M/s. Rajkumar Exports Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 976/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61030 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Section: 143(3); 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 976/MDS/2011 ASSESSMENT YEAR: 2005-06 M/S. RAJKUMAR EXPORTS PVT. LTD., B-603, KESHAV DURGA APARTMENTS, NO.1, EAST AVENUE, KESHAV PERUMAL PURAM, R.A. PURAM, CHENNAI 600 028. [PAN:AAACR3578H] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(3), CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : DR. S. MOHARANA, CIT-DR DATE OF HEARING : 01.05.2012 DATE OF PRONOUNCEMENT : 01.05.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) V, CHENNAI DATED 05.04.2011 IN ITA NO. 104/2010-11 FOR THE ASSESSMENT YEAR 2005-06. 2. DESPITE SERVICE OF NOTICE (AD ON RECORD), NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEEDED TO DECIDE THE APPEAL EX-PARTE AFTER HEARING THE DR. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.976 976976 976/M/11 /M/11 /M/11 /M/11 2 3. THE BRIEF FACTS IN THE ASSESSEES CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING CASHEW KERNELS FROM RAW CASHEW AND SELLING IT BOTH THE EXP ORT AS WELL AS DOMESTIC MARKET. FOR THE ASSESSMENT YEAR 2005-06, THE ASSESS EE FILED ITS RETURN OF INCOME ON 03.08.2005 ADMITTING TOTAL INCOME AT ` .99,62,716/-. LATER, A NOTICE UNDER SECTION 148 WAS ISSUED ON 01.04.2009 A ND ASSESSMENT WAS COMPLETED ON 10.11.2010 UNDER SECTION 143(3) R.W.S. 147 DETERMINING THE INCOME AT ` .1,17,10,566/-. WHILE COMPLETING THE ASSESSMENT, TH E ASSESSING OFFICER EXCLUDED INCOME OF ` .42,69,735/- REPRESENTING INCOME FROM DEPB LICENSE FROM PROFITS OF BUSINESS AND COMPUTED THE D EDUCTION UNDER SECTION 80IB. THE ASSESSING OFFICER HELD THAT THE INCOME FR OM DEPB HAS NO NEXUS TO THE MANUFACTURING ACTIVITY OF THE ASSESSEE AND T HEREFORE EXCLUDED FROM BUSINESS PROFITS FOR THE PURPOSE OF COMPUTING RELIE F UNDER SECTION 80IB. 4. THE CIT(A) CONFIRMED THE DISALLOWANCE FOLLOWING THIS TRIBUNALS DECISION IN ASSESSEES OWN CASE IN I.T.A. NO. 767/M DS/2008 DATED 31.03.2009 FOR THE ASSESSMENT YEAR 2003-04, WHEREIN THE TRIBUNAL HELD THAT DEPB INCOME IS NOT AN INCOME DERIVED FROM INDUSTRI AL UNDERTAKING AND MERE COMMERCIAL CONNECTION BETWEEN THE INCOME AND T HE INDUSTRIAL UNDERTAKING WOULD NOT SUFFICIENT TO CLAIM DEDUCTION UNDER SECTION 80IB. THE CIT(A) ALSO OBSERVED THAT THIS TRIBUNAL RELIED ON V ARIOUS DECISIONS ON THIS POINT INCLUDING THE HONBLE JURISDICTIONAL HIGH COU RTS DECISION IN THE CASE OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.976 976976 976/M/11 /M/11 /M/11 /M/11 3 M/S. SAKTHI FOOTWEAR VS. ACIT IN TC(A) NOS. 1066 & 1067 OF 2008 DATED 06.08.2008. THEREFORE, THE CIT(A), FOLLOWING THIS T RIBUNALS ORDER HELD THAT EXCLUSION OF DEPB INCOME FROM ELIGIBLE PROFIT IN AR RIVING RELIEF UNDER SECTION 80IA BY THE ASSESSING OFFICER IS IN ORDER. 5. AT THE TIME OF HEARING, THE DR SUBMITTED THAT T HIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF LIBERTY INDIA VS. CIT [317 ITR 218] AND PLACED A COPY OF TH E JUDGMENT BEFORE US. 6. THE FACTS BEFORE THE HONBLE SUPREME COURT IN T HE CASE OF LIBERTY INDIA VS. CIT (SUPRA) ARE THAT T HE ASSESSEE-PARTNERSHIP FIRM OWNED A SMALL SCALE INDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURI NG OF FABRICS OUT OF YARNS AND ALSO VARIOUS TEXTILE ITEMS OUT OF FABRICS /YARN PURCHASED FROM THE MARKET. FOR THE RELEVANT ASSESSMENT YEAR 2001-0 2, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB ON THE INCREA SED PROFITS EARNED/ DERIVED ON ACCOUNT OF DUTY ENTITLEMENT PASSBOOK SCH EME [DEPB] AND DUTY DRAWBACK SCHEME. THE ASSESSING OFFICER DENIED THE DEDUCTION ON THE GROUND THAT THE SAID TWO BENEFITS CONSTITUTED E XPORT INCENTIVES, AND THAT THEY DID NOT REPRESENT PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT DEDUCTION UNDER SECTION 80-IB WAS AVAILABLE ON THE PROFITS DERIVED ON ACCOUNT OF DUTY DRAWBACK WHILE THE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF DEPB LICENCE WAS NOT ENTITLED TO SUCH DEDUC TION. ON FURTHER I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.976 976976 976/M/11 /M/11 /M/11 /M/11 4 APPEAL BY THE REVENUE, THE TRIBUNAL HELD THAT THE A MOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF DUTY DRAWBACK WOULD NOT ENTI TLE THE ASSESSEE TO DEDUCTION UNDER SECTION 80-IB. ON APPEAL, THE HIGH COURT HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION. 7. THE HONBLE SUPREME COURT HELD THAT DEPB/DUTY D RAW BACK REMISSIONS ARE INCENTIVES, WHICH INCLUDE FROM THE S CHEME FRAMED BY THE CENTRAL GOVERNMENT OR FROM SECTION 75 OF THE CUSTOM S ACT, 1962. HENCE, THE INCENTIVE BENEFITS ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS UNDER SECTION 80IB. THEY BELONG TO THE CATEGORY OF ANCILL ARY PROFIT OF SUCH UNDERTAKING. ON ANALYZING THE CONCEPT OF REMISSIONS OF DUTY DRAW BACK AND DEPB, THE HONBLE SUPREME COURT HELD THAT THE REMIS SION OF DUTY IS ON ACCOUNT OF STATUTORY/POLICY PROVISIONS IN THE CUSTO MS ACT/SCHEME FRAMED BY THE GOVERNMENT OF INDIA AND THEREFORE, THE PROFITS DERIVED BY WAY OF SUCH INCENTIVE DO NOT FALL WITHIN THE EXPRESSION OF PRO FITS DERIVED FROM THE INDUSTRIAL UNDERTAKING IN SECTION 80IB. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT, WE HOLD THAT THE DEPB INCOME IS NOT A PROFIT DERIVED F ROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SECT ION 80IB. THEREFORE, WE AFFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.976 976976 976/M/11 /M/11 /M/11 /M/11 5 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT AT THE TIME OF HEARI NG ON TUESDAY, THE 1 ST MAY, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 1 ST MAY,2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.