Income Tax Appellate Tribunal - Jaipur
Neel Kanth Gum & Chemicals, Jaipur vs Acit, Jhunjhunu on 30 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 285 to 288/JP/2016
fu/kZkj.k o"kZ@Assessment Years : 2006-07, 2007-08, 2010-11 & 2012-13
M/s Neel Kanth Gum & cuke Assistant Commissioner of
Chemicals, near railway Vs. Income Tax,
station, Sardarshahr, Churu. Jhunjhunu.
TAN No.: AAEFN 6786 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.M. Mehta (CA)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 12/01/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/01/2017
vkns'k@ ORDER
PER: KUL BHARAT,J.M. All these four appeals are filed by the same assessee against the common order dated 27/01/2016 passed by the ld. CIT(A)-III, Jaipur pertaining to the A.Ys. 2006-07, 2007-08, 2010-11 & 2012-13.
2. Since the common issue is raised in all the appeals, therefore, the same are heard together and for the sake of convenience and brevity, a common order is being passed.
2 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT
3. For the purposes of facts, we take ITA No. 285/JP/2016 pertaining to A.Y. 2006-07. In this appeal, the assessee has raised only one effective ground, which is as under:-
"1. Ld. CIT(A) has erred in law and on facts in ignoring the legal grounds of appeal taken in original memo of appeal (Form No. 35) in respect of legality of reassessed framed under section 143(3)/148 of IT Act without issuing any statutory notice required under section 143(2) of IT Act within the time allowed under proviso to section 143(2) of IT Act.
(2) Without prejudice to ground No. (1), ld. CIT (A) has seriously erred in:
(i) Without any reason or adverse information in possessing, not admitting the status of the assessee firm as "Industrial undertaking", though it is manufacturer and exporter of Guwar Refined Splits etc., entitled, eligible, recognized as such and had received Rs.19,06,636/- on account of cash assistance in the form of DEPB (Duty Entitled Pass Book) and VKGUY (Vishesh Krishi Gram Udyog Yojana) from Government of India under its Schemes framed to encourage such manufacturers and Exporters.
(ii) Ld. CIT(A) was not justified in denying legally entitled deduction of Rs.4,76,659/- under section 80IB of IT Act, which is equal to 25% of the cash assistance of Rs. 19,06,636/- under DEPB and VKGUY by treating the said receipts as "incentive"
though such receipts are specifically categorized under the statute as "profit and gains of business 3 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT or profession" under section 28(iiib)/28(iiid) of IT Act."
In all the other appeals also, the assessees have taken similar identical grounds mentioned above.
4. At the time of hearing, the ld. Counsel of the assessee has submitted that he does not wish to press ground No. 1, 2 and 2(i) of the appeal, therefore, we dismiss the same as not pressed.
5. Briefly stated facts of the case are that the case of the assessee was reopened and the assessment U/s 143(3) read with Section 148 of the Income Tax Act, 1961 (hereinafter referred as the Act) was framed thereby the Assessing Officer declined the claim of the assessee made U/s 80IB of the Act.
Similar identical facts have also been mentioned by the A.O. in all the other appeals.
6. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions, has dismissed the appeal.
By passing the similar identical findings, the ld. CIT(A) have also dismissed all the other appeals of the assessees for all the other assessment years.
