Income Tax Appellate Tribunal - Jaipur
Neel Kanth Gum & Chemicals, Jaipur vs Acit, Jhunjhunu on 1 October, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH 'B' JAIPUR
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BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 613/JP/2019
fu/kZkj.k o"kZ@Assessment Year :2013-14
M/s Neel Kanth Gum & Chemicals, cuke ACIT,
Near Railway Station, Sardarshahar Vs. Jhunjhunu
(Churu)
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFN6786C
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri G. M. Mehta (CA)
jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 26/09/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 01/10/2019
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 01.03.2019 wherein the assessee has taken the following grounds of appeal:-
"1. Ld. CIT(A) has erred in law in denying deduction under section 80IB of Income tax Act under the head Duty Drawback, VKGUY and FPS Premium, being amount received from Central Government and chargeable to tax under 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 ITA No. 613/JP/2019 M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu 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 orders of the authorities below. The Assessing Officer noted that the assessee has claimed an amount of Rs. 17,38,256/- under the head V.K.G.U.Y (Vishesh Krishi Gram Udhyog Yojana) and Rs. 1,68,379/- on account of DEPB. Both these amounts being incentive to the assessee, do not qualify for deduction U/s 80IB of the Act, whereas the assessee has claimed these amounts as deduction U/s 80IB of the Act. Now the issue to be deiced whether the Assessing Officer was correct in holding that the assessee was not entitled for deduction U/s 80IB in respect of amount of Rs. 17,38,256/- under the head VKGUY and Rs. 1,68,379/- on account of DEPB. Ld. Counsel has heavily relied on the provisions of Section 28(iiib) and 28(iiid) of the Act, for the sake of clarity, the same is reproduced herein below:-
"(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ;
(iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992).2 ITA No. 613/JP/2019
M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu The Hon'ble Supreme Court in the case of Liberty India Vs. CIT (supra) after adverting to relevant provisions has held that Section 80IB/80IA are the code by themselves as they contain both substantive as 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 on the import content of export product. This neutralization is provided for by credit to customs duty against export 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. The ld AR of the assessee has relied upon the judgment of the Hon'ble Supreme Court in the case of Nissan Exports Vs. CIT (supra), the deduction as claimed falls U/s 80HHC of the Act and also in the case of Global Agro Products Pvt. Ltd. Vs. ITO (supra) pertains to claim of deduction U/s 80HHC of the Act, therefore, this would have application on the facts of the present case. Accordingly, in the light of the ratio laid down by the Hon'ble Supreme Court in the case of Liberty India Vs CIT (supra), we do not see any reason to interfere in the order passed by the ld. CIT(A), therefore, the order passed by the ld. CIT(A) is hereby confirmed."
3 ITA No. 613/JP/2019M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu
3. The ld AR has contended that the assessee has not accepted the aforesaid order of the Tribunal and has filed an appeal before the Hon'ble Rajasthan High Court. He further submitted that though the assessee has not got any relief from the Hon'ble Rajasthan High Court, the assessee has preferred an SLP before the Hon'ble Supreme Court.
4. Per contra, the ld DR submitted that filing of an SLP before the Hon'ble Supreme Court is not an estoppel against the decision of the Hon'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 assessment proceedings, the Assessing Officer observed that the assessee has included the surrendered income of Rs. 42,52,425/- while calculating the gross total income for working out eligible deduction u/s 80IB of the Act and a show cause was issued to the assessee. In response, the assessee submitted that at the time of survey, it was understood that this income is from business and consisted of income due to some discrepancies in the stock and cash found at the time of survey and deduction u/s 80IB was allowable as this income is derived directly from the purchase and sale of goods for which survey u/s 133A was carried out. However, the Assessing Officer was of the view that the 4 ITA No. 613/JP/2019 M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu amounts surrendered by the assessee at the time survey proceedings u/s 133A does not fall within the expression "profit derived from" the Industrial undertaking and the deduction to that extent was denied to the assessee. On appeal, the same has been confirmed by the ld. CIT(A) and now the assessee is in appeal before us.
