2017 (8) TMI 1238 - AT - Income Tax

Deduction u/s 10B - duty drawback - business income or not - Held that - Sub-section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the profits of the business eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. In the assessee s own case in the preceding years, after considering the decision in the case of Liberty India 2009 (8) TMI 63 - SUPREME COURT held that provisions of section 10B are different from the provisions of section 80IA wherein no 77 formula has been laid down for computing the eligible business profit. Thus question is answered, in affirmative and in favour of the assessee. Accordingly, the assessee is eligible for claim of deduction on export incentive received by it in terms of provisions of section 10B(1) read with section 10B(4) of the Act.

Summary

Issues:
- Eligibility of duty drawback for deduction under section 10B of the IT Act, 1961.

Analysis:
The appeal was filed by the Revenue against the order passed by CIT(A)-XIII, New Delhi for Assessment Year 2010-11. The primary issue was the eligibility of duty drawback for deduction under section 10B of the IT Act. The assessee company had claimed deduction u/s 10B amounting to a specific sum. However, the Assessing Officer disallowed the claim of duty drawback as a deduction under section 10B, resulting in an addition to the total income of the assessee.

Upon filing an appeal before the CIT(A), the appeal was allowed in favor of the assessee, relying on a Tribunal decision for Assessment Year 2009-10 in the assessee's own case. The Revenue challenged this decision before the ITAT Delhi. The Tribunal noted that the issue of duty drawback for deduction under section 10B had been extensively discussed in a Special Bench decision in the case of Moral Overseas Ltd. The Tribunal highlighted the statutory formula for computing the deduction under section 10B, emphasizing that once an income forms part of the business of the eligible undertaking, it cannot be excluded from eligible profits for the purpose of computing the deduction under section 10B.

The Tribunal further referenced CBDT Circulars and judicial precedents to support the interpretation of the provisions related to the computation of eligible profits under section 10B. The Tribunal concluded that the assessee was eligible for the claim of deduction on export incentive received, in line with the provisions of section 10B(1) read with section 10B(4) of the IT Act. Given the similarity of facts between the present case and the Tribunal's earlier decision for A.Y. 2009-10, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

In light of the above analysis and the precedents cited, the Tribunal dismissed the appeal of the Revenue, stating that the matter was settled based on previous decisions and the statutory provisions governing the computation of eligible profits under section 10B of the IT Act. The order was pronounced on 10th July 2017, affirming the decision in favor of the assessee.