4 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT
7. Now the assessee is in appeal before us. The ld AR of the assessee has argued that the authorities below were not justified in rejecting the claim of deduction U/s 80IB of the Act. Ld. AR has reiterated the submissions as made in the written brief. Ld. Counsel has drew our attention to provisions of Section 28(iiib)/28(iiid) of the Act. He submitted that the authorities below have wrongly applied the ratio of the judgment of the Hon'ble Supreme Court in the case of M/s Liberty India Vs. CIT (2009) 317 ITR 218. He submitted that Hon'ble Apex Court in following cases where the matter of sale of DEPB (Duty Entitled Pass Book) credit was remanded to the Assessing Officer for computation in accordance with law laid down in the case of Topman Exports (2012) 342 ITR 49 (SC). He placed reliance on the decision in the case of Nissan Exports Vs. CIT (2014) 360 ITR 93 (SC) and Global Agro Products Pvt. Ltd. Vs. ITO (2014) 360 ITR 117 (SC). Ld. AR submitted that in the case of Topman Exports Vs. CIT (2012) 342 ITR 49 (SC), it was held that DEPB credit is "cash assistance" receivable by a person against export under the scheme of the Government of India and falls under clause (iiib) (iiid) of Section 28 of the Act and is chargeable to income tax under the head "profit and gains from business or profession". He submitted that following the judgments of the Hon'ble 5 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT Supreme Court in the cases of Nissan Exports Vs. CIT (supra) and Global Agro Products Pvt. Ltd. Vs. ITO (supra), the Hon'ble Jaipur Bench of ITAT in the case of Saraf Export, Churu Vs. DCIT (2014) 51 Tax World 1 (JP) has held that profit arising from sale of DEPB license is liable for deduction U/s 80IB read with Section 28(iiid) of the Act. He further submitted that in the case of M/s Handicrafts Vs. ITO, Churu (2013) 50 Tax World 155 (Jd), the Hon'ble Jodhpur Bench of ITAT has held that DEPB, DDB are eligible for exemption U/s 10BA of the Act as business income. He submitted that under the provisions of Section (section 28(iiib) and (iiid) of the Act), the judgments of the Hon'ble Supreme Court and the decisions of the Hon'ble ITAT, the ld CIT(A) was not justified in ignoring the provisions of law in sustaining the disallowances of deduction U/s 80IB of the Act on cash assistance received from Government of India, treating the same as incentive and not business income.
8. On the contrary, the ld. Sr. DR has strongly opposed the submissions of the ld. AR and further submitted that the decision of the Hon'ble Supreme Court in the case of Liberty India Vs. CIT (supra) has been rightly applied by the authorities below. He submitted that the case laws as relied by the ld. Counsel of the assessee are distinguishable 6 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT as these are not applicable on the provisions of Section 80IB of the Act. He submitted that the provisions are clear, as per these provisions, where the gross total income include any profit and gains derived from any business referred to in Sub-section (3) to (11), such business being as the eligible business. He submitted that the assessee has to demonstrate that the profit and gains which is claiming as a deduction should be derived from the eligible business. He submitted that what the assessee is claiming is not derived from the eligible business, therefore, the authorities below were justified in declining the claim of deduction U/s 80IB of the Act.
9 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 7 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT 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 hereinbelow:-
"(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);"
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 the words "derived from" is narrower in connotation as compared to the words "attributable to". In other words, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. After analyzing the provision, it was held by the Hon'ble Supreme Court that the DEPB is an incentive.
8 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT 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. Ground raised in this appeal of the assessee is dismissed.
10. Now we take ITA No. 286 to 288/JP/2016 for the A.Y. 2007-08, 2010-11 and 2012-13.
9 ITA 285 to 288/JP/2016 M/s Neel Kanth Gum & Chemicals Vs ACIT In all these appeals, the facts are identical as were in the assessment year 2006-07. The assessee has not pointed out any new facts and circumstances and has also not brought to our notice any favourable binding precedent; therefore, taking a consistent view, we do not see any reason to disturb in the order passed by the ld. CIT(A). Therefore, the same is affirmed. Accordingly, the ground raised in appeals of the assessee for the A.Y. 2007-08, 2010-11 and 2012-13 are rejected.
11. In the result, all the appeals of the assessee are dismissed.
Order pronounced in the open court on 30/01/2017.
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(BHAGCHAND) (Kul Bharat)
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Tk;iqj@Jaipur
fnukad@Dated:- 30th January, 2017
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Neel Kanth Gum & Chemicals, Churu.
2. izR;FkhZ@ The Respondent- The ACIT, Jhunjhunu.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 285 to 288/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar