Gujarat High Court Case Information System Print TAXAP/1583/2010 6/ 6 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1583 of 2010 ========================================================= M/S BILAG INDUSTRIES (P) LTD - Appellant(s) Versus ASST. COMMISSIONER OF INCOME-TAX - Opponent(s) ========================================================= Appearance : MR RK PATEL for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 15/11/2011 ORAL ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) Assessee has filed this appeal challenging the judgment of Income Tax Appellate Tribunal (Tribunal for short) dated 18.2.2010. Following questions are presented for our consideration.
(1) Whether on facts the Tribunal is right in law in interpretation of section 80IA for denying deduction under the said section, value of notional export benefit to the tune of Rs.2,62,82,847/-credited to P & L A/c as claimed by the appellant?
(2) Whether the Tribunal is right in law in denying deduction under section 80IA by relying upon the ratio of Hon'ble Supreme Court in case of Liberty India at 317 ITR 218?
(3) Whether on facts, the Division Bench of Ahmedabad Tribunal is right in law in restoring the issue of deduction under section 80HHC on export benefit of Rs.2,62,82,847/- to the file of the Assessing Officer when the issue is concluded in favour of the appellant by Special Bench of Mumbai Tribunal in the case of Topman Exports (125 TTJ 289)?
At the outset, counsel for the appellant stated that, under the instructions, he is not pressing Question No.3. Such question is, therefore, not considered.
With respect to Question Nos.1 and 2, we notice that same pertains to a single issue, namely, deduction under Section 80IA which was claimed by the assessee but denied by the revenue authorities. Such view of the revenue authorities were also upheld by the Tribunal. The Tribunal in doing so relied on the decision of the Apex Court in case of Liberty India 317 ITR 218. The Tribunal made following observations.
"14. We have heard the parties. The assessee has claimed deduction under section 80IA on Rs.2,62,82,847/- being notional credits profit on account of export trade presuming that it will receive certain export benefit. It claimed deduction under section 80IA thereon. However, the issue is now directly covered against the assessee by the decision of Hon.Supreme Court in the case of Liberty India Vs.CIT (2009) 317 ITR 218 (SC) wherein it has held that DEPB, duty draw back benefit do not form part of net profit for the purpose of deduction under section 80I, 80IA and 80IB. Hon. Supreme Court in this regard held as under:-
"Sections 80-I, 80-IA and 80-IB provide for incentives in the form of deductions which are linked to profits and not investment. On analysis of sections 80-IA and 80-IB it becomes clear that any industrial undertaking which becomes eligible on satisfying subsection (2) would be entitled to deduction under sub-section (1) only to the extent of profits derived from such industrial undertaking after the specified date. Apart from eligibility, subsection (1) purports to restrict the quantum of deduction to a specified percentage of the profits. This is the importance of the words "derived from an industrial undertaking" as against "profits attributable to an industrial undertaking".
DEPB/ duty drawback are incentives which flow from the schemes framed by the Central Government or from section 75 of the Customs Act, 1962. Incentive profits are not profits derived from eligible business under section 80-IB : they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentives such as DEPB / Duty draw back cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial undertaking" under section 80-IB."
Counsel for the appellant candidly brought to notice of fact that under very similar circumstances, we had occasion to deal with an identical issue in Tax Appeal No.2478 of 2010 in case of group company of the present appellant. We had declined to entertain the tax appeal and rejected the contentions of the appellant making following observations:
Insofar as question No.1 is concerned, the same pertains to deduction claimed by the assessee under section 80IA of the Income Tax Act, 1961 on certain export benefits received by the assessee. The Tribunal relying on the decision of the Apex Court in case of Liberty India V/s. Commissioner of Income Tax reported in 317 ITR 218 held against the assessee.
Counsel for the assessee submitted that Tribunal erred in applying the decision of Apex Court in case of Liberty India (supra). He submitted that in the present case, there was no instance of sale of any license granted on the basis of exports made. It was pointed out that the amount receivable was towards advance license benefits.
However, we are of the opinion that the Tribunal correctly applied the decision of Apex Court in case of Liberty India (supra). It is true that in Liberty India, the Apex Court was examining whether profit from Duty Entitlement of Passbook Scheme (DEPB) and Duty Drawback Scheme could be said to be profit derived from the business of the industrial undertaking eligible for deduction under Section 80-IB of the Act. It may also be true that in the present case, the amount in question may not be profit derived from DEPB scheme or duty draw back scheme. Nevertheless, as contended by the assessee itself, the amount receivable was in relation to advance license benefit on account of exports made by the assessee. The Apex Court in case of Liberty India held that the benefits derived from DEPB scheme or duty draw back scheme cannot be stated to be income derived from an industrial undertaking. It was on this basis that such benefits were not held eligible for deduction for the purpose of Sections 80IB and 80IA of the Act which pertain to deduction in respect of profits and gains from industrial undertakings. The Apex Court concluded that duty draw back receipts or DEPB receipts do not form part of net profit for eligible industrial undertaking for the purpose of sections 80IA and 80IB of the Act.
In the present case, the assessee claims deduction under Section 80IA of the Act with respect to the amount received or receivable from the license issued on account of exports made by the assessee. Insofar as all material facts are concerned since there is no distinction, we have no hesitation to hold that the Tribunal rightly applied ratio in case of Liberty India (supra). Question No.1 is, therefore, not required to be considered.
Question No.2 represents the deduction denied to the assessee to the total of Rs.11.52 lacs under Section 80IA and 80HHC of the Act which has three different limbs.
The first pertains to the question whether for the purpose of Sections 80IA and 80HHC of the Act the net or the gross interest can be disallowed. This question is separately re-framed in the amended form as question No.3, such issue is, therefore, not decided.
Second aspect of question No.2 is with respect to interest income received from customers on delayed payments. Tribunal while allowing such claim following this Court's decision reported in 328 ITR 40, however, clarified that such deduction shall be subject to provision of sub-section (9) of Section 80IA of the Act since deduction is already allowed. This question is not required to be considered. Tribunal only provided that such deduction shall be subject to the provisions of Sub-Section (9) of Section 80IA of the Act. We see no infirmity in such a view. We are sure that the Assessing Officer while giving effect to, shall examine the same. The third aspect of this issue is with respect to interest on margin money. The assessee claimed deduction for the same under Section 80IA of the Act. However, the Tribunal relying on the case of this very assessee, ruled against the assessee.
Counsel for the appellant candidly stated that such decision of the Tribunal has not carried further in appeal. We find that amount is not substantial. In that view of the matter, this issue is not considered in the present appeal.
Issue being identical without recording separate reasons in the present tax appeal, such question is not required to be entertained.
Since no other questions survive for our consideration, this Tax Appeal is dismissed.
(AKIL KURESHI, J.) (Ms.SONIA GOKANI, J.) (ashish) Top