TMI Blog2009 (9) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ) treated the excess of receipt of insurance charges as profits and gains derived by an industrial undertaking from the export - charges as such are not on account of export of goods outside India but are the reimbursement of expenses incurred within India - same do not partake the receipt of sale of eligible articles or things as are described under s. 10BA and as such exemption under s. 10BA of IT Act cannot be granted in the light of ratio laid down by Hon'ble apex Court in Liberty India vs. CIT (2009 -TMI - 34471 - SUPREME COURT )- decision of CIT(A), set aside. Addition made for want of availability of quantitative details - no justification in the action of assessing authority in making addition as such without bringing any valid or independent material on record to suggest income not recorded in the books of account. Dis-allowance of Rs. 2,74,642 made on account of personal and other expenses - the expenses having been laid for the business purpose of the assessee, disallowance so deleted calls for no interference. Addition of Rs. 20,85,813 in terms of provisions of s. 2(22)(e) - Deemed dividend - In this case the authorities below did not examine the fact as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational (2008) 117 TTJ (Jd) 672 : (2008) 11 DTR (Jd)(Trib) 393 wherein the Tribunal by its order dt. 27th June, 2008 considering that the expression "profits" appearing in sub-s. (4) of s. 10BA of IT Act has been used in plural and the word "of" is to be read in conjunction with the word "business" that follows it and thus opined that profits include not only the profits by exporting eligible articles or things but also those incomes which are related to export of such articles or things. It, therefore, reached a conclusion that the amount of credit on account of DEPB/duty drawback is to be included as profit of the business of the undertaking for the purpose of s. 10BA of IT Act and the said amount will not enter into total turnover or export turnover of the undertaking for the purpose of calculating the profits derived by the undertaking of the assessee for the purpose of sub-s. (4) of s. 10BA of IT Act. In the result, the Tribunal has allowed deduction under s. 10BA of IT Act. 5. Revenue's case in appeal before the Tribunal is that the amounts of DEPB/duty drawback having been granted under the scheme of Central Government have no direct link to the manufacture or production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or things is reproduced as under: "See. 10BA. Special provisions in respect of export of certain articles or things-(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export out of India of eligible articles or things, shall be allowed from the total income of the assessee: Provided that where in computing the total income of the undertaking for any assessment year, deduction under s. 10A or s. 10B has been claimed, the undertaking shall not be entitled to the deduction under this section: Provided further that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years. (2) This section applies to any undertaking which fulfils the following conditions, namely: (a) it manufactures or produces the eligible articles or things without the use of imported raw materials; (b) it is not formed by the splitting up, or the reconstruction of a business already in existence: Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in s. 80-IA. Explanation-For the purposes of this section- (a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the RBI as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force; (b) 'eligible articles or things' means all hand-made articles or things, which are of artistic value and which requires the use of wood as the main raw material; (e) 'export turnover' means the consideration in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-s. (3) but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India; (d) 'export out of India' shall not include any transaction by way of sale or otherwise in a shop, emporium or any other establishment situate in India, not involving c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... degree source is the incentive scheme/provisions of the Customs Act. In this connection, Department places heavy reliance on the judgment of this Court in Sterling Foods. Therefore, in the present cases in which we are required to examine the eligible business of an industrial undertaking, we need to trace the source of the profits to manufacture [CIT vs. Kirloskar Oil Engines Ltd. (1985) 44 CTR (Bom) 98 : (1986) 157 ITR 762 (Bom)]. Para 16 DEPB is an incentive. It is given under the 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. Under DEPB an exporter may apply for credit as percentage of FOB value of exports made in freely convertible currency. Credit is available only against the export product and at rates specified by DGFT for import of raw material, components etc. DEPB credit under the scheme has to be calculated by taking into account the deemed import content of the export product as per basic customs duty and special additional dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Saraf Seasoning Udyog by the High Court of judicature of Rajasthan at Jodhpur are bound to follow the law declared by the Hon'ble Supreme Court in the case of Liberty India. 13. The decision of this Tribunal in the case of Bothra International shall also not operate as res judicata in view of the law declared by Hon'ble apex Court in Liberty India which entitles this Tribunal to take a different view in subsequent years and also having regard to the judgment in CIT vs. Brij Lal Lohia Mahabir Prasad Khemka 1974 CTR (SC) 167 : (1972) 84 ITR 273 (SC) and there remaining no dispute on the issue under consideration, we also decline to make a reference to Hon'ble President Tribunal for constitution of a Larger Bench for considering this issue. 14. Under the facts-circumstances and keeping in view aforesaid position of law, we hold that amount of DEPB benefits/duty drawback receipts do not form profits and gains derived by an industrial undertaking from the export out of India of eligible articles or things and as such the same shall not be allowed to be deducted from the total income of the assessee for the purposes of s. 10BA of IT Act. As a result ground raised by revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made for want of availability of quantitative details by the AO. The learned CIT(A) deleted the addition as he found no justification in the action of assessing authority in making addition as such without bringing any valid or independent material on record to suggest income not recorded in the books of account. 19. We have heard the parties with reference to material on record and find no reason to interfere with the decision reached by the learned CIT(A) in all these appeals. A similar issue came for consideration of this Tribunal in ITO vs. Bothra International where addition made on identical facts stood deleted by the Tribunal by concluding the issue as under: "In the absence of any material on record to suggest that there was suppression of income or that the assessee carried on any activity outside the books or detection of any discrepancy or inconsistency in the business transactions of the assessee, books of account could not be rejected on the ground that there was decline in GP rate and that the assessee did not maintain stock records and consequently the ad hoc addition made by the AO cannot be sustained." We, therefore, finding no merit in the ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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