IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G' NEW DELHI
BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI C. M. GARG, JUDICIAL MEMBER
I.T.A .No.-3746/Del/2013
(ASSESSMENT YEAR-2009-10)
ITO Vs. Smt. Shashi Sadh,
Ward-23(2) 52/12, Chitranjan Park
Room No. 1208, Pratyakshkar Bhawan, New Delhi-110019
Civil Centre, New Delhi-110002
PAN:AMLPS4154L
(APPELLANT) (RESPONDENT)
Revenue by:-Sh. Ramesh Chand, CIT. DR
Assessee by:-Sh. Satish Khosla, Adv.
ORDER
PER C. M. GARG, JM.
This appeal of the Revenue has been preferred against the order of CIT
(Appeals) -XXIII, New Delhi, vide dated 25.03.2013 in Appeal No.272/11-12
for the Assessment Year 2009-10.
2. The sole ground raised by the assessee in this appeal reads as under:
"1. On the facts and in the circumstances of the case; the
Ld. CIT(A) has erred in allowing the duty drawback of
Rs.21,62,369/- to be included as part of eligible profit
derived from export oriented unit u/s 10B of the
Income Tax Act."
3. Briefly stated the facts giving rise to Revenue's appeal as noted by the
CIT(A) are that the return of income for the A.Y. 2009-10 on 30.09.2009
2
disclosing a total income of Rs.2,92,453/- was filed and the appellant claimed
deduction u/s 10B of Rs.28,75,193/-. The return of income was revised on
16.08.2010, disclosing income of Rs.35,650/- in which deduction u/s 10B was
claimed at Rs.31,94,659/-, as earlier it had been wrongly claimed at 90% instead
of 100%. During the scrutiny assessment proceedings, the Assessing Officer
verified the claim of deduction u/s 10B of the IT Act. The appellant is engaged
in the business of export of made ups and garments through a 100% Export
Oriented Unit in Noida Special Economic Zone. The Assessing Officer
observed from the Profit & Loss a/c that net profit of Rs.32,30,306/- included
duty drawback of Rs.21,62,369/-. The Assessing Officer was of the opinion that
deduction u/s 10B could not be allowed on the portion of duty drawback,
relying on the judgment of the Supreme Court in the case of Liberty India Vs.
CIT 317 ITR 218, wherein duty drawback was held ineligible for computing
deduction u/s 80IA and 80IB.
4. The appellant submitted before the Assessing Officer that as per the
provisions of section 10B, the deduction was to be computed on the basis of
export turnover which was the export consideration brought into the country in
foreign exchange, but not including freight, telecommunication charges or
insurance attributable to the delivery of goods outside India, and expenses
incurred in foreign exchange in providing technical services outside India.
These exceptions did not include duty drawback which was paid to the exporter
3
by the Government of India. The Assessing Officer, however, relied on the
aforementioned case law to hold that the appellant was not entitled to include
duty drawback for the purpose of computing deduction u/s 10B of the IT Act.
He recomputed the deduction claimed at Rs.10,32,290/- and arrived at a total
income of Rs.21,35,350/-.
5. The aggrieved assessee preferred an appeal before ld. CIT(A) which was
allowed by passing the impugned order. Now, being aggrieved by the impugned
order of the ld. CIT(A) the Revenue has filed present appeal before this
Tribunal with the sole ground as reproduced hereinabove.
6. We have heard argument of both the sides and carefully perused the
relevant material placed on record. The ld. Departmental Representative (DR)
submitted that the ld. CIT(A) has granted relief to the assessee by following the
decision of Hon'ble Special Bench of ITAT, Indore in the case of Maral
Overseas Ltd. vs. ACIT Reported as (2012)-TIOL-197-ITAT-Indore,-Special
Bench dated 28.03.2012 but the section 255(3) of the Income Tax Act 1961,
(for short the Act) itself explicit that the Special Bench decision cannot go
beyond the case for disposal of which it was constituted. The ld. counsel
appearing for the assessee contended that the same argument of the ld. CIT DR
was considered and dismissed in the case of Sanjay Aggarwal vs. DCIT in ITA
No.3184/Del/2013 for A.Y. 2003-04 by the ITAT, Delhi `G ' Bench. He further
4
submitted that since the ld. DR could not substantiate and fail to point out any
specific and direct judgment rendered by either Hon'ble Supreme Court or
Hon'ble High Court on the issue that decision of Special Bench is not binding
on the Coordinate Bench of the Tribunal then the same deserve to be followed
by the other division benches of the Tribunal as there has to be same
consistency in the view taken by the Tribunal on a particular issue.
