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2013 (11) TMI 262 - AT - Income TaxExemption u/s 10BA - manufacturing and exporting of handicraft-wooden-items - A.O. has observed that the duty draw back amounting to ₹ 38,37,416/-, which is a part of P & L Account, if excluded then sales of the year will be reduced to ₹ 9,18,05,232/- which will reduce the g.p. rate of 0.01% - AO rejected the books of accounts and disallowed the deduction u/s 10BA - Held that - Ratio of the decision of Hon ble Apex Court rendered in the case of Liberty India vs. CIT 2009 (8) TMI 63 - SUPREME COURT is not applicable to the facts of this case. The Section under interpretation before Hon ble Summit Court was 80IA - In Sec 80IA, no formula for computation of profits derived by the undertaking is laid down, whereas in Section 10BA and Section 80HHC formula is prescribed for the purpose. Therefore, in our considered opinion, section 10BA and 80HHC are more nearer to each other, and whatever interpretation of derived from is given in any decision in which Section 80HHC is involved, would also mutatismutandis to the interpretation of Section 10BA. The Mumbai Bench of Hon ble Income Tax Appellate Tribunal in the case Arts and Crafts Exports 2010 (6) TMI 645 - ITAT MUMBAI , after considering the decision of Liberty India (2009 (8) TMI 63 - SUPREME COURT) has taken a clear cut decision in favour of the assessee. This decision has been approved by Hon ble Bombay High Court 2011 (12) TMI 338 - Bombay High Court and the decision in the case of M/s. Maral Overseas Limited Vs ACIT 2012 (4) TMI 345 - ITAT INDORE All the assessees before us are eligible for deduction u/s 10BA of the Act.
Issues Involved:
1. Disallowance of office expenses. 2. Non-allowance of exemption under Section 10BA on Duty Drawback. 3. Overall exemption under Section 10BA on Net Income. 4. Charging of interest under Section 234B. Detailed Analysis: 1. Disallowance of Office Expenses: The first issue involved the disallowance of Rs. 21,144/- out of office expenses. However, this ground was not pressed by the appellant's advocate during the hearing. Consequently, the tribunal did not address this issue further. 2. Non-allowance of Exemption under Section 10BA on Duty Drawback: The primary contention was whether the Duty Drawback (DDB) received by the assessee qualifies for exemption under Section 10BA of the Income Tax Act. The assessee argued that the DDB was related to the manufacturing and export of handicraft articles and should be exempt under Section 10BA. The Assessing Officer (A.O.) and the CIT(A) denied this benefit, citing the Supreme Court decision in Liberty India, which held that incentives like DDB do not form part of profits derived from manufacturing activities. The tribunal analyzed the provisions of Section 10BA, comparing them with Section 80HHC, which also involves a formula for computing profits derived from exports. The tribunal noted that the Supreme Court's decision in Liberty India pertained to Section 80IA, which lacks such a formula. The tribunal found that decisions in cases like Topman Exports and Arts & Crafts Exports, which considered Section 10BA, supported the assessee's claim. These decisions held that DEPB/DDB should be included in the profits derived from export activities. 3. Overall Exemption under Section 10BA on Net Income: The assessee contended that its entire net income should be exempt under Section 10BA, as it was derived from the export of handicrafts. The tribunal agreed, emphasizing that Section 10BA(4) provides a specific formula for computing profits derived from export activities. The tribunal referenced several judicial precedents that supported the inclusion of export incentives in the profits eligible for exemption under Section 10BA. 4. Charging of Interest under Section 234B: The tribunal did not explicitly address the issue of charging interest under Section 234B in its detailed analysis. However, since the primary issues were resolved in favor of the assessee, it can be inferred that the tribunal likely found the charging of interest under Section 234B to be unjustified. Conclusion: The tribunal concluded that the manufacturing activities of the assessee are eligible for deduction under Section 10BA of the Income Tax Act. It held that the Duty Drawback and other export incentives should be included in the profits derived from export activities, thus qualifying for exemption under Section 10BA. Consequently, the appeals of the assessees were allowed, and the appeals of the revenue were dismissed. Order Pronouncement: The order was pronounced in the court on 31st January 2013.
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