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TMI Blog2019 (10) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... der the head "Profit and gains of business or profession" under section 28 (iiib)/(iiid) of Income tax Act. 2. Ld. CIT (A) was not justified in denying deduction u/s 80IB on Rs. 42,52,425/- which was the business profit, noticed in form of discrepancy in quantity/valuation of business stock in survey, derived by the assessee from eligible business and disclosed under other head of income at the insistence of Survey Team." 2. At the outset, it is noted that the Ground No. 1 is decided against the assessee by the Co-ordinate Bench vide its order dated 30.01.2017 (ITA No. 285- 288/JP/2016) and the relevant findings reads as under:- "We have heard the rival contentions of both the parties, perused the material available on the record and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne what these provisions prescribe for "computation of profits of the eligible business". 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 words, by using 'the expression " derived from", Parliament intended to cover sources not beyond the first degree. After analyzing the provision, it 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the ld CIT(A) has followed the decision of the Tribunal as well as the decision of the Hon'ble Rajasthan High Court and therefore, the order of the ld CIT(A) should be confirmed. 5. In light of above discussions, respectively following the decision of the Hon'ble Rajasthan High Court, the matter is decided against the assessee. In the result, the ground of appeal is dismissed. 6. Regarding Ground No. 2, briefly stated, the facts of the case are that the assessee is engaged in the business of manufacturing of Guwar Gum & Churi etc and has claimed deduction u/s 80IB of the Act. During the course of assessment proceedings, the Assessing Officer observed that the assessee has included the surrendered income of Rs. 42,52,425/- while calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show the surrendered amount separately in its P&L account for the reason that deduction u/s 801B of IT Act on net profit could be denied. Had the assessee included the surrendered amount in its closing stock (actual stocktaking), the assessee would have been allowed deduction u/s. 801B of IT Act on its net profit. 9. It was further submitted that the AO did not agree that the closing stock is the actual stock taking at the close of the year which is valued at cost or market whichever is lower and therefore, the closing stock so arrived at is inclusive of surrendered amount, not requiring to be shown separately in P&L account. However if the amount of surrender is enhanced in actual closing stock which is correct as per principle of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in both scenarios, the nature of surrender would remain the same as excess undisclosed stock of Guwar and the excess stock thus found will form part of the closing stock & Churi etc and has rightly claimed deduction u/s 80IB of the Act. In our view, under the double entry system of accounting, where any unaccounted stock is brought in the books of accounts, the stock account is increased by value of unaccounted stock and corresponding entry is passed whereby investment in such unaccounted stock is credited to the profit/loss account. In the instant case, it is not clear how the assessee has passed the double entry in its books of accounts and how the same has been considered for claiming deduction under section 80IB of the Act in absence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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