9911796707
TMI Blog2015 (3) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... India Cine Agencies v. CIT [2008 (11) TMI 15 - SUPREME COURT ]. In view thereof, we hold that the assessee was engaged in the production of finished honey and the profits and gains arising from such activity were eligible for deduction under section 10B of the Act as the assessee fulfils the condition of being 100 per cent. export oriented unit and total sale proceeds were received in foreign exchange by the assessee. In the totality of the facts and circumstances, we are in conformity with the finding of the Assessing Officer that the assessee was eligible for the claim of deduction under section 10B of the Act. - Thus where the order of the Assessing Officer in coming to the conclusion that the assessee is entitled to claim of deduction under section 10B of the Act, was erroneous, there was no merit in exercise of revisionary jurisdiction by the Commissioner of Income-tax under section 263 of the Act. Accordingly, we cancel the directions issued by the Commissioner of Income-tax under section 263 of the Act in setting aside the assessment made by the Assessing Officer in this regard and hold that there was no error in the order of the Assessing Officer in granting exemption unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced rates where the assessee is in receipt of duty drawback, DEPB, we are of the view that the incentives received by the assessee under the "Vishesh Krishi Upaj Yojna" as an export incentive were given to the assessee to neutralise the incidence of high transport cost and also to offset other disadvantages. The said neutralisation as in the case of the hon ble Supreme Court in the case Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT ] is linked to the FOB value of exports by way of duty credit scrip. The said benefits are provided by DGFT in the case of the assessee and the said scheme being similar to the scheme of grant of Duty Drawback/DEPB and in turn applying the ratio laid down by the hon ble Supreme Court in the case of Liberty India v. CIT [supra] we hold that the assessee is not entitled to the claim of deduction under section 10B of the Act on the said incentives. In view thereof, we uphold the order of enhancement passed by the Commissioner of Income-tax in exercise of its jurisdiction under section 263 of the Act - Decided against assessee. Claim of expenditure of commission paid to Shri Parminder Thapar - CIT(A)had set aside the issue observing that the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax-II, Ludhiana, dated March 24, 2011, relating to the assessment year 2006-07 against the order passed under section 263 of the Income-tax Act, 1961. The appeal in I. T. A. Nos.1210 and 1211/Chd/2012 are filed by the assessee against the consolidated order of the Commissioner of Income-tax (Appeals) dated September 20, 2012, against the order passed under section 143(3) read with section 263 and 143(3) of the Act, respectively. The appeal in I. T. A. No. 690/Chd/2011 is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) dated April 13, 2011, against the order passed under section 143(3) of the Act. All the four appeals relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. The assessee in I. T. A. No. 553/Chd/2011 has raised the following grounds of appeal: "1. That order under section 263 by the learned Commissioner of Income-tax-II, Ludhiana, is against law and facts on the file inasmuch as the assessment framed by the learned Assessing Officer cannot be said to be erroneous inasmuch as prejudicial to the interests of the Revenue. 2. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax, Ludhiana. The submission of the assessee are reproduced at pages 5 to 7 of the order passed under section 263 of the Act. One of the planks of arguments made by learned counsel before the Commissioner of Income-tax was that similar claim of exemption under section 10B of the Act has been decided by the Chandigarh Bench of the Tribunal in the assessee's own case relating to the assessment years 2004-05 and 2005-06. The Commissioner of Income-tax, Ludhiana, observed as under: "The decision of the hon'ble Income-tax Appellate Tribunal, Chan digarh Bench, dated March 31, 2009, mentioned above has been rendered in favour of the assessee on the ground that the Assessing Officer had adopted one view which was possible and that the Commissioner of Income-tax could not substitute his view in a subjective manner under the provisions of section 263 of the Act. However, in the case of the assessee for the assessment year 2006-07, which is under consideration, as brought out in the notice dated May 29, 2009, reproduced above, my predecessor clearly brought out a number of issues different from those for the assessment year 2004-05 and the assessment year 2005-06. He has men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the provisions of section 80HH/80-I of the Act. As the assessee had failed to draw distinction between various judgments pointed out in the notice issued under section 263 of the Act and the Assessing Officer's reliance on other decisions and also non-following of specific directions of the Additional Commissioner of Income-tax, under section 144A of the Act, as per the Commissioner of Income-tax, makes the order erroneous and as the exemption resulted into reduction in tax liability of the assessee, the same was prejudicial to the interests of the Revenue. The Commissioner of Income-tax further noted that the assessment in the case was completed by the Assessing Officer in great haste as the main work of assessment and decision making was carried out on the last date, i.e., December 30, 2008, when survey report under section 133B of the Act was also handed over to the Assessing Officer. As no survey under section 133A of the Act was carried out by the Assessing Officer, the Commissioner of Income-tax observed that further enquiry was necessary in the case and mere failure to make such enquiry makes the order erroneous. Further, the Revenue has also filed an appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative for the assessee pointed out that the assessment in the case was completed under section 143(3) of the Act vide order dated October 30, 2008, at total income of ₹ 77,84,513. It was further pointed out by the learned authorised representative for the assessee that thereafter show-cause notice was issued by the Commissioner of Income-tax is placed at pages 1 to 4 of the paper book and the reply of the assessee dated February 9, 2010, is placed at pages 6 to 10 of the paper book. In the said show-cause notice issued, the learned authorised representative for the assessee met with all the objections raised in show-cause notice of the Commissioner of Income-tax para-wise. In respect of the first objection of claim of exemption under section 10B of the Act, the learned authorised representative for the assessee pointed out that during the assessment proceedings, queries were raised to which reply was filed by the assessee and reference was made under section 144A of the Act and further replies were filed during the assessment proceedings. The Assessing Officer thereafter passed order under section 143(3) of the Act and invoking of the jurisdiction by the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned authorised representative for the assessee pointed out that there was no claim of additional depreciation during the year under consideration. Our attention was drawn to the query raised by the Assessing Officer and replies by the assessee. The third objection of the Commissioner of Income-tax was in respect of incentives received by the assessee. The learned authorised representative for the assessee pointed out that the assessee is in the business of export and incentives received were by virtue of exports and the same is not disputed. The Assessing Officer had considered the replies of the assessee and allowed the claim, whereas the Commissioner of Income-tax has held the assessee not entitled to the claim of deduction under section 10B of the Act on the said incentives and income has been enhanced by the Commissioner of Income-tax. It was pointed out by the learned authorised representative for the assessee that on merits of the case, the assessee was entitled to the said deduction. Further contention of the learned authorised representative for the assessee was that once the issue has been decided by the Assessing Officer, the Commissioner of Income-tax cannot su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v. Relish Foods [1999] 237 ITR 59 (SC) ; (v) CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174 (SC) ; and (vi) B. G. Chitale v. Deputy CIT [2008] 305 ITR (AT) 81 (Pune) [SB]. 12. The learned Departmental representative further submitted that what the assessee was doing collecting honey, processing and making the same marketable and the same is not tantamount to manufacture. In respect of issue of additional depreciation, the learned Departmental representative for the Revenue pointed out that no directions were issued by the Commissioner of Income-tax in this regard. The next issue was the incentives received by the assessee and the same being eligible for deduction under section 10B of the Act. The learned Departmental representative for the Revenue pointed out that though the Assessing Officer had called for details but not discussed the legal position and the said legal position had been addressed by the Commissioner of Income-tax at page 13 in paragraph 6 of his order. It was further pointed out by the learned Departmental representative for the Revenue that 5 per cent. of export value was given as licence by DGFT and no money in cash was given. The money was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details, such view was being taken. The learned authorised representative for the assessee further submitted that there was no definition of the word "manufacture" under section 10B of the Act but the definition as provided in Explanation 1 (iii) to section 10AA of the Act may be considered. The learned authorised representative for the assessee had furnished compilation of documents which would be considered in paragraphs herein- after. The copy of chart showing differences between raw honey and finished honey is also placed at pages 131 and 132 of the paper book. 15. The learned Departmental representative for the Revenue, after the close of the appellate proceedings vide letter dated July 16/29, 2013 had filed written submissions and it was pointed out that the fact of the case in the assessment year 2006-07 were different from that in the assessment