Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs M/S. Hritnik Exports Pvt. Ltd., New ... on 10 July, 2017
1 ITA NO. 4322/Del/2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'C' NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No. 4322/DEL/2014 (A.Y .2010-11)
ITO Vs Hrithik Exports Pvt. Ltd.
Ward-12(4) 225, Karishma Apartments,
New Delhi 27, I. P. Extension
(APPELLANT) New Delhi
AAACH9458A
(RESPONDENT)
Appellant by Sh. R. S. Singhvi, CA
Respondent by Sh. Arun Kumar, Sr. DR
Date of Hearing 05.07.2017
Date of Pronouncement 10.07.2017
ORDER
PER SUCHITRA KAMBLE, JM
The appeal is filed by the Revenue against the order dated 9/6/2014 passed by CIT(A)-XIII, New Delhi for Assessment Year 2010-11.
2. The grounds of appeal are as under:-
"1. On the facts and in the circumstances, of the case, the order of CIT(A) is wrong, Perverse, illegal and against the provisions of law which is liable to be set aside.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of receipt of duty drawback of Rs.58,99,364/- u/s 10B of the IT Act, 1961, to the assessee company."2 ITA NO. 4322/Del/2014
3. The return of income declaring total income at Rs.1,79,850/- was filed by the assessee company on 8/10/2010. The return was processed u/s 143(1). The case was selected for scrutiny under CASS. Accordingly, first notice u/s 143(2) dated 24/8/2011 was issued and duly served upon the assessee on 26/8/2011. In response to subsequent statutory notices the authorized representative of the assessee attended from time to time & filed necessary details. The company was incorporated on 28/6/2001 with Registrar of Company (NCT) Delhi & Haryana, with the main object to carry on the business of manufacture, trader of readymade garments/fabrics. The assessee company has not commenced any business till 31/3/2003 except acquiring an industrial land from Noida Authority for constructing factory building located at D-143, Hosiery Complex, Phase-II Extn., Noida. The assessee company commenced its business during Financial Year 2003-04 and incurred loss of Rs.70430/-. The assessee company was also granted a status of 100% Export Oriented Undertaking w.e.f. 3/10/2007. During the year under consideration, the assessee company has claimed deduction u/s 10B of the IT Act amounting to Rs.83,97,846/-. The Assessing Officer noticed that the assessee also claimed receipt of duty drawback of Rs.58,99,364/- as deduction. Accordingly, the Assessing Officer held that 'duty drawback' receipts are not eligible for deduction u/s 10B of the IT Act, 1961 and thus, duty drawback Rs.58,99,364/- claimed as deduction u/s 10B was added back in the total income of the assessee.
5. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee by following the decision of the Tribunal In ITA No. 2111/Del/2013 for Assessment Year 2009-10 in assessee's own case and deleted the addition made by the Assessing Officer . The Revenue is before us.
6. The Ld. AR submitted that the Tribunal in Assessment Year 2009-10 dismissed the appeal filed by the Department which is confirmed by the 3 ITA NO. 4322/Del/2014 Hon'ble Delhi High Court in ITA No. 219 of 2014 vide order dated 13/11/2014. Thus, the matter is covered as the issue therein is also related to Section 10B Sub Section 1 of the Income Tax Act.
7. The Ld. DR did not distinguish the same.
8. We have heard both the parties and perused the order in assessee's own case passed by this Tribunal as well as order passed by the Hon'ble Delhi High Court. The issue is very much covered by these orders. The extract of the Tribunal order is as follows:-
5. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that the only issue in dispute is regarding eligibility of duty draw back for the computation of deduction u/s 10B of the Act. The issue is squarely covered in favour of assessee vide Special Bench decision in the case of Moral Overseas Ltd. (supra). The ITAT has discussed similar situation vide paras 78 to 80 of the said order which is reproduced as under:-
78. Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100% EOU. Section 10B(4) lays down special formula for computing the profits derived by the undertaking from export. The formula is as under Profit of the business of the Export turnover Undertaking X Total turnover of business carried out by the undertaking
79. Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, not-with-standing the fact that sub-section (1) of section 10B refers the profits and gains as are derived by a 100% EOU, yet the manner of determining such eligible profits has been statutorily defined in sub-section (4) of section 10B of the Act. As per the formula stated above, the entire profits of the business are to be taken which are multiplied by the ratio of the 4 ITA NO. 4322/Del/2014 export turnover to the total turnover of the business. Subsection (4). does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits. The mode of determining the eligible deduction u/s 10B is similar to the provisions of section 80HHC inasmuch as both the sections mandates determination of eligible profits as per the formula contained therein. The only difference is that section 80HHC contains a further mandate in terms of Explanation (baa) for exclusion of certain income from the "profits of the business"
which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub-section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the "profits of the business" eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. The CBDT Circular No. 564 dated 5th July, 1990 reported in 184 ITR (St.) 137 explained the scope and ambit of section 80HHC and the mode of determination of profits derived by an assessee from the export of goods. I.T.A.T., Special Bench in the case of International Research Park Laboratories vs. ACIT, 212 ITR (AT) 1, after following the aforesaid Circular, held that straight jacket formula given in sub-section (3) has to be followed to determine the eligible deduction. The Hon'ble Supreme Court in the case of ; -P.R. Prabhakar; 284 ITR 584 had approved the principle laid down in the Special Bench decision in International Research Park Laboratories vs. ACIT (supra). In the assessee's own case the I.T.A.T. in the preceding years, after considering the decision in the case of Liberty India held that provisions of section 10B are different from the provisions of section 80IA wherein no 77 formula has been laid down for computing the eligible business profit.
5 ITA NO. 4322/Del/201480. In view of the above discussion, question no. 2 is answered , in affirmative and in favour of the assessee. Accordingly, the assessee is eligible for claim of deduction on export incentive received by it in terms of provisions of section 10B(1) read with section 10B(4) of the Act.
The facts and circumstances of the present case being similar to the facts of the above Tribunal order, therefore, we do not see any infirmity in the order of Ld CIT(A).
6. In the result, the appeal filed by the revenue is dismissed."
The facts of A.Y. 2009-10 are similar to the present assessment year, therefore, the Revenue's appeal does not survive.
9. In result, appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 10th JULY, 2017.
Sd/- Sd/-
(R. K. PANDA) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 10/07/2017
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
6 ITA NO. 4322/Del/2014
Date
1. Draft dictated on 05/07/2017 PS
2. Draft placed before author 06/07/2017 PS
3. Draft proposed & placed before .2017 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS 10.07.2017
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 10.07.2017 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.