Mohini Originals, New Delhi vs Assessee

Appellant by : Shri R.K. Singh Adv. Respondent by : Shri P. Dum Kanunjna Sr. DR

Date of hearing : 12-06-2015 Date of order : 17-06-2015.

ORDER

PER S.V. MEHROTRA, A.M:-

These appeals, by the assessee, are directed against separate orders passed by the ld. CIT(A)-XXIII, New Delhi relating to A.Y. 2007-08 & 2010-11. Both the appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.

ITA no. 6235/Del/2013 (AY 2007-08):

2. The assessee, a partnership firm, in the relevant assessment year was engaged in the business of export of Made ups and garments which is 2 ITA 6235 & 6236/Del/13

hundred percent export oriented unit, set up at Noida Special Economic Zone ('SEZ'). The assessee had filed its return of income declaring income of Rs. 10,78,460/-. The AO has observed that assessee had claimed deduction u/s 10B of Rs. 48,40,296/-, which was allowed at the time of assessment. The deduction u/s 10B on duty draw back amounting to Rs.

35,51,990/- also had been allowed. However, in the course of assessment proceedings for AY 2009-10, deduction claimed on duty draw back had been disallowed, relying on the decision of Hon'ble High Court in the case of M/s Ritesh Industries and also on the decision of Hon'ble Supreme Court in the case of M/s Liberty India 183 Taxman 349, wherein duty draw back were not considered eligible profit for deduction u/s 80-I & 80B of the Income-tax Act on the ground that the same was similar in nature for computing deduction u/s 10B of the I.T. Act. Accordingly 147 proceedings were initiated for AY 2007-08 for the reasons that income of Rs. 35,51,990/- had escaped assessment.

3. After considering detailed submissions of assessee, reproduced in the assessment order, the AO disallowed 90% of export incentive of Rs. 35,51,990/- being Rs. 31,96,791/- out of the deduction claimed u/s 10B.

4. Ld. CIT(A) dismissed the assessee's appeal relying on the decision of Hon'ble Supreme Court in the case of Sterling Foods vs. CIT and Liberty India, wherein it has been held that there must be, for the application of the words, 'derived from' a direct nexus between the profits and gains and the industrial undertaking, whereas in the instant case, the nexus was not direct but only incidental. Aggrieved, the assessee is in appeal before us:

3 ITA 6235 & 6236/Del/13

5. Effective grounds raised by the assessee are as under:

"That the Ld. AO wrongly disallowed duty draw back amounting to Rs. 31,96,791/- from the eligible deduction u/s 10B of the Income Tax Act.

The Ld. CIT(Appeals) erred in confirming the above additions of Rs. 31,96,791/-."

6. At the outset ld. counsel for the assessee submitted that this issue is covered by the decision of Tribunal in assessee's own case for AY 2009-10, wherein the Tribunal, following the decision of Special Bench in M/s Maral Overseas Vs. Addl. CIT, has allowed the assessee's claim.

7. We have heard rival submissions and perused the material available on record. We find that the ITAT in assessee's own case for AY 2009-10 in ITA no. 2829/Del/2013, in para 6 of its order dated 21-5-2014 has observed as under:

"Heard Mr. Keyur Patel, the ld. Sr. DR. The issue under consideration is covered by the decision of the Special Bench of the Tribunal in the case of Maral Overseas Ltd. vs. ACIT, wherein it is held as follows.

"Para 78: Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100 per cent export oriented unit. Section 10B(4) lays down special formula for computing the profits derived by the undertaking from export. Profit of business x export turnover/ turnover of business of EOU.

Para 79: Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be 4 ITA 6235 & 6236/Del/13

computed by apportioning the profits of the business of the undertaking in the ratio of export turnover to the total turnover. Thus, notwithstanding the fact that sub-section (1) of section 10B refers the profits and gains as are derived by a 100 percent export oriented unit, 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."

Respectfully following the binding precedent, we uphold the order of the first appellate authority and dismiss the appeal of the revenue."

8. There being no change in facts and circumstances of the case, respectfully following the decision of coordinate Bench in assessee's own case for earlier year, we set aside the orders of authorities below on the issue in question and the assessee's claim of deduction u/s 10B on account of duty draw back is allowed in terms of Tribunal's direction in AY 2009-10.

ITA 6236/Del/2013 (AY 2010-11):

9. Effective grounds raised by the assessee in this year are as under:

"That the Ld. AO wrongly disallowed duty draw back amounting to Rs. 29,87,250/- from the eligible deduction u/s 10B of the Income Tax Act.

The Ld. CIT(Appeals) erred in confirming the above additions of Rs. 29,87,250/-."

5 ITA 6235 & 6236/Del/13

10. Admittedly facts for A.Y. 2010-11 are similar to AY 2007-08 and 2009-10. For the reasons given by us in AY 2007-08, orders of authorities below on the issue in question are set aside and the assessee's claim of deduction u/s 10B on account of duty draw back is allowed in terms of Tribunal's direction in AY 2009-10.

11. In the result, both the appeals filed by the assessee are allowed.

Order pronounced in open court on 17-06-2015.

Sd/- Sd/- (GEORGE GEORGE K.) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17-06-2015. MP: Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR