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2015 (7) TMI 770 - ITAT LUCKNOW

2015 (7) TMI 770 - ITAT LUCKNOW - TMI - Disallowance of deduction under section 80 IB - exclusion of "duty drawback" from computation of "eligible profit" - Held that:- As per the judgment of Hon'ble Apex Court in Liberty India (2009 (8) TMI 63 - SUPREME COURT) export incentive in any form is not an income derived from industrial undertaking and these judgments of Hon'ble Apex Court in context of deduction u/s 80HHC cannot help the assessee in a case where the dispute is with regard to allowabil .....

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Admittedly, this investment amount includes two investments in foreign subsidiaries and since the dividend income from these two investments is not exempt, this investment should not be included in the amount of investment for the purpose of making disallowance u/s 14A of the Act. To this extent, we find force in the contentions of Learned A.R. of the assessee and direct the Assessing Officer to recompute the disallowance u/s 14A of the Act after excluding the amount of investment in foreign sub .....

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equence, disallowance u/s 14A as per formula prescribed in Rule 8D has to be made. We direct the Assessing Officer to recompute the disallowance after excluding the amount of investment in foreign subsidiaries. Decided in favour of assessee for statistical purposes. - ITA No.804/LKW/2013 - Dated:- 17-7-2015 - SHRI SUNIL KUMAR YADAV AND SHRI A.K. GARODIA, JJ. For the Appellant : Shri P. K. Kapoor, C.A. For the Respondent : Shri Amit Nigam, D. R. ORDER PER A. K. GARODIA, A.M. This is assessee s ap .....

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e question whether the duty drawback is an incidental profit or a profit of the first degree depends on the business model followed by the assessee. In the present case Dharam Pal Premchand 317 ITR 353 (Del) is not applicable and the case is squarely covered by Liberty India 317 ITR 218 (SC)". 2. BECAUSE the "CIT(A)", on the facts and circumstances of the present case should have held that the controversy deserved to decided in favour of the appellant by referring to: (a) earlier .....

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earned CIT(A). He also placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of CIT vs. Dharam Pal Prem Chand Ltd. [2009] 317 ITR 353 (Del). He also placed reliance on a synopsis on the term derived from in the context of section 80IB of the Act, which is available on pages 116 to 127 of the paper book. 4. Learned D. R. of the Revenue supported the orders of the authorities below. He also submitted that the issue is covered against the assessee by the judgment of H .....

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of Dharam Pal Prem Chand Ltd. (supra). In this case, the issue was regarding Excise Duty refund and not any export incentive such as Duty Drawback as in the present case. As per the facts noted by Hon'ble Delhi High Court in that case, the assessee was entitled to exemption from Excise Duty but the procedure for claiming exemption was that the assessee would first clear the goods from its bonded warehouse by paying the excise duty and, thereafter, the assessee would claim refund of excise du .....

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no profit and therefore, it was held that no part of the refund of Excise Duty was to be reduced from the profit of the assessee company in that case for the purpose of claiming deduction u/s 80IB of the Act. In the case of Liberty India (supra) also, the basis of decision of Hon'ble Apex Court is that as per section 75 of the Customs Act, 1962 and Section 37 of Central Excise Act, 1944, Government of India is empowered to provide for repayment of customs duty and excise duty paid by an ass .....

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a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Hence, in a case where the refund of Excise Duty is not arithmetically equal to customs duty or Central excise duty actually paid by the assessee, it amounts to export incentive, which is not derived from industrial undertaking as per this judgment of Hon'ble Apex Court in the case of Liberty India (supra) and theref .....

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in the present case, in our humble opinion, the judgment of Hon'ble Apex Court rendered in the case of Liberty India (supra), is applicable and not the judgment of Hon'ble Delhi High Court in the case of Dharam Pal Premchand (supra). 6. Regarding the synopsis on the term derived from as available on pages 116 to 127 of the paper book, we find that as per this synopsis, the assessee has placed reliance on a judgment of Hon'ble apex Court rendered in the case of B. Desraj vs. CIT [200 .....

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rt incentives and this formula is also indicated in the circular referred to in this case issued by the Central Board of Direct Taxes and on this basis, it was held that the words business profit in the formula prescribed u/s 80HHC would include cash compensatory allowance or Duty Drawback and therefore, the Assessing Officer should work out the deduction u/s 80HHC in accordance with the law but for the purpose of 80IB, the requirement is different and only that income, which is derived from ind .....

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t sale of such DEPB constitute different business and excess as adjustment thereof is of business wholly not connected with the export business. It is stated that both the profits are profit derived from business of industrial undertaking eligible for deduction u/s 80IB of the Act. We find no merit in these contentions because as per the judgment of Hon'ble Apex Court in Liberty India (supra), export incentive in any form is not an income derived from industrial undertaking and these judgmen .....

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scussion, we have seen that this issue is covered against the assessee by the judgment of Hon'ble Apex Court rendered in the case of Liberty India (supra) and therefore, we do not find any reason to interfere in the order of CIT(A) on this issue. Accordingly ground No. 1 & 2 are rejected. 8. Ground No. 3 is as under: 3. BECUAE the "CIT(A)" has erred in law and on facts in upholding the disallowance of ₹ 7,37,928/- out of expenditure claimed, by invoking the provisions of .....

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ubmitted that the list of investment in share is available on page 28 of the paper book, which includes investment in foreign company also i.e. ₹ 1,55,043/- in Super Tannery (U.K.) Ltd. and Safety Solutions S.R.O. ₹ 4,42,755/. He submitted that the income from foreign company is taxable and therefore, investment in these shares should not be considered for making disallowance u/s 14A of the Act. 10. Learned D. R. of the Revenue supported the orders of the authorities below. 11. We ha .....

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investment for the purpose of making disallowance u/s 14A of the Act. To this extent, we find force in the contentions of Learned A.R. of the assessee and direct the Assessing Officer to recompute the disallowance u/s 14A of the Act after excluding the amount of investment in foreign subsidiaries. 12. Regarding this contention of Learned A.R. of the assessee that borrowed fund was not used for making investment in share because there is sufficient own funds of the assessee company, we find that .....

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