2015 (11) TMI 1757 - AT - Income Tax

Deduction u/s. 80IB on the amount of DEPB - Held that - Hon ble Supreme Court in the case of Baby Maine Exports 2007 (3) TMI 206 - SUPREME COURT relied by the assessee before us. In this decision Hon ble Apex Court has held that the premium paid by the export house or the trading house to a supporting manufacturer is an integral part of the turnover of the supporting manufacturer and was thus includible in the profits of the business eligible for deduction u/s. 80HHC. The assessee was entitled for deduction u/s. 80IB in respect of sale of DEPB received as supporting manufacturer. In view of catena of decisions relied upon by the assessee in our considered view the conclusion of the CIT(A) denying deduction u/s. 80IB qua purported DEPB receipt is not found to be correct. No material is adduced by the DR to take a contrary view. We therefore reversing the impugned order hold that the assessee is entitled for deduction u/s. 80IB of the Act. This issue is decided in favour of the assessee as such. The ground No. 1 is accordingly allowed. Computation of deduction u/s. 80HHC and 80IB ignoring the provisions of section 80IB(13) r/w sec. 80IA(9) - Held that - Referring to the varied decisions in the matter laying our hands on the decision favourable to the assessee rendered in the case of Associated Capsules (P) Ltd. 2011 (1) TMI 787 - BOMBAY HIGH COURT relied by assessee we reverse the order of the CIT(A) holding that deduction u/s. 80IB would not go to reduce the total income for the purpose of calculating deduction u/s. 80HHC. Accordingly this issue is decided in favour of the assessee. Disallowance on account of foreign traveling - Held that - For want of any bills/vouchers or supporting evidence to substantiate foreign traveling expenses to the extent of 1, 47, 827/- the ld. Authorities below have rightly disallowed the same. Therefore this ground of appeal raised by assessee has no force and is liable to be dismissed.

Summary

Issues involved:
1. Deduction u/s. 80IB on DEPB amount
2. Double deduction under sections 80HHC and 80IB
3. Disallowance of foreign traveling expenses

Issue 1: Deduction u/s. 80IB on DEPB amount
The appeal was against disallowance of deduction u/s. 80IB on DEPB amount received by the assessee. The CIT(A) disallowed the deduction, citing precedents that DEPB is not income derived from the business eligible for deduction u/s. 80IB. However, the assessee argued citing the Supreme Court's decision in CIT vs. Baby Marine Exports that DEPB is integral to the turnover of a supporting manufacturer. The ITAT, Delhi Benches in Flora Exports vs. ACIT also ruled in favor of the assessee. Ultimately, the ITAT allowed the deduction u/s. 80IB, holding that DEPB received as a supporting manufacturer is eligible for the deduction.

Issue 2: Double deduction under sections 80HHC and 80IB
The AO observed that the assessee claimed double deduction under sections 80HHC and 80IB, which was not permissible under the law. The CIT(A) upheld this observation based on the ITAT Mumbai decision in Leben Laboratories Ltd. vs. DCIT. However, the assessee relied on the Mumbai High Court's decision in Associated Capsules (P) Ltd. vs. DCIT, which favored the assessee. The ITAT, following the principle of adopting the view favorable to the assessee, reversed the CIT(A)'s decision, ruling that deduction u/s. 80IB would not reduce the total income for calculating deduction u/s. 80HHC.

Issue 3: Disallowance of foreign traveling expenses
The AO disallowed foreign traveling expenses of a specific amount due to lack of supporting bills/vouchers. The CIT(A) upheld this disallowance. The ITAT found no fault in the CIT(A)'s decision, stating that the disallowance was justified as there was no supporting evidence for the expenses. Consequently, the ground of appeal related to foreign traveling expenses was dismissed.

In conclusion, the ITAT partly allowed the appeal, permitting the deduction u/s. 80IB on the DEPB amount and rejecting the double deduction claim under sections 80HHC and 80IB. The disallowance of foreign traveling expenses was upheld.