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TMI Blog2015 (1) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.10B - Held that:- The receipt by way of DEPB shall not form part of the eligible profit of the assessee’s EOU u/s.10B(1) r/w s. 10B(4). Decided against assessee. - I.T.A. No. 628/Mum/2011 - - - Dated:- 13-1-2015 - SHRI SANJAY ARORA AND SHRI VIVEK VARMA, JJ. For The Appellant : Shri R. K. Sahu For The Respondent : Shri K. Gopal ORDER Per Sanjay Arora, A. M.: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-29, Mumbai ( CIT(A) for short) dated 04.10.2010, allowing the assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2007-08 vide order dated 15.12.2009. 2. The appeal raises two issues, which we shall take up in seriatim, as follows: 3. Issue No. 1 - Reimbursement of freight charges (Rs.74,14,903/-): The assessee, a manufacturer and exporter of readymade garments, was during the course of assessment proceedings observed to have disclosed a receipt by way of freight charges at ₹ 74.15 lacs. In explanation of the genesis of the said receipt, it was explained by the assessee that the sale invoice in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.43 lacs) for being included in computing the deduction u/s.10B of the Act. Both the assessee and the Revenue have relied on a series of case law, both by the tribunal and the higher courts of law, which we may enlist as under: i. By the Revenue: Liberty India vs. CIT [2009] 317 ITR 218 (SC); India Comnet International vs. ITO [2008] 304 ITR 322 (Mad) (approving its earlier decision in CIT vs. Menon Impex (P.) Ltd. [2003] 259 ITR 403 (Mad)); Tessitura Monti India (P.) Ltd. vs. ITO [2013] 22 ITR (Trib) 329 (Mum) [141 ITD 531]; Tricom India Ltd. vs. Asst. CIT [2010] 36 SOT 302 (Mum); ITO vs. V. J. Home (P.) Ltd. [2009] 125 TTJ 215 (Jodh)/[2010] 38 SOT 4 (Jodh) (URO). ii. By the assessee: Topman Exports vs. CIT [2012] 342 ITR 49 (SC); CIT vs. Arts Crafts Exports [2012] 246 CTR 463 (Bom) (22 taxmann.com 53 (Bom)); CIT vs. Motorala India Electronics (P.) Ltd. (Kar) (in ITA Nos. 428 427 of 2007 dated 11.12.2013); Arts Crafts Exports vs. ITO [2012] 66 DTR 69 (Mum- Trib); Rajesh Exports Ltd. vs. Asst. CIT (in ITA No. 51/Bang/2008 dated 14.08.2008). The decisions relied upon by the Revenue-appellant are on the premise that deduction u/s.10B, though on the income derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue that the decision by the apex court in Liberty India (supra), vigorously relied upon by it before us as well as in the other decisions relied upon by it, has no relevance in the facts of that case. In view thereof, the hon ble court declined to entertain the third question of law raised by the Revenue before it, and did not thus answer the same, which is the only pertinent question as far as the issue/s arising in this appeal is concerned. 6.2 The second question before us is if the matter, in view of the conflicting and differing views by the different courts and tribunal, ought to be referred by us to a larger bench, so as to conform to the principle of judicial proprietary. Toward this, we observe that both the parties have relied upon a decision/s each by the hon ble high court. The same, being an appellate forum higher in judicial hierarchy than the appellate tribunal, no useful purpose would be served by referring the matter to a larger bench of the tribunal, even as the decision by the non-jurisdictional high court is persuasive and not binding on this tribunal (refer: CIT v. Thane Electricity Supply Ltd. [1994] 206 ITR 727 (Bom.)). In fact, this specific propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation are the words profits and gains as are derived by a hundred per cent export-oriented undertaking from the export for articles or things or computer software . , occurring in section 10B(1), which confers as well as delineates the scope of the deduction. Implicit therein is the condition of the profits of the eligible undertaking derived from its business as being the qualifying profits. Vide sub section (4) of section 10B, the profit derived by a hundred per cent export-oriented undertaking (EOU) from export of eligible goods is deemed to be an appropriate fraction, i.e., the ratio of the export turnover of such goods to the total turnover of the undertaking. Clearly, therefore, the profits derived from the export (of the eligible goods) are a part of that derived from the business of the eligible undertaking, determined by allocating the same in the ratio of the export turnover of the relevant goods to the total turnover of the undertaking. It is only the profits derived from more than one source that could be appropriated or allocated thus, i.e., amongst the different sources from which it arises, and which is what is contemplated by or the provision of s. 10B(4) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3 and 4.4(c) is relevant in this regard, which also makes reference to the decision by the apex court in Liberty India (supra), which has application in-as-much as the words used in section 80IB are derived from the business of the undertaking or derived from the eligible business . 6.4 For the reason afore-mentioned, we are unable to subscribe to the view expressed per the decisions relied upon by the assessee, i.e., that in view of computational formula of section 10B(4), the entire profits of the business of the undertaking, irrespective of their immediate source, shall comprise the qualifying profits. The words profits of the business of the undertaking , occurring in section 10B(4), have to be accorded a contextual meaning and, therefore, are circumscribed by the qualifying condition of section 10B(1). As explained earlier, implicit in the proportionate formula (of section 10B(4)) is the condition that the profits being allocated thus are derived from such business of the eligible undertaking. It is only where they are so that the further restriction, i.e., to that derived from the relevant exports, could be derived or arrived at. All that was therefore required, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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