By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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8 (2008) 117 TTJ 672 (Jd.)
ITO v. Bothra International
ITA Nos. 607 & 608 (Jd.) of 2007
A.Ys. : 2004-05 and 2005-06. Dated : 27-6-2008
S. 10BA of the Income-tax Act, 1961 — Amount of credit on
account of DEPB/Duty Drawback (DDB) has to be included as profits of the
business of the undertaking for the purpose of S. 10BA(4) and the said amount of
credit of DEPB or DDB will not enter into the total turnover or export turnover
of the undertaking for the purpose of calculating profits derived from the
business of the undertaking of the assessee within the meaning of Ss.(4).
For the relevant assessment year, the Assessing Officer
rejected the assessee’s claim for deduction of DEPB and DDB u/s.10BA. The
CIT(A), however, allowed the claim for deduction.
The Tribunal upheld the CIT(A)’s order and allowed the
deduction u/s.10BA. In arriving at this decision the Tribunal relied upon the
decisions in the case of B. Desraj v. CIT, (2008) 7 DTR (SC) 54 and
Kerala State Co-op. Marketing Federation Ltd. & Ors. v. CIT, (1998) 147 CTR
(SC) 29/231 ITR 814 (SC).
The Tribunal noted as under :
(a) By the use of expression ‘subject to’ in Ss.(1) of S.
10BA, it is clear that the provision contained U/ss.(4) shall override the
provisions of Ss.(1) of S. 10BA.
(b) Once the assessing authority has found the assessee
eligible for deduction u/s.10BA(1), then the only scope available to the
assessing authority was to find out the quantum of the deduction as per
prescription of Ss.(4) of S. 10BA and no other method or manner could be used,
as the answer is available from the scheme contained in the special provision
of S. 10BA itself, where allowability of deduction was by mandate subjected to
such provisions contained therein.
(c) When the profits are derived from manufacture and
export of eligible articles, the solitary business activity of the
undertaking, then the incentive such as DEPB/DDB irrespective of its real
character or source has to be taken into account and has to be included as
profits of the business of the undertaking, in particular when the expression
used in Ss.(4) of S. 10BA is the ‘profits of the business of undertaking’.
(d) The Legislature in its wisdom did not use the
expression ‘profit’ in singular, but used it as ‘profits’ in plural. Thus,
there can be profits not only by exporting the eligible articles or things,
but also can be those profits which are related to export of such articles or
things, which in the present case are DEPB and DDB determined with relation to
export sales effected by these assessees.
