HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 61 / 2016 Ranjana Johari, Proprietor M/s Global Art Exports, S-249, Mahaveer Nagar, Tonk Road, Jaipur ----Appellant Versus Assistant Commissioner of Income Tax, Circle-6, Jaipur ----Respondent For Appellant(s) : Mr. Sanjay Jhanwar For Respondent(s) : Mr. Prateek Kedawat & Mr. K. D. Mathur on behalf of Mr. R. B. Mathur HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS judgment 23/10/2017 1. By way of this appeal, appellant has challenged judgment and order of Tribunal whereby Tribunal has allowed appeal of department as well as cross objection of assessee only for statistical purposes. 2. This court while admitting appeal on 31.01.2017 framed following questions of law:- (i) Whether income from duty draw back and sale of export license does not qualify as profit derived by undertaking from export out of India of eligible articles or things for allowing deduction u/s 10BA of Act? (ii) Whether order of Ld. Tribunal does not got vitiated on account of apparent inconsistency of reversing order of Ld. CIT(A) and simultaneously setting aside ground of appeal to Ld. Assessing Officer? (2 of 5) [ITA-61/2016] 3. While considering matter Tribunal observed as under:- 12. We have heard rival contentions and perused material on record. Hon ble Supreme Court in case of Liberty India (supra) has considered issue of DEPB and duty draw back and with reference to section 80IA/80IB held that DEPB/duty draw back benefit would not form part of net profit. section 80IA and 80IB deduction is provided by Statute for industrial undertaking and profit & gains derived from any business of industrial undertaking certain percentage deduction be allowed for number of assessment years specified under law. Whereas in section 80IB deduction is allowed to certain industrial undertaking other than infrastructure development undertaking from profit and gains derived from any business referred to in sub section (3) to (11), (11A) and 11B) as such business being referred to as eligible business on certain percentage basis and for such number of assessment years specified under law. Section 10BA also provides special deduction of such profit of eligible article or things. This section applies to any undertaking which fulfill following conditions, namely, (a)It manufactures or produces eligible articles or things without use of imported raw materials ; (d) Ninety per cent or more of its sales during previous year relevant to assessment year are by way of exports of eligible articles or things. Besides these, other conditions provided in clause (b), (c) and (e) are to be fulfilled for claiming deduction. sub section (4) of section 10BA reads as under :- Sub Section (4) : For purposes of sub-section (1), profits derived from export out of India of eligible articles or things shall be amount which bears to profits of business of undertaking, same proportion as export turnover in respect of such articles or things bears to total turnover of business carried on by undertaking. As per sub-section (6) of section 10BA, sub- section (8) and sub-section (1) of section 80IA also applicable in relation to und ertaking referred to in this section as they apply for purpose of undertaking referred to in section 80IA. Section 10BA was inserted by Finance Act, 2003 with effect (3 of 5) [ITA-61/2016] from 1.4.2004 whereas section 80IA was inserted by Finance Act,1999 with effect from 1.4.2000. Originally section 80IA was inserted by Finance Act, 1991 with effect from 1.4.1991. languages of both sections are same but effective dates are different. Therefore, findings of Hon ble Supreme Court in case of Liberty India squarely are applicable in case of deduction claimed by assessee under section 10BA and credited duty draw back and DEPB in Profit & Loss Account, but is not derived income from undertaking. Therefore, we reverse order of ld. CIT (A) to that extent. 12.1. However, Hon ble Supreme Court in case of Topman Exports (supra) held that entire sale proceeds not to be treated as profits but only difference between sale value and face value of credit DEPB credit chargeable as income under section 28(iiib) in year in which applied for against exports. Further, profit on transfer of credit chargeable under section 28(iiid) in year in which transferred. ld AR has also referred decision of ITAT Jodhpur Bench, Jodhpur in case of Angira Art Exports and Suraj Exports India and others in ITA No. 360/Jodh/2012 order dated 31/1/2013 and also ITAT Mumbai Bench in case of Arts & Crafts Exports Vs. ITO 66 DTR 69 (ITAT Mumbai Bench) and claimed that both ITATs have allowed assessee s appeal by considering Hon'ble Supreme Court decision in case of Liberty India and Topman Exports (supra). We have considered assessee s submission but fact of both cases are not verifiable from submissions made by assessee, therefore Assessing Officer is directed to considering order of Hon ble Supreme Court in case of Topman Exports (supra) and case laws referred by assessee i.e. decision of ITAT Jodhpur Bench, Jodhpur in case of Angira Art Exports and Suraj Exports India and others and ITAT Mumbai Bench decision in case of Arts & Crafts Exports Vs. ITO (supra)and recalculate income accordingly. Therefore, this ground of appeal is setaside to ld Assessing Officer. 4. However, view taken by Supreme Court in case of Commissioner of Income-Tax V/s Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC) wherein it has been held as under:- 20. Liberty India being fourth judgment in this line also does not help Revenue. What this (4 of 5) [ITA-61/2016] Court was concerned with was export incentive, which is very far removed from reimbursement of element of cost. DEPB drawback scheme is not related to business of industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when undertaking goes on to export said product, that is after it manufactures or produces same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of product and/or sale within India is not proximate or direct but is one step removed. Also, object behind DEPB entitlement, as has been held by this Court, is to neutralize incidence of customs duty payment on import content of export product which is provided for by credit to customs duty against export product. In such scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by industrial undertaking or business itself. 28. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as subsidies that are received by respondent, would be income from other sources referable to Section 56 of Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is separate and distinct head as recognised by Section 14 of Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on incurring of costs relatable to business, are under head income from other sources , which is residuary head of income that can be availed only if income does not fall under any of other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of Government of India, will be income chargeable to income tax under head profits and gains of business or profession . If cash assistance received or receivable against exports schemes are included as being income under head profits and gains of business or profession , it is obvious that subsidies which go to reimbursement of cost in production of goods of particular business would also have to be included under head profits and gains of business or profession , and not under (5 of 5) [ITA-61/2016] head income from other sources . 29. For reasons given by us, we are of view that Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80- IB and 80-IC. Himachal Pradesh High Court, having wrongly interpreted judgments in Sterling Foods and Liberty India to arrive at opposite conclusion, is held to be wrongly decided for reasons given by us hereinabove. 4. same view was followed by this Court in case of CIT Jaipur V/s Suresh Kumar Bajoria in D. B. Income Tax Appeal No. 294/2008 decided on 18.05.2017. said decisions have not been taken into consideration by authority. 5. Therefore, matter is remitted back to AO to decide same in light of aforesaid decisions. It is made clear that we have not expressed anything on merits. 6. appeal stands accordingly disposed of. (VIJAY KUMAR VYAS),J. (K.S.JHAVERI),J. B.M.G/Gourav/22 Ranjana Johari v. Assistant Commissioner of Income-tax, Circle-6, Jaipur