7. We have gone through the written submissions of ld. CIT(A) DR,
decision of Hon'ble Supreme Court in the case of Union of India Vs. Paras
Laminates Pvt. Ltd. 186 ITR 726 and decision of ITAT Delhi `G' Bench in the
case of Sanjay Aggarwal vs. DCIT (Supra).
8. On careful consideration of rival submissions of both the parties on the
issue and on careful perusal of the decision of ITAT `G' Bench, Delhi in the
case of Sanjay Aggarwal vs. DCIT (Supra) we observe that the Coordinate
Bench of this Tribunal has declined to accept the contention of the ld. CIT.DR
that the decision of Special Bench cannot go beyond the case for disposal of
which it was constituted. The relevant para 14 of this judgment reads as under:
"14. Since the Special Bench has decided this issue in
this manner, it is not possible for us to deviate from the
same. There has to be some consistency in the view
taken by the Tribunal. Once a Special Bench has
decided a particular issue in a particular manner,
5
then, that becomes binding on all the division benches
across the country unless there is a contrary judgment
of the Hon'ble Supreme Court or that of some High
Court. As the ld. DR failed to point out any specific
and direct judgment rendered by the Hon'ble High
Court on the issue which is obtaining in the present
appeal, we are disinclined to deviate from the Special
Bench order in the case of All Cargo (supra). We,
therefore, hold in principle that no addition can be
made for any assessment year u/s 153A, the assessment
for which is not pending on the date of search, unless
any incriminating material is found in the course of
search".
9. In view of above, we are in agreement with the decision of Coordinate
Bench of ITAT `G ' Bench on this legal issue that there has to be some
consistency in view taken by the Tribunal, hence, once Special Bench has
decided a particular issue in a particular manner, then, that becomes binding of
all the Division Benches of the Tribunal across the country unless there is a
contrary judgment of Hon'ble Supreme Court or that some of High Courts. We
may also note that the Hon'ble Jurisdictional High Court of Delhi in the case of
CIT vs. Hritnik Export (P) Ltd., ITA Nos. 219 & 239/2014 dated 13.11.2014
has considered and upheld the view taken by the Special Bench in the case of
Maral Overseas P. Ltd. Vs. ACIT (Supra) by dismissing the appeal of the
Revenue. The relevant operative part of this judgment reads as under:
6
"By way of these appeals, the Revenue has challenged the orders
passed by Income Tax Appellate Tribunal (Tribunal, for short)
dated 11th September, 2013 and 24th October, 2013 relating to
assessment years 2008- 09 and 2009-10, respectively. Tribunal
has followed the decision of their Special Bench in the case of
Maral Overseas Ltd. versus Additional Commissioner of Income
Tax decided on 20th March, 2012, in which it has been held:-
78. Section 10B sub-section (1) allows deduction in respect of
profits and gains as are derived by a 100% EOU. Section 10B(4)
lays down special formula for computing the profits derived by
the undertaking from export. The formula is as under :-
Profit of the business of the Export turnover X Total turnover of
business carried out by the undertaking .
79. Thus, sub-section (4) of section 10B stipulated that deduction
under that section shall be computed by apportioning the profits
of the business of the undertaking in the ratio of turnover to the
total turnover. Thus, not-with-standing the fact that sub-section
(1) of section 10B refers the profits and gains as are derived by a
100% EOU, yet the manner of determining such eligible profits
has been statutorily defined in sub-section (4) of section 10B of
the Act. As per the formula stated above, the entire profits of the
business are to be taken which are multiplied by the ratio of the
export turnover to the total turnover of the business. Sub-section
(4) does not require an assessee to establish a direct nexus with
the business of the undertaking and once an income forms part of
the business of the undertaking, the same would be included in
7
the profits of the business of the undertaking. Thus, once an
income forms part of the business of the eligible undertaking,
there is no further mandate in the provisions of section 10B to
exclude the same from the eligible profits. The mode of
determining the eligible deduction u/s 10B is similar to the
provisions of section 80HHC inasmuch as both the sections
mandates determination of eligible profits as per the formula
contained therein. The only difference is that section 80HHC
contains a further mandate in terms of Explanation (baa) for
exclusion of certain income from the "profits of the business"
which is, however, conspicuous by its absence in section 10B. On
the basis of the aforesaid distinction, sub-section (4) of section
10A/10B of the Act is a complete code providing the mechanism
for computing the "profits of the business" eligible for deduction
u/s 10B of the Act. Once an income forms part of the business of
the income of the eligible undertaking of the assessee, the same
cannot be excluded from the eligible profits for the purpose of
computing deduction u/s 10B of the Act. As per the computation
made by the Assessing Officer himself, there is no dispute that
both these incomes have been treated by the Assessing Officer as
business income. The CBDT Circular No. 564 dated 5th July,
1990 reported in 184 ITR (St.) 137 explained the scope and
ambit of section 80HHC and the mode of determination of profits
derived by an assessee from the export of goods. I.T.A.T., Special
Bench in the case of International Research Park laboratories v.
ACIT, 212 ITR (AT) 1, after following the aforesaid Circular,
held that straight jacket formula given in sub-section (3) has to
be followed to determine the eligible deduction. The Hon'ble
8
Supreme Court in the case of P.R. Prabhakar; 284 ITR 584 had
approved the principle laid down in the Special Bench decision
in International Reserarch Park laboratories v. ACIT (supra). In
the assessee IS own case the I.T.A.T. in the preceding years, after
considering the decision in the case of liberty India held that
provisions of section 10B are different from the provisions of
section 80lA wherein no formula has been laid down for
computing the eligible business profit.
80. In view of the above discussion, question no. 2 is answered in
affirmative and in favour of the assessee. Accordingly, the
assessee is eligible for claim of deduction on export incentive
received by it in terms of provisions of section 108(1) read with
section 108(4) of the Act.?
The aforesaid view is in consonance with the decision of this
Court dated 1st September, 2014 passed in ITA 438/2014,
Commissioner of Income Tax-VII versus XLNC Fashions in
which this court has held as under :-
Deduction under Section 108 of the Income Tax Act, 1961 (Act,
in short) is to be made as per the formula prescribed by Sub-
Section (4), which reads as under:
10B. Special provision in respect of newly established hundred
per cent export- oriented undertakings-
..............
..............
9
(4) For the purposes of sub-section (1), the profits derived from
export of articles or things or computer software shall be the
amount which bears to the profits of the business of the
undertaking, the same proportion as the export turnover in
respect of such articles or things or computer software bears to
the total turnover of the business carried on by the undertaking?
Sub-section (4), therefore, is the special provision which enables
the assessee to compute the profits derived from the export of
articles or things or computer software. We do not see any
conflict between Sub- section (1) and Sub-section (4) to Section
10B, as Sub-section (1) states that deduction of such profits and
gains as are derived by a hundred percent export-oriented
undertaking from the export of articles or things or software
would be eligible under the said Section. Sub- section (1) is a
general provision and identifies the income which is exempt and
has to be read in harmony with Sub-section (4) which is the
formula for finding out or computing what is eligible for
deduction under Sub-section (1). Neither of the two provisions
should be made irrelevant and both have to be applied without
negating the other. In other words, the manner of computing
profits derived from exports under Sub-section (1), has to be
determined as per the formula stipulated in Sub-Section (4),
otherwise Sub-section (4) would become otiose and irrelevant.
The issue in question in this appeal which pertains to the
Assessment Year 2009-10, relates to duty draw back in the form
of DEPB benefits. As per Section 28, clause (iii-c), any duty of
customs or excise repaid or repayable as drawback to a person
10
against exports under Customs and Central Excise Duties Draw
Back Rules, 1971 is deemed to be profits and gains of business or
profession. The said provision has to be given full effect to and
this means and implies that the duty draw back or duty benefits
would be deemed to be a part of the business income. Thus, will
be treated as profit derived from business of the undertaking.
