2023 (3) TMI 822 - AT - Income Tax

Deduction u/s. 80IB - allowability of income under Duty Draw Back and MEIS scheme for the profits derived from eligible industrial undertaking - Effect of subsequent decision of Supreme court - AO has referred to the decision of the Hon ble Supreme Court in the case of M/s. Liberty India 2009 (8) TMI 63 - SUPREME COURT to exclude the export incentives for the purpose of deduction u/s. 80IB(11A) - whether the decision in the case of M/s. Meghalaya Steels Limited 2016 (3) TMI 375 - SUPREME COURT held by the Apex Court does not over ride the subsequent judgment of the Apex Court in M/s. Liberty India 2009 (8) TMI 63 - SUPREME COURT ? - HELD THAT - As in view of the subsequent decision of the Hon ble Supreme Court in the case of Meghalaya Steel Ltd (supra), the findings recorded by the Ld. AO based on the decision of the Hon ble Supreme Court in the case of Liberty India (supra) cannot be held as sustainable as in Meghalaya Steel Ltd (supra) held that the Hon ble Himachal Pradesh High Court having wrongly interpreted the judgment in the case of CIT vs. Sterling Foods 1999 (4) TMI 1 - SUPREME COURT and Liberty India (supra) to arrive at the opposite conclusion has held to be wrongly decided. Since the Hon ble Supreme Court has overruled its earlier decision in the case of Liberty India (supra) and now the decision in the case of Meghalaya Steel Ltd (supra) holds good. In the assessee s own case for the AY 2017-18 2022 (6) TMI 350 - ITAT VISAKHAPATNAM this Bench has held that the export entitlements is an income assessable under the head profits or gains from business or profession as per clause (iiib) and (iiid) to section 28 of the IT Act, 1961. Respectfully following the above precedents, we hold that the export incentives such as Duty Draw Back and MEIS is an income assessable under the head profits or gains from business or profession as per clause (iiib) and (iiid) to section 28 of the Act. In view of the above, the grounds raised by the Revenue are dismissed.

Summary

Issues:
The judgment involves the issue of the allowability of income under Duty Draw Back and MEIS scheme for the profits derived from an eligible industrial undertaking for claiming deduction under Section 80IB of the Income Tax Act, 1961.

Summary:

Issue 1:
The appeal by the Revenue was against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the deduction claimed under Section 80IB(11A) of the Act for the AY 2018-19.

The assessee, engaged in the business of export of frozen shrimp and other sea foods, claimed a deduction under Section 80IB(11A) amounting to Rs. 73,58,97,729/- on the net profits derived from a specific unit. The Revenue contended that export incentives like Duty Draw Back and MEIS cannot be considered as profit derived from an industrial undertaking. The Ld. CIT(A) allowed the appeal of the assessee based on previous judgments. The Revenue appealed against this decision.

Issue 2:
The main contention was whether export incentives like Duty Draw Back and MEIS should be considered as income derived from an industrial undertaking for the purpose of claiming deduction under Section 80IB(11A) of the Act.

The Ld. DR argued that these incentives cannot be considered as income from the industrial undertaking, citing the judgment in M/s. Liberty India vs. CIT. On the other hand, the Ld. AR argued that the judgment in CIT vs. Meghalaya Steels Ltd should prevail, emphasizing the direct link between these incentives and the activities of the industrial undertaking.

Decision:
The Tribunal considered the legislative intent behind the insertion of a clause to section 28 of the Act and referred to relevant sections of the Act. Relying on the judgment in Meghalaya Steels Ltd, the Tribunal held that export incentives like Duty Draw Back and MEIS should be treated as income under the head "profits and gains from business or profession." The Tribunal dismissed the Revenue's appeal, upholding the order of the Ld. CIT(A) in favor of the assessee.

This summary provides a detailed overview of the legal judgment, highlighting the key issues, arguments presented, and the final decision of the Appellate Tribunal ITAT VISAKHAPATNAM.