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2015 (10) TMI 1086 - HC - Income TaxDeduction under Section 10B - exclusion of duty draw back in the form of DEPB benefits - The issue in question in this appeal which pertains to the Assessment Year 2009-10- Held that - As per Section 28, clause (iii-c), any duty of customs or excise repaid or repayable as drawback to a person against exports under Customs and Central Excise Duties Draw Back Rules, 1971 is deemed to be profits and gains of business or profession. The said provision has to be given full effect to and this means and implies that the duty draw back or duty benefits would be deemed to be a part of the business income. Thus, will be treated as profit derived from business of the undertaking. These cannot be excluded. Even otherwise, when we apply Sub-section (4) to Section 10B, the entire amount received by way of duty draw back would not become eligible for deduction/exemption. The amount quantified as per the formula would be eligible and qualify for deduction/exemption. The position is somewhat akin or close to Section 80HHC of the Act, which also prescribes a formula for computation of deduction in respect of exports.
Issues: Deduction under Section 10B of the Income Tax Act, 1961; Duty draw back in the form of DEPB benefits; Interpretation of Sub-section (4) of Section 10B; Application of Section 28, clause (iii-c) regarding duty draw back as profits and gains of business or profession.
The judgment by the Delhi High Court addressed the issue of deduction under Section 10B of the Income Tax Act, 1961, specifically focusing on the interpretation of Sub-section (4) of the said section. The court emphasized that Sub-section (4) provides a formula for computing the profits derived from the export of articles, things, or computer software by a hundred percent export-oriented undertaking. It clarified that Sub-section (1) and Sub-section (4) of Section 10B are not in conflict; rather, they complement each other. Sub-section (1) identifies the income eligible for exemption, while Sub-section (4) outlines the method for determining the profits eligible for deduction under Sub-section (1). The court highlighted that both provisions must be applied without negating the other to ensure the proper computation of eligible profits from exports. Regarding duty draw back in the form of DEPB benefits, the court referred to Section 28, clause (iii-c) of the Income Tax Act, which deems any duty of customs or excise repaid or repayable as drawback to be profits and gains of business or profession. The court emphasized that duty draw back or benefits must be considered as part of the business income and cannot be excluded. When applying Sub-section (4) of Section 10B to duty draw back, the court clarified that only the amount quantified as per the formula would be eligible for deduction or exemption. This approach is similar to the computation method prescribed under Section 80HHC of the Act for deduction in respect of exports. In conclusion, the court dismissed the appeal related to the Assessment Year 2009-10, stating that the duty draw back amount would not entirely qualify for deduction/exemption under Section 10B. The judgment emphasized the importance of applying the formula stipulated in Sub-section (4) to determine the eligible profits derived from exports and upheld the full effect of Section 28, clause (iii-c) in considering duty draw back as part of the business income.
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