These cannot be excluded.
Even otherwise, when we apply Sub-section (4) to Section 10B,
the entire amount received by way of duty draw back would not
become eligible for deduction/exemption. The amount quantified
as per the formula would be eligible and qualify for
deduction/exemption. The position is somewhat akin or close to
Section 80HHC of the Act, which also prescribes a formula for
computation of deduction in respect of exports.
In view of the aforesaid, we do not find any merit in the present
appeal and the same is dismissed.?
Karnataka High Court in Commissioner of Income Tax, Central
Circle versus Motorola India Electronics (P) Ltd., ITA No.
428/2007, decided on 11.12.2013, reported as [2014] 46
taxmann.com 167 (Karnataka) has also taken a similar view,
wherein it has been held:-
By Finance, Act, 2001, with effect from 01.04.2001, the present
Sub- section (4) is substituted in the place of old Sub-section (4).
No doubt Sub-section 10(B) speaks about deduction of such
profits and gains as derived from 100% EOU from the export of
articles or things or computer software. Therefore, it excludes
11
profit and gains from export of articles. But Sub-section (4)
explains what is (4) says that profits derived from export of
articles or things or computer software shall be the account
which bares to the profits of the business of the undertaking and
not the profits and gains from export of articles. Therefore,
profits and gains derived from export of articles is different from
the income derived from the profits of the business of the
undertaking. The profits of the business of the undertaking
includes the profits and gains from export of the articles as well
as all other incidental incomes derived from the business of the
undertaking. It is interesting to note that similar provisions are
not there while dealing with computation of income under
Section 80HHC. On the contrary there is specific provisions like
Section 80HHB which expressly excludes this type of incomes.
Therefore, in view of the aforesaid provisions, it is clear that,
what is exempted is not merely the profits and gains from the
export of articles but also the income from the business of the
undertaking.?
In view of the aforesaid position, the appeals have to be
dismissed. We order accordingly."
10. In view of above, respectfully note that the decision of Special Bench in
the case of Maral Overseas P. Ltd. Vs. ACIT has been upheld by the
Jurisdictional High Court of Delhi in the case of Hritnik Export (P) Ltd.,
(Supra). Therefore, we are inclined to hold that the decision of Special Bench in
the case of Maral Overseas P. Ltd. Vs. ACIT (Supra), which has been
12
confirmed and upheld by jurisdictional High Court of Delhi, is binding on all
the Division Benches of the ITAT unless there is a contrary judgment of
Hon'ble Supreme Court or that of the larger bench of Hon'ble High Court. On
specific query from the bench the ld. CIT. DR failed to point out any specific
and direct judgment either from Hon'ble Supreme Court or from Hon'ble
Jurisdictional High Court or any other High Court on the issue, therefore, we
decline to take a different or deviated view from the conclusion of the Special
Bench in the case of Maral Overseas P. Ltd.(Supra).
11. Having heard so, we now need to examine the factual position of the case
on merits. On careful consideration of rival contention and submissions of both
the parties and careful perusal of relevant material placed before us on record,
we note that the main contention of the ld. DR is that the ld. CIT(A) grossly
erred in allowing the duty drawback of Rs.21,62,369/- to be included as part of
eligible profit derived from export oriented unit u/s 10B of the Act. The ld. DR
vehemently contended that the ld. CIT(A) went wrong in following the decision
of Special Bench of the ITAT, Indore, in the case of Maral Overseas P.
Ltd.(Supra) and the issue has to be decided in the light of decision of Hon'ble
Supreme Court in the case of Liberty India Vs. CIT 317 ITR 218 (SC). The ld.
CIT. DR submitted that the decision of Ambika Sadh, Vs. CIT in ITA
No.3606/Del/2013 dated 10.02.2014 of ITAT Delhi `A' Bench is not binding
on this bench of the Tribunal and even otherwise the Special Bench decision in
13
Maral Overseas P. Ltd.(Supra) cannot be pressed into services for granting
relief for the present assessee.
