Income Tax Appellate Tribunal - Delhi
Madan Lal,, vs Department Of Income Tax on 22 September, 2004
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F'
'F' : NEW DELHI
BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND
SHRI C.L.SETHI, JUDICIAL MEMBER
ITA No.5170/Del/2004
No.5170/Del/2004
Assessment Year : 2001-
2001-02
Income Tax Officer, Vs. Shri Madan Lal,
Lal,
Ward-
Ward-1, Prop. M/s Ganpati Overseas,
Panipat. G.T.Road,
Panipat.
PAN No.AAIPT6895J.
(Appellant) (Respondent)
ITA No.5184/Del/2004
No.5184/Del/2004
Assessment Year : 2001-
2001-02
Shri Madan Lal, Vs. Income Tax
Tax Officer,
Prop. M/s Ganpati Overseas, Ward-
Ward-1,
G.T.Road, Panipat.
Panipat.
PAN No.AAIPT6895J.
(Appellant) (Respondent)
Revenue by : Shri H.K.Lal, Sr.DR.
Assessee by : Shri Ajay Wadhwa, CA.
ORDER
PER C.L.SETHI, C.L.SETHI, JM JM :
These are cross-appeals filed by the assessee as well as by the Revenue against the learned CIT(A)'s order dated 22.9.2004 passed in the matter of assessment made u/s 143(3) of the Income-tax Act, 1961 (the Act) for the AY 2001-02.
2. We shall first take up the appeal filed by the Revenue.
3. In this appeal filed by the Revenue, the following ground has been taken:-
2 ITA-5170 & 5184/D/2004 "On facts and in the circumstances of the case, the ld.CIT(A) has erred in law in directing the AO to allow deduction u/s 80IB on the amount of duty draw back of Rs.17,82,651/- by ignoring the principle exposited by the Hon'ble Supreme Court in the case of CIT Vs. Sterling Foods Ltd. 237-ITR-579 and the Hon'ble Madras High Court in the case of CIT Vs. Vishwanathan & Co., 261-ITR-737 and CIT Vs. Jameel Leathers and Uppers, 246-ITR-97 wherein it is held that export incentives do not form part of profit derived from industrial undertaking and are therefore one not includible in income for computing special deduction."
4. We have heard both the parties and have gone through the orders of authorities below. The issue whether amount of duty drawback is eligible for deduction u/s 80IB is now squarely covered by the decision of Hon'ble Supreme Court in the case of Liberty India - 317 ITR 218 where it has been held that the amount of duty drawback and other incentives are not eligible for deduction u/s 80IB of the Act. Respectfully following the decision of Hon'ble Supreme Court in the above referred case, we reverse the order of CIT(A) and restore that of the AO by holding that the assessee is not eligible to a deduction u/s 80IB in respect of duty drawback amounting to `17,82,651/-. Therefore, this ground raised by the Revenue is allowed and decided in favour of the Revenue.
5. Now, we shall come to the appeal filed by the assessee.
6. The first issue raised by the assessee is with regard to addition of `5,32,756/- made by the AO by estimating the gross profit rate at 22%. In this case, the assessee had shown gross profit of `53,17,568/- on sales of `2,65,87,835/- which gives a GP rate of 20% as against GP rate of 20% on sales of `70,88,731/- during the previous year relevant to the AY 2000-01 and GP rate of 28.21% shown during the AY 1999-2000 on sales of `33,46,663/-. The AO pointed out certain defects in the books of account of the assessee and stated that the assessee failed to 3 ITA-5170 & 5184/D/2004 furnish the requisite details. The AO, therefore, applied GP rate of 22% and made the addition of `5,32,756/- to the declared profit of the assessee. CIT(A) confirmed the AO's action.
7. We have heard both the parties and have gone through the orders of the authorities below. The assessee has not been able to point out any irregularity in the AO's order in rejecting the assessee's books of account in the light of specific defects pointed out by the AO. We therefore hold that the AO was justified in estimating the GP. However, keeping in view the fact that the assessee's turnover has been increased from `33,46,663/- and `70,88,731/- in the AY 1999- 2000 & 2000-01 respectively to `2,65,87,835/- in the current year, and in the light of the fact that the GP rate shown in AY 2000-01 was 20% only and in AY 1999-2000 GP rate was 28.21%, we hold that estimation of GP at 21% will be justified. It is well settled that when turnover increases, margin of profit decreases. The rate of GP in the immediate preceding assessment year was 20% but due to certain defects in the year under consideration, some addition is called for. We, therefore, estimate the GP at 21% which is to be applied for making addition on account of omission of profit in the year under consideration. The AO shall modify the assessment order accordingly.
8. Next ground is directed against CIT(A)'s order in confirming the addition of `10,000/- on account of packing expenses.
9. We have heard both the parties. It is not in dispute that packing expenses are part of trading account. The trading addition has already been made by estimating the GP at 21%. That would take care of this addition of `10,000/-. We, therefore, hold that no separate addition of `10,000/- is called for. Hence, the same stands deleted.
4 ITA-5170 & 5184/D/2004
10. Next ground is against the addition of `10,423/- on account of telephone expenses and addition of `10,620/- on account of vehicle expenses. In this case, the books of account have been rejected and the gross profit has been estimated by applying the GP rate. Therefore, no separate addition is called for on account of disallowance of expenses. Moreover, the disallowance has been made by the AO on ad-hoc basis to the extent of 1/5th of the total expenses, which has been reduced by the CIT(A) to 1/10th. Since the books of account have been rejected and addition on account of GP has been made, these additions are not separately called for. We, therefore, delete these additions.
11. Last ground raised by the assessee is with regard to assessee's claim of deduction u/s 80IB in respect of sale of DEPB license. This issue is squarely covered by the decision of Hon'ble Supreme Court in the case of Liberty India - 317 ITR 218 wherein it has been held that DEPB and duty drawback do not fall within the expression "profits derived from industrial undertaking" u/s 80IB of the Act and therefore, they are not eligible for deduction u/s 80IB. Respectfully following the decision of the Hon'ble Supreme Court, this ground raised by the assessee is rejected.
12. In the result, the appeal of the Revenue is allowed and that of the assessee is partly allowed.
Decision pronounced in the open Court on 28th January, 2011.
Sd/- Sd/-
(G.E.VEERABHADRAPPA)
(G.E.VEERABHADRAPPA) (C.L.SETHI)
(C.L.SETHI)
VICE PRESIDENT JUDICIAL MEMBER
Dated : 28.01.2011.
VK.
Copy forwarded to: -
5 ITA-5170 & 5184/D/2004
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar