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Judgment
The issue involved in this case is squarely covered by the decision of this Court in the case of “Ranjana Johari Vs. Assistant Commissioner of
Income Tax, Circle-6, Jaipur†(D.B. Income Tax Appeal No.61/2016) decided on 23.10.2017 wherein the following adjudication was made by the
co-ordinate bench which reads as under:-
“""3. While considering the matter the Tribunal observed as under:-
We have heard rival contentions and perused the material on record. The Hon’ble Supreme Court in the case of Liberty India (supra) has
considered the issue of DEPB and duty draw back and with reference to section 80IA/80IB held that DEPB/duty draw back benefit would not form
part of the net profit. The section 80IA and 80IB deduction is provided by the Statute for industrial undertaking and profit & gains derived from any
business of an industrial undertaking a certain percentage deduction be allowed for number of assessment years specified under the law. Whereas in
section 80IB deduction is allowed to certain industrial undertaking other than infrastructure development undertaking from the profit and gains derived
from any business referred to in sub section (3) to (11), (11A) and 11B) as such business being referred to as the eligible business on certain
percentage basis and for such number of assessment years specified under the law. Section 10BA also provides special deduction of such profit of
eligible article or things. This section applies to any undertaking which fulfill the following conditions, namely,
(a)It manufactures or produces the eligible articles or things without the use of imported raw materials ;
(d) Ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or
things.
Besides these, other conditions provided in clause (b), (c) and (e) are to be fulfilled for claiming deduction. The sub section (4) of section 10BA reads
as under :-
Sub Section (4) : For the purposes of sub-section (1), the profits derived from export out of India of the eligible articles or things shall be the amount
which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to
the total turnover of the business carried on by the undertaking.
As per sub-section (6) of section 10BA, the subsection (8) and sub-section (1) of section 80IA also applicable in relation to the undertaking referred to
in this section as they apply for the purpose of undertaking referred to in section 80IA. Section 10BA was inserted by the Finance Act, 2003 with
effect (3 of 5) [ITA61/2016] from 1.4.2004 whereas section 80IA was inserted by the Finance Act,1999 with effect from 1.4.2000. Originally section
80IA was inserted by the Finance Act, 1991 with effect from 1.4.1991. The languages of both the sections are same but the effective dates are
different. Therefore, findings of Hon’ble Supreme Court in the case of Liberty India squarely are applicable in case of deduction claimed by the
assessee under section 10BA and credited duty draw back and DEPB in the Profit & Loss Account, but is not derived income from undertaking.
Therefore, we reverse the order of ld. CIT (A) to that extent.
12.1. However, Hon’ble Supreme Court in the case of Topman Exports (supra) held that entire sale proceeds not to be treated as profits but only
difference between sale value and face value of credit â€" DEPB credit chargeable as income under section 28(iiib) in year in which applied for
against exports. Further, profit on transfer of credit chargeable under section 28(iiid) in year in which transferred. The ld AR has also referred the
decision of ITAT Jodhpur Bench, Jodhpur in the case of Angira Art Exports and Suraj Exports India and others in ITA No. 360/Jodh/2012 order dated
31/1/2013 and also ITAT Mumbai Bench in the case of Arts & Crafts Exports Vs. ITO 66 DTR 69 (ITAT Mumbai Bench) and claimed that both the
ITATs have allowed the assessee’s appeal by considering the Hon'ble Supreme Court decision in the case of Liberty India and Topman Exports
(supra). We have considered the assessee’s submission but fact of both the cases are not verifiable from the submissions made by the assessee,
therefore the Assessing Officer is directed to considering the order of the Hon’ble Supreme Court in the case of Topman Exports (supra) and
case laws referred by the assessee i.e. decision of ITAT Jodhpur Bench, Jodhpur in the case of Angira Art Exports and Suraj Exports India and
others and ITAT Mumbai Bench decision in the case of Arts & Crafts Exports Vs. ITO (supra)and recalculate the income accordingly. Therefore,
this ground of appeal is setaside to the ld Assessing Officer.
However, the view taken by the Supreme Court in the case of Commissioner of Income-Tax V/s Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC)
wherein it has been held as under:-
“20. Liberty India being the fourth judgment in this line also does not help Revenue. What this (4 of 5) [ITA61/2016] Court was concerned with
was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the
business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export
the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its
relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB
entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is
provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived
from profits and gains made by the industrial undertaking or business itself.â€
It only remains to consider one further argumentby Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent,
would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income
from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax
Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to
a business, are under the head “income from other sourcesâ€, which is a residuary head of income that can be availed only if income does not fall
under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received
or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head
“profits and gains of business or professionâ€. If cash assistance received or receivable against exports schemes are included as being income
under the head “profits and gains of business or professionâ€, it is obvious that subsidies which go to reimbursement of cost in the production of
goods of a particular business would also have to be included under the head “profits and gains of business or professionâ€, and not under the (5 of
5) [ITA-61/2016] head “income from other sourcesâ€.
For the reasons given by us, we are of the viewthat the Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80- IB and 80-
IC. The Himachal Pradesh High Court, having wrongly interpreted the judgments in Sterling Foods and Liberty India to arrive at the opposite
conclusion, is held to be wrongly decided for the reasons given by us hereinabove.
The same view was followed by this Court in thecase of CIT Jaipur V/s Suresh Kumar Bajoria in D. B.
Income Tax Appeal No. 294/2008 decided on 18.05.2017. The said decisions have not been taken into consideration by the authority.
Therefore, the matter is remitted back to the AO todecide the same in the light of aforesaid decisions. It is made clear that we have not expressed
anything on merits.
The appeal stands accordingly disposed of. â€
In view of above, the matter is hereby remitted to the Assessing Officer and it will open for both the parties to raise their contentions before the
Assessing Officer.
The instant income tax appeal is hereby disposed of accordingly.