IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR.

BEFORE SH. UDAYAN DAS GUPTA, JUDICIAL MEMBER AND SH. KRINWANT SAHAY, ACCOUNTANT MEMBER Sh. Nitin Aima, Wani Manzil Vs. ACIT, Circle-3, Saidpora Iddah Gah Srinahar Srinagar.

Kashmir, [PAN:ACNPA4599D]

(Appellant) (Respondent)

Appellant by Sh. Sandeep Vijh, CA Respondent by Sh. Davinder Pal Singh, Sr. DR Date of Hearing 18.12.2024 Date of Pronouncement 27.02.2025

ORDER

Per: Udayan Das Gupta, JM This appeal is filed by the assessee against the order of the ld. CIT(A)-2, Ludhiana, passed u/s 250 (6) of the Act 1961 dated 01.01.2020 which has emanated from the order of the Assistant Commissioner of Income Tax, Circle-3, Srinagar, (in short the AO) u/s 143(3) of the Act dated 27.12.2017 for A.Y. 2015-

16.

2. The grounds of appeal preferred by the assessee as per memorandum of appeal are as under;

“1. That the learned CIT(A) has erred in not defeating the addition made on account of export incentives of the assesse which is exempt under section 10aa of the act.

2. The learned CIT(A) has erred in not adjudicating in respect of quantification the amount of addition made and basis of the quantum.

3. The assessee craves to add or delete any ground of appeal at the time of hearing.”

3. The brief facts are that the assessee is engaged in export business and has an unit at SEZ, Moradabad, UP, from where handicrafts are exported under the name and style of “Shaila Exports”. The only issue in this case is that during the year under appeal the assessee has claimed to have received export incentives by way of duty drawback amounting to Rs. 9.95 crores, which has been clubbed with the total turnover for the purpose of claiming deduction under the provisions of section 10AA of the Act 61, which has been disallowed by the AO due to the reasons that Duty Draw Back receipts (in short DDB ) cannot be considered as eligible for benefit u/s 10AA , as they do not form part of profits and gains derived from export , of such articles or things or from services, and for arriving at the above conclusion the AO relied on the decision of the Hon’ble Apex court in the case of Liberty India vs CIT ( 317 ITR 218 ) , where the Hon’ble court while analysing the provisions of section 80 IB of the Act 61, the relevant portion has held as follows:

“The next question is - what is duty drawback? Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of Section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of duty drawback receipt lies in Section 75 of the Customs Act and Section 37 of the Central Excise Act. 18. Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/policy provisions in the Customs Act/Scheme(s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression "profits derived from industrial undertaking" in Section 80-IB.

4. The AO further concluded that if DDB does not fall within the expression “profits derived from industrial undertaking”, for the purpose of section 80-IB, then logically it can be concluded that DDB will also not fall within the expression profits and gains derived from the export of such articles or things or from services, as e