2017 (3) TMI 482 - AT - Income Tax

Entitlement for deduction U/s 80IB - amount under the head VKGUY Vishesh Krishi Gram Udhyog Yojana and on account of DEPB - Held that - The Hon ble Supreme Court in the case of Liberty India Vs. CIT (2009 (8) TMI 63 - SUPREME COURT) has held that Section 80IB/80IA are the code by themselves as they contain both substantive as well as procedural provision. It is evident that Section 80IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. It is held by the Hon ble Supreme Court that the words derived from is narrower in connotation as compared to the words attributable to . After analyzing the provision, it was held by the Hon ble Supreme Court that the DEPB is an incentive. It is given under Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralize the incidence of customs duty payment on the import content of export product. This neutralization is provided for by credit to customs duty against export product. Hon ble Supreme Court has held that the duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80IA/80IB of the Act. - Decided aganst assessee

Summary

Issues Involved:
Appeal against common order dated 27/01/2016 passed by CIT(A)-III, Jaipur for A.Ys. 2006-07, 2007-08, 2010-11 & 2012-13. Interpretation of legality of reassessment under section 143(3)/148 of IT Act without issuing statutory notice under section 143(2). Claim of deduction under section 80IB of IT Act for cash assistance received from Government of India under DEPB and VKGUY schemes. Application of judgments by Hon'ble Supreme Court and ITAT regarding treatment of DEPB credits as business income. Dismissal of appeals by CIT(A) and confirmation of orders.

Detailed Analysis:

Issue 1: Legality of Reassessment
The appeals raised common issues regarding the legality of reassessment under section 143(3)/148 of the IT Act without issuing the statutory notice required under section 143(2). The assessee contended that the CIT(A) erred in ignoring the legal grounds of appeal related to the reassessment. However, during the hearing, the assessee chose not to press certain grounds, leading to their dismissal.

Issue 2: Claim of Deduction Under Section 80IB
The main contention revolved around the denial of deduction under section 80IB of the IT Act by the Assessing Officer, which was upheld by the CIT(A). The assessee argued that the cash assistance received from the Government of India under DEPB and VKGUY schemes should be eligible for deduction under section 80IB. The assessee relied on provisions of Section 28(iiib) and 28(iiid) of the Act, along with judgments by the Hon'ble Supreme Court and ITAT supporting the treatment of such receipts as business income.

Issue 3: Application of Legal Precedents
The assessee cited various judgments by the Hon'ble Supreme Court and ITAT to support their claim that DEPB credits should be considered as business income eligible for deduction under section 80IB. However, the Senior DR opposed these submissions, asserting that the provisions of section 80IB require the profits claimed for deduction to be derived from the eligible business, which, in this case, was not demonstrated by the assessee.

Judgment and Dismissal of Appeals
After considering the arguments from both parties and reviewing the relevant provisions and legal precedents, the ITAT confirmed the orders of the CIT(A) and dismissed all appeals of the assessee for the relevant assessment years. The ITAT found no reason to interfere with the CIT(A)'s decision, based on the interpretation of the provisions of section 80IB and the treatment of DEPB credits as incentives rather than profits derived from the eligible business. The consistent view was taken across all appeals, leading to the rejection of the grounds raised by the assessee and the ultimate dismissal of the appeals.