TaxTMI 
TaxTMI 
2016 (7) TMI 463
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....m of deduction under section 80IB of the Income Tax Act,1961 ("the Act" for short). While processing such claim, the Assessing Officer noticed that the claim included income of Duty Entitlement Pass Book ("DEPB for short) of Rs. 17.72 lacs (rounded off) and DEPB premium income of Rs. 2.96 lacs. Along with other sundry receipts, the Assessing Officer disallowed the deduction qua these incomes holding that the same cannot be stated to be derived from the eligible business of the industrial undertaking. 3. The assessee carried the matter in appeal. CIT(Appeals) reversed the view of the Assessing Officer and directed him to allow deduction under section 80IB of the Act on the DEPB and DEPB premium income on the ground that same was part of the business profit of the assessee. 4. The issue was carried in appeal by the Revenue before the Tribunal. The Tribunal applied the decision of Supreme Court in case of Liberty India v. Commissioner of Income tax reported in (2009) 317 ITR 218 and held that the issue was squarely covered in favour of the Revenue. The decision of the CIT(Appeals) on this point was reversed. It is this judgement the assessee has challenged in the present appeal.....
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....e field. The ratio laid down would squarely apply in facts of the present case and was therefore, rightly applied by the Tribunal. 7. In order to resolve this controversy we may notice that section 80IB of the Act pertains to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Subsection( 1) of section 80IB provides that where the gross total income of an assessee includes any profits and gains derived from any business referred to in subsections (3) to (11C), referred to as the eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. Subsection( 2) of section 80IB lays down the conditions for an industrial undertaking to claim deduction under the said section. Subsection (3) to subsection (11C) specifies the different businesses to which such deductions would apply. 8. In context of such deductions under section 80IB of the Act, question that arose befor....
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....t, 1962 and Section 37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs 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 individual importercummanufacturer. Subsection (2) of Section 75 the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances 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 duty drawback receipt lies in Section 75 of the Customs Act and Section 37 of the Central 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 no....
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.... Department is allowing deduction on profit of Rs. 100 under Section 80IB of the 1961 Act. 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 Sections 80I/80IA/ 80IB of the 1961 Act." 9. Section 80IB, we may recall provides deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. The industrial undertaking eligible for such deductions have been specified in subsection (3) to subsection (11C) of the said subsection and provides incentives for variety of industries. For example, under subsection( 4) of section 80IB in case of an industrial undertaking in an industrially backward State specified in the Eight Schedule, deduction of 100% of the profits and gains derived from such industrial undertaking is provided for five assessment years beginning with the initial assessment year and thereafter, at the rate of 25%, upto a maximum of 10 consecutive assessment years. Likewise, under subsection( 10) of section 80IB, deduction is provided in case of an undertaking developing and building housing p....
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....to the total turnover of the business carried on by the assessee. This provision in mathematical terms is expressed as under : Profits derived from exports = profits of the busines x export turnover Total Turn over 11. Section 80HHC contains an explanation clause defining various terms such as export turnover in clause(b) of the explanation, total turnover in clause(ba) and profits of the business in clause(baa). Term 'profits of the business' has been defined in clause (baa) as under : "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib) (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;" 12. It is as per this definition of profits of the business that the question of eliminating 90% of the DEPB or duty draw back from t....
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.... export profit to be ascertained through a complex formula provided in subsection( 3) of the section by further applying the definition of term "profits of the business" contained in clause (baa) of the explanation. Secondly, in case of Liberty India (supra), the Supreme Court had quoted a hypothetical example in which the assessee had opening stock of Rs. 100, had incurred expenditure of Rs. 1000 and on the credit side it had shown sales of Rs. 1000, duty draw back of Rs. 100 and closing stock of Rs. 200 and that is how claimed net profit of Rs. 200. The department however, recognised deduction under section 80IB of the Act on the profit of Rs. 100, ignoring the duty drawback of Rs. 100 received by the assessee. This formula was specifically approved by the Supreme Court in background of its conclusion that the benefits of DEPB cannot be stated to have been derived from the industrial undertaking of the assessee which was eligible for deduction under section 80IB. Accepting the contention of Shri Hemani would amount to rewriting the judgement in case of Liberty India (supra). Further, it was not and could not have been argued that the decision in case of Liberty India (supra) shou....