12. Replying to the above, the ld. counsel appearing for the assessee placed a
copy of the decision of ITAT Delhi `A'Bench in ITA No.3606/Del/2013 for
A.Y. 2008-09 dated 10.02.2014 (Supra) and submitted that on similar set of
facts and circumstances the appeal of the Smt. Ambika Sadh was allowed by the
Tribunal and therefore, present appeal of the Revenue on the similar issue does
not have legs to stand on the legal platform. The ld. counsel further contended
that the issue in question stand squarely decided in favour of the assessee by the
decision of Hon'ble Jurisdictional High Court of Delhi in the case of CIT vs.
Hritnik Export (P) Ltd, (Supra), decision of ITAT, Indore Special Bench in the
case of Maral Overseas Ltd. vs. ACIT (Supra) and decision of ITAT Delhi `A'
Bench in the case of Smt. Ambika Sadh vs. CIT (Supra). Supporting the order
of the CIT(A) the ld. counsel strongly contended that the AO and the
department have not disputed that u/s 10B (1) of the Act, deduction in the ratio
of profits and gains as are derived by the 100% Export Oriented Unit (EOU) are
allowable and u/s 10B(4) of the Act, specific formula in computing the profits
derived by the entity from export turnover.
13. The ld. counsel further contended that the department has not disputed
that the provisions of section 10B(4) of the Act mandate that the deduction shall
14
be computed by apportion the profits of the business of the undertaking in the
ratio of export turnover by the total turnover and sub section(1) and sub
section(4) of section 10B of the Act are to be read together while computing the
eligible deduction u/s 10B of the Act. The ld. counsel submitted that in the case
of Liberty India (Supra), Hon'ble Supreme Court has dealt with the provisions
of section 80I of the Act wherein no formula was laid down for computing the
profits derived by the undertaking which has specifically been provided under
sub section (4) of section 10B of the Act. The ld. counsel especially pointed out
that the decision of Hon'ble Supreme Court in the case of Liberty India (Supra)
is not applicable to the present case therefore, contention of the Revenue are not
sustainable and order of the ld. CIT(A) and impugned order of the CIT(A)
should be upheld.
14. The ld. counsel for the assessee also pointed out and drawn our attention
towards decision of Hon'ble Supreme Court in the case of Liberty India (Supra)
and submitted that as per ratio of decision of Hon'ble Apex Court on the issue
of derived from duty drawback has been rightly applied by the AO while
dealing with section 10A of the Act. In the present case the ld. counsel fairly
contended that the ruling of Special Bench in the case of Maral Overseas Ltd.
cannot be taken as final, since while adjudicating upon the issueless relevant
aspects of present case of apportion of formula has been given disproportionate
15
importance while the vital aspect of income derived from has been completely
ignored.
15. On careful consideration of above submissions and contentions, we may
note that in the case of Smt. Ambika Sadh (Supra) ITAT Delhi `A' Bench,
allowing the appeal of the assessee held as under:
"3. Ld. Counsel for the assessee contends that the issue in question stands
settled in favour of assessee as decided on merits by the ITAT Indore
Special Bench judgment in the case of Maral Overseas Ltd. Vs. Addl.
CIT (ITA nos. 777 & 999(Ind) of 2004 & 295 & 356(Ind) of 2006)
dated 28-3-2012). The Special Bench observed that in the case of
Liberty India (supra) the Hon'ble Supreme Court has dealt with the
provisions of Sec. 80IA of the I.T. Act where the issue under
consideration was sec. 80IB. The Special Bench after duly
considering the facts & issues held as under:
"It is clear from the plain reading of section 10B(1) of
the Act that the said section allows deduction in
respect of profits and gains as are derived by a 100%
EOU. Further, section 10B(4) of the Act stipulates
specific formula for computing the profit derived by the
undertaking from export. Thus, the provisions of
subsection (4) of section 10B of the Act mandate that
deduction under that section shall be computed by
apportioning the profits of the business of the
undertaking in the ratio of export turnover by the total
turnover. Thus, even though sub-section (1) of section
10B refers to profits and gains as are derived by a
100% EOU, the manner of determining such eligible
profits has been statutorily defined in sub-section (4) of
that section. Both sub-sections (1) and (4) are to be
read together while computing the eligible deduction
16
u/s 10B of the Act. We cannot ignore sub-section (4) of
section 10B which provides specific formula for
computing the 74 profits derived by the undertaking
from export. As per the formula so laid down, the
entire profits of the business are to be determined
which are further multiplied by the ratio of export
turnover to the total turnover of the business. In case of
Liberty India, the Hon'ble Supreme Court has dealt
with the provisions of section 80IA of the Act wherein
no formula was laid down for computing the profits
derived by the undertaking which has specifically been
provided under sub-section (4) of section 10B while
computing the profits derived by the undertaking from
the export. Thus, the decision of the Hon'ble Supreme
Court is of no help to the revenue in determining the
claim of deduction u/s 10B in respect of export
incentives.