7. During the course of hearing, the ld. AR submitted that in this case, survey u/s. 133A of I.T. Act was conducted on 30.05.2012. During the course of survey, no incriminating material was found but the Survey Team persuaded the assessee to make surrender. For one reason or the other, Survey team pointed out some discrepancy in quantity and value of goods for which assessee was asked to make surrender Rs.42,52,425/-. Though the stock is valued on actual 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 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 accounting, on the same higher net profit of business, deduction under 5 ITA No. 613/JP/2019 M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu section 80IB of IT Act is allowable. Therefore both the lower authorities were not justified in denying deduction u/s. 8018 of I.T. Act on net profit which was inclusive of surrendered amount of 42,52,425/- appearing in profit and loss account.
10. The ld DR was heard who has relied on the order of the Assessing officer and submitted that the surrendered income is not profit derived from industrial undertaking and in absence of the same, the said amount of surrendered stock is not eligible for deduction under section 80IB of the Act.
11. We have heard the rival contentions and perused the material available on record. On perusal of the statement of Sh. Yogesh Kumar recorded during the course of survey on 31.05.2012 u/s 133A of the Act, the relevant question is question No. 13, and the response of Sh. Yogesh Kumar and the same are reproduced as under:-
"iz%13 losZ dh dk;Zokgh ds nkSjku eS- fuyd.B xe ,.M dSfedYl ds O;kikjhd laLFkku ij LVkWd dk HkkSfrd lR;kiu ds ckn izkIr LVkWd dh lwph eSa vkidks fn[kk jgk gwWa ftlesa xokj dk vkf/kD; LVkWd (Excess Stock) 14.04.2015 fDoaVy d`i;k bl vf/kd LVkWd dk Li"Vhdj.k ns ?
mRrj vkids }kjk HkkSfrd lR;kiu ls ftu vkf/kD; LVkWd xokj dk vkids }kjk eq>s crk;k x;k gS blds ckjs esa eSa vHkh dqN Hkh Li"V djus dh fLFkfr esa ugha gwWa D;ksafd esjs iwT ; nknkth dk LoxZokl gksus dh otg ls gekjk izfrLBku ij dk;Z lapkyu can gSA ysfdu eSa blds ,sot esa vkidks bl vkf/kd; LVkWd ij cuus okys dj dkss nsus ds fy, rS;kj gwWA ;g vkf/kd; (144.15 x 29500) = 42,52,425/- : gSa bl jkf'k ij dj 13,14,000/- dk pSd la 379650 fn- 15/9/2013 eSa vkidks ns jgk gwWaA
12. The excess undisclosed stock so found during the course of survey is thus the stock of Guwar which is used as a raw material for the manufacture of Guwar Gum, a fact not disputed by the Revenue. The assessee has reflected the amount surrendered on account of excess stock separately as surrendered 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 6 ITA No. 613/JP/2019 M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu 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 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 of working of deduction under section 80IB of the Act on record. Further, we find that there is no specific finding recorded by the ld CIT(A) in this regard though the assessee has raised this ground before the ld CIT(A). We are accordingly constrained to set-aside the matter to the file of the ld CIT(A) to examine the same afresh after providing reasonable opportunity to the assessee.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the Open Court on 01/10/2019.
Sd/- Sd/-
¼ lanhi xkslkbZ ½ ¼foØe flag ;kno½
(Sandeep Gosain) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 01/10/2019
*Ganesh Kr.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Neel Kanth Gum & Chemicals, Churu
2. izR;FkhZ@ The Respondent- ACIT, Jhunjhunu 7 ITA No. 613/JP/2019 M/s Neel Kanth Gum & Chemicals, Churu Vs. ACIT, Jhunjhunu
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 613/JP/2019} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 8