years 2004-05 and 2005-06 as the order in the assessment year 2006-07 has been passed by the Assessing Officer without any enquiry and application of mind to both issues and hence, the Commissioner of Income-tax was justified in invoking the provisions of section 263 of the Act. Reliance is placed on various decisions fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT and mere registration under the central excise or other Government authorities for the purpose of administrative or statutory compliance was held to be not sufficient ground to conclude that the assessee was engaged in manufacture or production of honey. Reliance was placed on series of decisions by the learned Departmental representative for the Revenue and it was further contended that if the change made in the article results in new and different article, then the same would amount to manufacturing activity. Reliance was placed on the ratio laid down by the hon'ble Mumbai Customs, Excise and Gold Tribunal in the case of Charak Pharmaceuticals India Pvt. Ltd. v. CCE (copy placed on record) wherein the hon'ble Bench has held that honey procured from apiaries and subjected to processing such as heating, cooling, staining, filtration and then packed in the containers for marketing does not amount to manufacture and not excisable. 17. We have heard the rival contentions and perused the record. Original assessment in the case of the assessee was completed under section 143(3) of the Income-tax Act and the assessee was held to be eligible for claim of deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of deduction under section 10B of the Act with respect to the concept of manufacturing. The reply of the assessee dated December 26, 2008, in this regard is placed at pages 86 to 90 of the paper book in which the assessee explained various aspects of its manufacture and also pointed out that the definition of production and manufacture have been considered by the hon'ble Supreme Court in India Cine Agencies v. CIT [2009] 308 ITR 98 (SC) and the term "production" includes packing, labelling, relabelling of containers ; repacking from bulk packages to retail packages and adoption of any other method to render the produce marketable. In view of the definition, as referred to by the hon'ble Supreme Court in India Cine Agencies v. CIT [2009] 308 ITR 98 (SC), it was pointed out that the assessee was engaged in the manufacture/production of honey as the definition was wide enough to include all types of manufacturing activities undertaken by the assessee. The learned authorised representative for the assessee also pointed out that the finished honey was distinct in character and properties from the raw honey and various impurities, wax, moisture were reduced and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally authorised inspec tion processes. Such unauthorised inspection procedures are prejudicial to the sanctity of the tax administration and any findings made there suffer from irregularity. B. Secondly, to adjudge changes in the chemical properties, as found by the inspectors, technical qualification and knowledge is obviously necessary. There is nothing on record to suggest that the inspectors were so qualified. Therefore, the findings of the inspectors should not have been taken into consideration by the Assessing Officer in the process of adjudicating the claim for deduction under section 10B. C. Thirdly, though it is claimed that the extent of transformation of raw honey results in the finished honey becoming a distinct commodity, nothing is brought on record such as any technical benchmarks or standards to substantiate the claim that the finished honey represents a distinct product at least in technical terms. The records do not indi cate that the technical parameters of finished honey are distinct from those of raw honey. Mere variations in percentage terms of contents of sugar, moisture and micro biological properties cannot impart technical distinctiveness to finis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 307 (SC), Lucky Minmat Pvt. Ltd. v. CIT [2000] 245 ITR 830 (SC), CIT v. Tara Agencies [2007] 292 ITR 444 (SC), CIT v. Kala Cartoons P. Ltd. [2001] 252 ITR 658 (SC), etc. 3. The Assessing Officer failed to take into consideration the deci sion of the hon'ble Supreme Court in CIT v. Relish Foods [1999] 237 ITR 59 (SC) and CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174 (SC) which he was directed to do so by the Additional Com missioner of Income-tax, Range vide his direction under section 144A issued on October 22, 2008. (Instruction. No-1). In view of these facts I have reason to believe that the Assessing Officer has erred in law and on facts in allowing deduction under sec tion 10B of ₹ 5,79,59,512 on the processing of honey done by you." 19. The issue arising before us is two fold. The first aspect of the issue raised before us is whether the assessee is engaged in the manufacturing activities which entitles it to the claim of exemption under section 10B of the Act. The second aspect of the issue is whether the exercise of revisionary jurisdiction by the Commissioner of Income-tax under the provisions of section 263 of the Act has been correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee for processing raw honey into finished honey. 21. The Government of India vide Foreign Trade Policy, 2002, under Chapter 25 had formulated scheme for export oriented units (EOUs). The purpose of the scheme was to boost the exports by creating additional production capacity. Under the scheme the exporters were willing to set up units with long-term commitment to exports under customs bond operations and freedom was given to the said persons to set up the units at the places of choice and was not necessary to set up units in free trade zone/ export processing zone. However, the benefits under the said scheme were provided as provided to the units set up in zone. The benefits which was extended to export oriented units were provided to give them a competitive edge to compete in the export market and the same were as follows : I. Export oriented units are allowed to procure raw materials/capital goods duty free, either through import or through domestic sources ; II. Reimbursement of Central Sales Tax (CST) ; III. Reimbursement of duty paid on fuels procured from domestic oil companies ; IV. CENVAT credit on the goods and service and refund thereof ; V. Fast tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll decisions relating to the export oriented units were taken by the board of approvals set up under the Department of Commerce, which in turn is chaired by the Secretary, Ministry of Commerce. One of the requirements to set up a unit as an export oriented unit was that the premises of export oriented unit were to be approved as a customs bonded warehouse under the warehousing provisions of the Customs Act. The manufacturing and other operations were carried out under customs bond and the unit bore appropriate charges for officers on cost recovery basis. In case of units in aquaculture, horticulture, floriculture, granite quarrying, etc., exemption from bonding was given for administrative reasons with certain other safeguards being put in place to check that duty free benefits where availed of were not abused. The export oriented units were required to execute multi-purpose bond with surety/security with jurisdictional Central Excise and Customs officers (Refer Circular No. 15/ 95-Cus., dated February 23, 1995). Further under the EOU scheme, the units were allowed to import or procure locally without payment of duty, all types of goods including capital goods, raw materials, compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Commissioners or their private records approved by the Commissioner. (Refer Circular No.88/98-Cus., dated December 2, 1998). Import/procurement of goods by an export oriented unit for use in manufacture or in connection with production or packaging of goods for export is exempted from payment of customs and central excise duties. Export oriented units execute a general purpose B-17 bond along with surety or security covering the duty foregone on imported goods. This bond is prescribed under Notification No. 6/ 98-CE (NT) dated March 2, 1998, as general bond to be executed by the export oriented units for provisional assessment of goods to central excise duty, for export of goods and for accounting/disposal of excisable goods procured without payment of duty. This bond also takes care of the interests of Revenue against risks arising out of goods lost in transit, goods taken into domestic tariff area for job work/repair/display, etc., but not brought back. Basically the B-17 bond is an "all purpose" bond covering liabilities of the export oriented unit both under Customs and Central Excise Acts. However, it does not cover the differential duty amount against advance DTA s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture in the bond of the scheduled cost, in the premises and from the imported materials described in the said application. The assessee has further placed the copy of the licence issued by the Deputy Commissioner, Central Excise Division-I, Ludhiana, dated April 20, 2004 and Customs Bond Registration Certificate under which the assessee is authorised to be engaged in the manufacture of other operation in the manufacture of honey, beeswax sheets. Further the assessee at page 180 had placed on record Form RC, i.e., Central Excise Registration Certificate issued by the Deputy Commissioner, Central Excise Division-I, Ludhiana, on January 30, 2004, for registering the assessee for operating an export oriented undertaking at G.T. Road, Village Mallipur, Doraha, Ludhiana for the purpose of carrying on the activity for which an application was moved. The copy of registration-cum-partnership certificate issued by the Agricultural and Processed Food Products Export Development Authority (APEDA), Ministry of Commerce issued on February 10, 2004, is placed at page 185 of the paper book under which also the assessee is registered and recognised as manufacturer. In order to establish its unit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the previous year in which the manufacture or production is started by the undertaking. Under the provisions of section 10B of the Act exemption is allowed to such person who had established 100 per cent. export oriented units under which it manufactures or produces articles or things or computer software. As referred to before us in the paras hereinabove the scheme for establishment of export oriented units has been formulated by the Foreign Trade Policy, 