78. Section 10B sub-section (1) allows deduction in
respect of profits and gains as are derived by a 100%
EOU. Section 10B(4) lays down special formula for
computing the profits derived by the undertaking from
export. The formula is as under :-
Profit of the business of the X Total turnover of
business Undertaking carried out by the undertaking
79. Thus, sub-section (4) of section 10B stipulated that
deduction under that section shall be computed by
apportioning the profits of the business of the
undertaking in the ratio of turnover to the total
turnover. Thus, not-with-standing the fact 75 that sub-
section (1) of section 10B refers the profits and gains
as are derived by a 100% EOU, yet the manner of
determining such eligible profits has been statutorily
defined in sub-section (4) of section 10B of the Act. As
per the formula stated above, the entire profits of the
business are to be taken which are multiplied by the
ratio of the export turnover to the total turnover of the
business. Sub-section (4) does not require an assessee
to establish a direct nexus with the business of the
undertaking and once an income forms part of the
17
business of the undertaking, the same would be
included in the profits of the business of the
undertaking. Thus, once an income forms part of the
business of the eligible undertaking, there is no further
mandate in the provisions of section 10B to exclude the
same from the eligible profits. The mode of
determining the eligible deduction u/s 10B is similar to
the provisions of section 80HHC inasmuch as both the
sections mandates determination of eligible profits as
per the formula contained therein. The only difference
is that section 80HHC contains a further mandate in
terms of Explanation (baa) for exclusion of certain
income from the "profits of the business" which is,
however, conspicuous by its absence in section 10B.
On the basis of the aforesaid distinction, sub-section
(4) of section 10A/10B of the Act is a complete code
providing the 76 mechanism for computing the "profits
of the business" eligible for deduction u/s 10B of the
Act. Once an income forms part of the business of the
income of the eligible undertaking of the assessee, the
same cannot be excluded from the eligible profits for
the purpose of computing deduction u/s 10B of the Act.
As per the computation made by the Assessing Officer
himself, there is no dispute that both these incomes
have been treated by the Assessing Officer as business
income. The CBDT Circular No. 564 dated 5th July,
1990 reported in 184 ITR (St.) 137 explained the scope
and ambit of section 80HHC and the mode of
determination of profits derived by an assessee from
the export of goods. I.T.A.T., Special Bench in the case
of International Research Park Laboratories vs. ACIT,
212 ITR (AT) 1, after following the aforesaid Circular,
held that straight jacket formula given in sub-section
(3) has to be followed to determine the eligible
deduction. The Hon'ble Supreme Court in the case of
P.R. Prabhakar; 284 ITR 584 had approved the
principle laid down in the Special Bench decision in
International Research Park Laboratories vs. ACIT
(supra). In the assessee's own case the I.T.A.T. in the
preceding years, after considering the decision in the
case of Liberty India held that provisions of section
18
10B are different from the provisions of section 80IA
wherein no formula has been laid down for computing
the eligible business profit.
80. In view of the above discussion, question no. 2 is
answered in affirmative and in favour of the assessee.
Accordingly, the assessee is eligible for claim of
deduction on export incentive received by it in terms of
provisions of section 10B(1) read with section 10B(4)
of the Act.
