2014 (8) TMI 524 - AT - Income Tax

Deduction u/s 80IC on export incentive - Manufacture of carpets AO was of the view that the sum included the amount as duty drawback towards export incentives Held that - It has been decided in assessee s own case for the earlier assessment year, it has been held in the judgment of Sharda Exports Versus Joint Commissioner of Income-tax 2013 (10) TMI 513 - ITAT DELHI wherein it was held that, the decision of Hon ble Supreme Court is subsequent to the amendment, hence, the decision cannot be distinguished - Following the decision in Liberty India vs. CIT 2009 (8) TMI 63 - SUPREME COURT - DEPB receipts are not derived from an industrial undertaking rather their genesis is from the beneficiary scheme formulated under Central Excise Act etc. - They are the ancillary profit - the AO is directed to allow the deduction u/s 80IC of the Act as per law excluded on the DEPB receipts. CIT(A) has clearly observed that the assessee had received ₹ 7,29,34,000/- and the balance sum was shown as outstanding and the assessee was maintaining accounts on mercantile basis - assessee himself has included the amount in the net profit and claimed deduction u/s 80IC - the entire amount had to be considered and has rightly been considered by CIT(A) Decided against Assessee.

Issues:
1. Allowability of deduction u/s 80IC on duty draw back towards export incentives.
2. Determination of duty draw back amount for deduction under section 80IC.
3. Applicability of previous judicial decisions on the case.
4. Interpretation of section 80IC in comparison to other sections.
5. Treatment of duty draw back receipts as business income for deduction u/s 80IC.
6. Consideration of new arguments raised during the appeal process.
7. Compliance with accounting basis for deduction under section 80IC.

Analysis:
1. The primary issue in this case revolves around the allowability of deduction under section 80IC on duty draw back received towards export incentives. The Assessing Officer (AO) and the ld. CIT(A) disallowed the deduction based on various judicial decisions, particularly the decision of the Hon'ble Supreme Court in the case of Liberty India Vs. CIT. The AO highlighted that the source of investment was not the eligible business of the undertaking but a scheme of the Government of India, thus concluding that the assessee was not entitled to the deduction u/s 80IC on export incentives.

2. Another crucial issue was the determination of the duty draw back amount for the purpose of claiming deduction under section 80IC. The ld. CIT(A) confirmed the AO's decision to consider the entire duty draw back amount of Rs. 13,98,31,925 for disallowance, rejecting the assessee's contention that only the received amount of Rs. 7,29,34,000 should be considered.

3. The appellate arguments included the applicability of previous judicial decisions such as Liberty India Vs. CIT and other relevant cases like Raja Bahadur Kamakshya Narayan Singh, Mrs. Bacha F. Guzdar, Sterling Foods, and Pandian Chemicals Ltd. The assessee contested the application of these decisions to their case, citing differences in the provisions and context.

4. The interpretation of section 80IC in comparison to other sections like 80IB was a significant aspect of the case. The counsel highlighted the distinct features of section 80IC and 80IB, emphasizing that duty draw back should be considered as part of business profits eligible for deduction under section 80IC.

5. The treatment of duty draw back receipts as business income for the purpose of deduction u/s 80IC was a key argument by the assessee. They contended that duty draw back was a return of duties paid during raw material purchase, thus forming part of business profits and eligible for deduction under section 80IC.

6. The case also involved the consideration of new arguments raised during the appeal process. The ld. CIT(DR) objected to the assessee's plea regarding exclusion of duty draw back receivable, citing the maintenance of accounts on a mercantile basis and the inadmissibility of new arguments at the appellate stage.

7. Lastly, the compliance with the accounting basis for deduction under section 80IC was discussed. The Tribunal relied on its previous decision in the assessee's case for A.Y. 2009-10, upholding the disallowance of deduction on duty draw back based on the principles established in the Liberty India case.

In conclusion, the Tribunal dismissed the assessee's appeal, upholding the disallowance of deduction under section 80IC on duty draw back towards export incentives, considering the entire duty draw back amount for assessment, and following the precedent set in previous judicial decisions.

← Previous Next →