2002, which lays down various procedures to be followed in addition various registrations to be obtained by the manufacturing unit and restrictions are placed upon the warehousing being customs bonded warehouse. The assessee in the present case and as referred to before us in the paras hereinabove has been registered as 100 per cent. export oriented unit. The purpose of the scheme itself reflects that establishment of such export oriented units is basically to boost exports by creating additional production capacity. So in order to recognize it as an export oriented unit, the assessee has to be engaged in manufacture or production of any articles or things or computer software. The statute has clearly laid down that the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh and Uttranchal. As Schedule-XIV of Income-tax Act is meant for promotion for things/products which are manufactured and not for trading of items, the Schedule given under section 80-IC of the Act categorically lays down that the section applies to any undertaking or enterprise which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule. Following the abovesaid reasoning it could not be said that the assessee was not engaged in the manufacture of honey, though not in the State of Himachal Pradesh. 29. The difference between raw honey and finished honey has been pointed out by the assessee and there is change in characteristics, i.e., both physical and chemical and also the purity aspects of raw honey and finished honey. All the aspects of both the raw honey and finished honey had been tabulated at page 188 of the paper book which are as under : III. Change in characteristics : Physical, chemical, residual and purity aspects Sr. No Parameter Raw honey (nectar) Finished honey (country/buyer specific requirement maintained during manufacturing) 1. Colour 8 mm-114 mm and above on P-fund sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down by the hon'ble Supreme Court in the case of India Cine Agencies v. CIT [2009] 308 ITR 98 (SC). 32. In view thereof, we hold that the assessee was engaged in the production of finished honey and the profits and gains arising from such activity were eligible for deduction under section 10B of the Act as the assessee fulfils the condition of being 100 per cent. export oriented unit and total sale proceeds were received in foreign exchange by the assessee. In the totality of the facts and circumstances, we are in conformity with the finding of the Assessing Officer that the assessee was eligible for the claim of deduction under section 10B of the Act. 33. We find that the Tribunal in the assessee's own case in I. T. A. Nos. 36 and 37/Chd/2009 in the assessment years 2004-05 and 2005-06, vide order dated March 31, 2009, considered the issue of exercise of revisionary powers of the Commissioner under section 263 of the Income-tax Act and also took into consideration factual aspects of the activity carried out by the assessee as to whether the same amounted to "manufacture" or "production", or not. The Tribunal vide paragraph 13 observed as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Cine Agencies reported at [2003] 261 ITR 491 (Mad). The hon'ble High Court held that the reduction of the size of jumbo photographic paper rolls into easily marketable desired sizes with the help of slitting machines did not amount to either 'manufacture' or 'production'. Ostensibly, the assessee claimed before the hon'ble Madras High Court that, on the basis of the marketability test, the slitting of jumbo photographic paper into smaller rolls amounted to 'manufacture' or 'production'. The hon'ble High Court considered the marketability test being propounded before it and held that the slitting of jumbo photographic papers into smaller rolls does not amount to 'manufacture'. In fact, seen in the present context, the case made out by the assessee before the Assessing Officer and which has been accepted by the Assessing Officer is on a parallel to that before the hon'ble Madras High Court. The proposition did not find favour with the hon'ble Madras High Court. So, however, the decision of the hon'ble Madras High Court was carried before the hon'ble Supreme Court and the proposition has since been accepted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn is that of test of marketability. The Tribunal, on the basis of the marketability test, held that the assessee to be engaged in the production of honey and the exercise of power under section 263 of the Act by the Commissioner in holding that the Assessing Officer was not correct in accepting the activity undertaken by the assessee as amounting to "manufacture" or "production", was held to be not correct. After coming to the conclusion in respect of the application of test of marketability to the facts of the present case, another aspect considered by the Tribunal was vide paragraphs 15 and 16, which read as under : "15. Before we part, we may also refer to the approach of the Com missioner as it emerges from a reading of the concluding lines of the office note appended to the assessment order. In this case, the 'office note' of the Assessing Officer clearly points out that the case was also discussed with the then Commissioner of Income-tax-II, Ludhiana, 'in detail and the order is passed after taking verbal concurrence'. During the hearing it was confronted to the learned Departmental representative as to when the assessment has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10B of the Act. It was pointed out by the learned Departmental representative for the Revenue that the order passed by the Assessing Officer was erroneous in ignoring the ratio laid down by the hon'ble Supreme Court in the case of CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174 (SC) and CIT v. Relish Foods [1999] 237 ITR 59 (SC). 