3.1. Since the Special Bench after considering the ratio of decisions in the
case of Liberty India (supra); International Research Park
Laboratories v. ACIT 212 ITR (AT) 1; and CBDT Circular has held
that while working out the deduction u/s 10B(1) the calculation of
eligible profits is to be made by including the claim of export
incentives, thus the claim ultimately allowed by the assessing officer
is justified, which is endorsed by Special Bench. Therefore, the order
of CIT should be set aside as the merits stand decided.
4. Ld. DR supported the order of ld. CIT.
5. We have heard rival submissions and gone through the relevant
material available on record. In our considered view, since the issue
in question stands squarely decided in favour of the assessee by the
ITAT Special Bench order in the case of Maral Overseas Ltd. (supra),
which has not been disturbed by any superior authority, is binding on
us. Respectfully following the same, we hold that on merits the
assessee's computation of eligible profit u/s 10B is to be allowed after
including the export profits as claimed by the assessee. In view
thereof, without going into technicalities of validity of sec. 263 we
uphold the action u/s 263 and the issue on merits is decided in favour
of the assessee following the ITAT Special Bench Judgment (supra).
19
Thus the order ld. CIT setting aside the assessment back to the file of
assessing officer stands vacated and the claim of the assessee as
allowed by A.O. stands.
16. In the present case from operative part of the impugned order we observe
that the ld. CIT(A) has granted relief for the assessee with following conclusion:
"4. I have carefully considered the submissions made by the
appellant. I have also perused the judgments relied upon by
the Assessing Officer and by the appellant. As argued by the
appellant, the judgment of the Supreme Court in the case of
M/s. Liberty India (Supra) relates to the claim of deduction
under section 80I, 80IA and 80IB, which have a common
scheme and the said sections provide for incentives in the
form of deductions which are linked to profits `derived from
industrial undertaking'. The appellant has relied on the
recent Special Bench Judgment in the case of Maral
Overseas Ltd. Vs. Addl. CIT reported at 2012-TIOL-197-
ITAT-Indore-SB. In the judgment dated 28.03.2012, the
Special Bench of the ITAT has held that, "...In case of
Liberty India, the Hon'ble Supreme Court has dealt with the
provisions of section 80IA of the Act wherein no formula
was laid down for computing the profits derived by the
undertaking which has specifically been provided under
sub-section (4) of section 10B while computing the profits
derived by the undertaking from the export. Thus, the
decision of the Hon'ble Supreme Court is of no help to the
20
revenue in determining the claim of deduction under section
10B in respect of export incentives".
4.1 The Hon'ble Special Bench has further held that sub-section
10B(4) does not require an assessee to establish a direct
nexus with the business of the undertaking and once an
income forms part of the business of the eligible
undertaking, there is no further mandate in the provisions of
section 10B to exclude the same from the eligible profits.
The Court has held that the mode of determining the eligible
deduction under section 10B is similar to the provisions of
section 80HHC, with the significant difference that section
80HHC contains a further mandate in terms of Explanation
(baa) for exclusion of certain income from the profits of the
business, which is conspicuously absent in section 10B. Sub-
section (4) of section 10B of the Act is a complete code
providing the mechanism for computing the profits of the
business eligible for deduction under section 10B. Thus,
after considering the decision of the Supreme Court in the
case of Liberty India Ltd., the Special Bench has held that
the provisions of section 10B are different from the
provisions of section 80IA, wherein no formula has been
laid down for computing the eligible business profit. In view
of the direct judgment on this issue, the appellant is held to
be eligible for the claim of deduction on the export incentive
received by it in terms of section 10B(1) read with section
10B(4) of the Act. Accordingly, the appellant succeeds at its
ground of appeal."
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17. From vigilant perusal and careful consideration of the ratio of decision of
ITAT Special Bench, Indore we observe that the Special Bench after
considering the ratio of decision in the case of Liberty India (Supra),
International Research park Laboratories vs. ACIT 212 ITR (AT) 1 and relevant
Circular of the CBDT has held that while working out the deduction u/s 10B(1)
of the Act the calculation of eligible profits has to be made by including the
claim of export incentives, therefore, the claim ultimately allowed by the AO
was found to be justified which was also endorsed by Special Bench in that
case.
