2004 (6) TMI 581 - AT - Income Tax

Summary

Issues:
- Addition of Rs. 5,47,968 on account of Duty Drawback.

Analysis:
The appeal in this case was filed against the order of the CIT(A)-XXI for the assessment year 1996-97, specifically challenging the addition of Rs. 5,47,968 on account of Duty Drawback. The assessee, a private limited company engaged in trading garments, exported goods through its sister concern and received duty drawback from the Government of India. The Assessing Officer held that the duty drawback accrued to the assessee as income, even though it was passed on to the sister concern, as exports were made and bills were raised in the assessee's name. The CIT(A) upheld this decision, stating that the duty drawback obtained by the assessee, based on exports made and claims submitted, constituted the assessee's income.

The assessee contended that the duty drawback should not be treated as income, as it was merely an expenditure recouped. The Tribunal, after considering the arguments and the relevant rules, agreed with the CIT(A) that the duty drawback accrued to the assessee as income. Referring to the Customs and Central Excise Duty Drawback Rules, it was noted that duty drawback is the entitlement of the exporter and constitutes income chargeable under business profits. The Tribunal emphasized that the diversion of income to the sister concern did not negate the accrual of income to the assessee. The decision in the case cited by the assessee was deemed irrelevant to the current situation, as exports were carried out by the assessee, bills were issued in its name, and duty drawback claims were made accordingly.

Ultimately, the Tribunal upheld the CIT(A)'s decision to sustain the addition of Rs. 5,47,968 as the duty drawback income of the assessee. It was clarified that passing on the duty drawback to the sister concern did not alter the fact that the income accrued to the assessee, leading to the dismissal of the appeal. The Tribunal highlighted that the diversion of the received amount did not extinguish the accrual of income in the hands of the assessee, emphasizing the legal obligation to include the duty drawback amount in the total income of the assessee.

Therefore, the Tribunal dismissed the appeal of the assessee, affirming the inclusion of the duty drawback amount as part of the assessee's total income for the assessment year 1996-97.