37. In rejoinder the learned authorised representative for the assessee pointed out that both said decisions are not applicable to the facts of the case as in the facts of the case before the hon'ble Supreme Court in CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174 (SC) the activity carried on by the assessee was the biological phenomena, i.e., hatching of eggs and hence it was held that the assessee was not engaging in any manufacturing activities. On the other hand, the assessee was not engaged in any biological activities. 38. We find merit in the plea of the assessee as there are two steps involved in bringing into existence the finished product, i.e., finished honey. The process of formation of honey in the raw form is biological phenomena which is undertaken by the bees. Thereafter the said honey is collected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty. In view thereof and our deliberation upon the issue hereinabove, we find no merit in the stand of the Revenue in this regard as we have already held that the assessee is engaged in the processing of honey. 42. The issue rising in the present appeal is in relation to the exercise of reversionary powers by the Commissioner of Income-tax under section 263 of the Act. The Commissioner of Income-tax under section 263 of the Act is empowered to revise such order passed by the Assessing Officer which are erroneous and prejudicial to the interests of the Revenue. The twin conditions of the order being erroneous and prejudicial to the interests of the Revenue are to be satisfied simultaneously for the Commissioner of Income-tax to exercise his powers under section 263 of the Act. If either of the conditions are not satisfied, then the Commissioner of Income-tax cannot take recourse to section 263 of the Act. 43. The hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) held as under (page 87) : "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsus tainable in law." 44. The hon'ble Punjab and Haryana High Court in CIT v. Munjal Castings [2008] 303 ITR 23 (P&H) had held as under : " No question of law warranting admission of the appeal would arise because there would be no tax effect as the interest income realised from the capital invested by the partners was bound to be assessed in their hands. They could not in any case, be taxed twice. Moreover, if the view taken by the Assessing Officer is one of the possible views then it cannot constitute the basis for the Commissioner to brush aside that view in preference to his own view in exercise of jurisdiction under section 263. In that regard the Tribunal had rightly placed reliance on a judgment of the Supreme Court in the case of Malabar Industrial Co. Ltd. [2000] 243 ITR 83, 88 (SC). It was, thus, evident that the Assessing Officer had taken one view which was probable if the same was examined in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional depreciation during the year under consideration, the order of the Commissioner of Income-tax on this ground in holding the order of the Assessing Officer to be erroneous and prejudicial to the interests of the Revenue is invalid and the same is set aside. Ground No. 4 raised by the assessee is thus allowed. 47. The next issue raised by the Commissioner of Income-tax in the order passed under section 263 of the Act was in relation to the profits on sale of incentives received from the Ministry of Commerce, Government of India and whether the same were eligible for deduction under section 10B of the Act. The assessee under the scheme of Ministry of Commerce, Government of India titled as "Vishesh Krishi Upaj Yojna" had received 5 per cent. of FOB value of exports and direct income of ₹ 2,80,87,433. The assessee claimed that the said receipts were directly linked to the export of articles made by the assessee, against which the assessee claimed deduction under section 10B of the Act. The income from the said scheme computed at ₹ 2,57,88,457 was claimed to be derived from hundred per cent. export oriented unit. However, the Commissioner of Income-tax hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008, placed at pages 65 to 72 of the paper book to which the details were annexed as annexure I. The said licences are granted by the DGFT, Ministry of Commerce and is equivalent to 5 per cent. of FOB value of the exports made by the assessee, which in turn is calculated on the basis of shipping bills/BRCs filed with DGFT. The value of licences worked to ₹ 2.23 crores on export sales of ₹ 46.46 crores for the financial year 2005-06 and ₹ 76.33 lakhs on export sales of ₹ 16.17 crores relating to the financial year 2004-05. The said licences were sold by the assessee during the year under consideration for ₹ 2.16 crores and ₹ 61 lakhs respectively totalling ₹ 2.78 crores. Further amount of ₹ 30 lakhs was provided on estimate basis for pending licences and the income of ₹ 2.80 crores was shown in the books of account on the basis of actual sale price of the licences/provision. The deduction under section 10B of the Act on the same had been claimed at ₹ 2,57,88,457. In the first instance where the queries had been raised by the Assessing Officer, which in turn had been replied to by the assessee and the issue having been consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it-linked incentives. Chapter VI-A of the Act which provides for incentives in the form of deductions essentially belongs to the category of 'profit- linked incentives'. Therefore, when section 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives : what attracts the incentives under section 80-IA/80-IB is the generation of profits (operational profits). It is for this reason that Parliament has confined deduction of profits derived from eligible businesses mentioned in sub-sections (3) to (11A). Each of the businesses mentioned in sub-sections (3) to (11A) constitutes a stand-alone item in the matter of computation of profits. Sections 80-IB and 80-IA are a code by themselves as they contain both substantive as well as procedural provisions. Section 80-IB provides for the allowing of deduction in respect of profits and gains derived from the eligible business. The connotation of the words 'derived from' is narrower as compared to that of the words 'attributable to'. By using the expression 'derived from' Parliament intended to cover sources not beyond the first degree . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med import content of the export product as per basic customs duty and special additional duty payable on such deemed imports. Therefore, in our view, DEPB/Duty drawback are incentives which flow from the schemes framed by the Central Government or from section 75 of the Customs Act, 1962, hence, incentive profits are not profits derived from the eligible business under section 80-IB. They belong to the category of ancillary profits of such undertakings." 55. In view of the ratio laid down by the hon'ble Supreme Court in Liberty India v. CIT [2009] 317 ITR 218 (SC) the issue to be considered is whether the incentive receipts under the "Vishesh Krishi Upaj Yojna" are the receipts on the first degree and entitled to the claim of deduction under section 10B of the Act. While denying the benefit of deduction under sections 80-I/80-IA and 80-IB of the Act on DEPB receipts, it was observed by the hon'ble Supreme Court in Liberty India v. CIT [2009] 317 ITR 218 (SC) that the object behind DEPB is to neutralise the incidence of customs duty payment on the import content of export product, which was provided for by way of credit to customs duty against export product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot;Vishesh Krishi Upaj Yojna" as an export incentive were given to the assessee to neutralise the incidence of high transport cost and also to offset other disadvantages. The said neutralisation as in the case of the hon'ble Supreme Court in the case Liberty India v. CIT [2009] 317 ITR 218 (SC) is linked to the FOB value of exports by way of duty credit scrip. The said benefits are provided by DGFT in the case of the assessee and the said scheme being similar to the scheme of grant of Duty Drawback/DEPB and in turn applying the ratio laid down by the hon'ble Supreme Court in the case of Liberty India v. CIT [2009] 317 ITR 218 (SC) we hold that the assessee is not entitled to the claim of deduction under section 10B of the Act on the said incentives. In view thereof, we uphold the order of enhancement passed by the Commissioner of Income-tax in exercise of its jurisdiction under section 263 of the Act. Ground No. 5 raised by the assessee is thus dismissed. 59. The last issue raised in the revisionary order passed under section 263 of the Act is in relation to the claim of expenditure of commission paid to Shri Parminder Thapar amounting to ₹ 27,43,200. The Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, where we have held the assessee to be engaged in the processing of honey, and entitled to claim of deduction under section 10B of the Act, the order of the Commissioner of Income-tax (Appeals) is thus reversed. The Assessing Officer is directed to allow deduction under section 10B of the Act to the assessee. Ground No. 1 raised by the assessee is allowed. 62. The issue vide ground of Appeal No. 2 is against the allowance of deduction under section 10B of the Act at 100 per cent. instead of 90 per cent. allowed by the Assessing Officer. Under the provisions of section 10B of the Act the assessee is entitled to the claim of deduction of such profits and gains as are derived from 100 per cent. export oriented unit. The second proviso under section 10B of the Act provides that for the assessment year beginning on the first day of April, 2003, the deduction shall be 90 per cent. of the profits and gains derived by an undertaking from the export of such articles or things or computer software. In view of the provisions of the Act wherein it has been provided that for the assessment year beginning on the first day of April, 2003, the deduction would be restricted to 90 per cent. of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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