IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF DISTRIBUTORS (BARODA) P. LTD. VS. UOI 155 ITR 120 SUPPORTS THIS VIEW. HENCE, WE FEEL THAT WE CANNOT PERPETUATE THE MISTAKE BY IGNORI NG PARA 17 - 18 OF THIS JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WHEN IT HAS COME TO OUR ATTENTION. WE, THEREFORE, HAVE NO HESITATION IN FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE DECLINE TO INTERFERE IN THE ORDER OF LEARNED CIT ( A) . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 3 R D DEC . 2013. *C.L.SINGH COPY OF THE O RDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A ) 5. DR, ITAT, LUCKNOW ASSISTANT REGISTRAR