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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 ..... 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 against assessee Denying deduction u/s 80IB - 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 - HELD THAT:- 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 unaccoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b)/(iiid) of Income tax Act. 2. Ld. CIT (A) was not justified in denying deduction u/s 80IB on ₹ 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 also gone through the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as procedural provision. Therefore, we need to examine 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Rajasthan High Court wherein the appeal of the assessee has been dismissed. It was further submitted that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l stock taking but in order to co-operate with the Department, assessee agreed for surrender. 8. It was further submitted that the assessee was asked by Survey Team 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amount in its profit and loss account and has claimed deduction thereon under section 80IB of the Act. The contention of the assessee is that had the same been shown as part of closing stock, the closing stock value would have increased by an equivalent amount and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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