18. On careful consideration of factual matrix of the present case, we are of
the considered opinion that the issue in question related to allowability of the
duty drawback stand squarely covered in favour of the assessee by the order of
the jurisdictional High Court of Delhi in the case of CIT vs. Hritnik Export (P)
Ltd, (Supra), wherein their lordships speaking for the Jurisdictional High Court
of Delhi after considering and approving the ratio of the decision of Special
Bench in the case of Maral Overseas Ltd.,(Supra) have held that as per section
28, clause (iiic) of the Act any duty of Custom and Excise repayable as
drawback to a person against export under Custom and Central Excise Duty
drawback Rules 1971 is deemed to be the profits and gains of business or
profession. Their lordship further held that the said provision has to be given
full effect to and this means that the duty drawback or duty benefits would be
22
deemed to be a part of business income and this will be treated as profit derived
from business of the undertaking and the same cannot be excluded.
19. In the present case, from operative part of the impugned order as
reproduced hereinabove, we observe that before granting relief for the assessee
the ld. CIT(A) has held that the dedcision of Hon'ble Apex Court in the case of
Liberty India relates to the claim of deduction u/s 80I, 80IA & 80IB of the Act
which have a common scheme and the said sections provide for incentives in
the form of deductions which are linked to profit derived from industrial
undertaking. We may also note that in the case of Maral Overseas Ltd.,(Supra)
the Special Bench of the ITAT has held that in the case of Liberty India the
Hon'ble Apex Court has dealt with the provisions of section 80IA of the Act for
which no formula was laid down for computing the profits derived by the
undertaking which has specifically been provided under sub section (4) of
section 10B of the Act, for computation of the profits derived by the
undertaking from the export business. Under these facts and circumstances, we
respectfully held that the ld. CIT(A) was right in holding that the benefit of the
ratio of decision of Hon'ble Apex Court in the case of Liberty India (Supra) is
not allowable for the Revenue in determining the claim of the assessee u/s 10B
of the Act. The ld. CIT(A) was right in holding that section 10B(4) of the Act is
a complete code which provides a formula/mechanism for computing the profits
of the business eligible for deduction u/s 10B of the Act and in view of the
23
decision of Special Bench in the case of Maral Overseas Ltd.,(Supra) the
present assessee was rightly held to be eligible for the claim of deduction on the
export incentive received by it as per provision of section 10B (1) r.w.s. 10B(4)
of the Act.
20. On the basis of foregoing discussion, we reach to logical fortified
conclusion that the AO misinterpreted the ratio of decision of Hon'ble Apex
Court in the case of Liberty India(Supra) while denying claim of the assessee
u/s 10B of the Act.
21. On the other hand we are inclined to hold that the ld. CIT(A) was right in
following the decision of Special Bench of ITAT Indore in the case of Maral
Overseas Ltd.,(Supra) while granting relief for the assessee in the impugned
order. We also respectfully note that the Hon'ble Jurisdictional High Court of
Delhi in the recent decision dated 13.11.2013 in the case of CIT vs. Hritnik
Export (P) Ltd., (Supra) have upheld the ratio of the decision of Special Bench
of ITAT Indore in the case of Maral Overseas Ltd.,(Supra) and the ld. CIT. DR
has miserably failed to point out any specific and direct judgment on the issue
which may compel us to take deviated view of stand from the Special Bench
order (Supra).
22. To sum up, we hold that the ratio of the decision of the Special Bench of
the Tribunal is binding on the all Division Benches of the Tribunal until and
24
unless there is a different view either of Hon'ble Supreme Court or by Hon'ble
Jurisdictional High Court of any other High Court on the issue. We also hold
that the AO was not justified in disallowing the claim of the assessee on the
basis of decision of Hon'ble Apex Court in the case of Liberty India (Supra).
23. Per contra, we are inclined to hold that the ld. CIT(A) was right and quite
justified in granting relief for the assessee by following decision of Special
Bench in the case of Maral Overseas Ltd.,(Supra) and we uphold the same.
Accordingly sole ground of the Revenue being devoid of merit is dismissed.
24. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 30/12/2014.
Sd/- Sd/-
(S. V. MEHROTRA) (C. M. GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated/ 30/12/2014
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
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