Tribunal includes Duty drawback in turnover calculations for Income Tax Act deduction

The Tribunal upheld the decision that Duty drawback should be included in both total turnover and export turnover for calculating the deduction under section 10B of the Income Tax Act. The inclusion of Duty drawback in turnover calculations led to the dismissal of the Revenue's appeal. Additionally, the Tribunal dismissed the Cross Objection raised by the assessee regarding the disallowance of a specific amount of foreign remittance. Ultimately, both the appeals of the Revenue and the Cross Objection of the assessee were dismissed by the Tribunal.

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Issues involved:
1. Inclusion of Duty drawback in Export Sale for calculating deduction u/s 10B of the Income Tax Act.

Analysis:
The case involved a dispute regarding the inclusion of Duty drawback in Export Sale for calculating deduction u/s 10B of the Income Tax Act. The assessee, engaged in manufacturing and export of garments, claimed exemption u/s 10B amounting to Rs. 1,18,56,646. The Assessing Officer disallowed a portion of this claim as certain payments were not received within the stipulated time frame. The assessee contended that as a 100% export-oriented unit, they were allowed to bring export payments within 12 months as per RBI circular. The ld. CIT(A) held that Duty drawback is an incentive and should be included in both total turnover and export turnover for calculating the deduction u/s 10B. The Tribunal upheld this decision, stating that the Duty drawback amount was to be considered in the turnover calculations, resulting in the dismissal of the Revenue's appeal.

The Tribunal noted that the introduction of section 10B aimed to provide tax exemption for 100% export-oriented units to incentivize foreign exchange earnings. The circulars and provisions allowed for the realization and repatriation of export proceeds within a specified period. Since the assessee had received a portion of the export proceeds within the prescribed timeframe, the deduction related to that amount could not be disallowed. The Tribunal emphasized that Duty drawback was an incentive and should be factored into both total turnover and export turnover for determining the deduction u/s 10B. Consequently, the Tribunal upheld the ld. CIT(A)'s decision, leading to the dismissal of the Revenue's appeal.

Regarding the Cross Objection raised by the assessee, disputing the disallowance of a specific amount of foreign remittance, the Tribunal found no merit in the argument and dismissed the Cross Objection along with the appeal of the Revenue. Ultimately, both the appeals of the Revenue and the Cross Objection of the assessee were dismissed by the Tribunal.

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