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2021 (1) TMI 196 - AT - Income TaxDeduction u/s. 80IB(11A) - Claim denied on DEPB entitlement - as per AO DEPB entitlement amount is not derived from the industrial activities of the assessee, for which, the assessee is entitled for deduction u/s. 80IB(11A) - HELD THAT:- Respectfully following the decision of Meghalaya Steel [2016 (3) TMI 375 - SUPREME COURT], we hold that the DEPB entitlement amount received or receivable by the assessee under the Government of India export promotion scheme is an income includible under the head “profits and gains of business or profession” as per clause (iiib) and (iiid) to Section 28 of the Act. As we have noted above that the AO himself noted, in the middle para at page 25 of the assessment order for A.Y. 2011-12, that “The statute in 80 IB(11A) makes no difference between an export sales and domestic sales, the Act provides same level of deduction for both kind of sales”. Thereafter, he noted a complete contradictory finding to his earlier said observations that “export is an activity which is different from the scope of works envisaged by the Statute. Thus, no deduction on account export sales and consequent receipt of DEPB premium can be allowed.” As we have noted above at the time of passing assessment order, the decisions of Hon’ble Supreme Court in the cases of Sterling Foods [1999 (4) TMI 1 - SUPREME COURT] and Liberty India [2009 (8) TMI 63 - SUPREME COURT] were holding field against the assessee and in favour of the revenue, thus, the AO was bound to follow the same and thus, he denied deduction in respect of DEPB entitlements to the assessee. But thereafter the scenario changed on 9.3.2016, when the Hon’ble Supreme Court rendered decision in the case of Meghalaya Steels Ltd [2016 (3) TMI 375 - SUPREME COURT] - When the statue in section 80 IB of the Act has not made any distinct between export and domestic sales and the profit arising from both the kind of sales is entitled for deduction, then, the profit earned by the assessee in the form of DEPB entitlement amount, which is directly related and calculated on the amount of export sales, cannot be regarded or tagged as income from other sources to take it out from the benefit of deduction u/s. 80IB(11A) of the Act to the assessee. Thus we hold that DEPB entitlement amount is having direct nexus with the industrial activities of the assessee, which is export oriented entitled for deduction u/s. 80IB(11A) - DEPB entitlement amount is an income derived by the assessee from industrial undertaking of the assessee, thus, the same is also entitled for deduction u/s. 80 IB(11A) of the Act.
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