Mukesh Oil Mill Private Limited v. Income Tax Appellate Tribunal Jaipur Bench Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 1 / 2008 Mukesh Oil Mill Private Limited, Having Its Office At E-59,Industrial Area, Khairthal District Alwar Rajasthan Through ItsDirector Shri Anmol Gupta ----Appellant Versus 1. Income Tax Appellate Tribunal Jaipur Bench Jaipur 2. Commissioner of Income Tax (Appeals) Alwar 3. Assistant Commissioner of Income Tax, Circle-1 Alwar. ----Respondents Connected With D.B. Income Tax Appeal No. 56 / 2008 Krishna Murari Agarwal Proprietor M/s. Shakuntala Oll Products Having Its Office ITI Road, Old Industrial Area, Alwar (Rajasthan) ----Appellant Versus 1. Union of India, Through Finance Secretary, Ministry of Finance Government of India, New Delhi. 2. Commissioner of Income Tax, Moti Doongri, Alwar 3. Assistant Commissioner of Income Tax, Range-I, Alwar ----Respondents _____________________________________________________ For Appellant(s) : Mr. Anant Kasliwal with Ms. Charu PareekFor Respondent(s) : Mrs. Parinitoo Jain with Ms. Shiva Goyal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 26/08/2017 1. In both these appeals, common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellants have assailed thejudgment and order of the Tribunal whereby Tribunal hasdismissed the appeal of the assessee and confirmed the order ofthe AO. 3.This court while admitting the appeals framed followingsubstantial question of law:- 3.1Appeal No.1/2008 admitted on 23.1.2008 “Whether the Appellate Tribunal hascorrectly interpreted the provision ofSection 80IA to disallow the appellantcompany’s claim there under in respect ofthe its receipt under the head Insurancecharges, postage, FDR Interest andinterest on IT refund?” 3.2Appeal No.56/2008 admitted on 22.5.2012 “Whether the Appellate Tribunal hascorrectly interpreted the provision ofSection 80IB to disallow the appellantcompany’s claim there under in respect ofits receipts on account of insurance chargesand surplus of interest account?” 4.The appeal (1/2008) was earlier heard on 12.4.2017 whichcame to be dismissed however subsequently review applicationno.31/2017 was heard and in view of the decision of SupremeCourt, matter was heard. 4.1Counsel for the appellant contended that the bills which arepart of the papers at Annexure-2A, amount which has beenclaimed for insurance and excess amount is part of the income. 4.2Counsel for the appellant has relied upon the two decisionsone by Gujarat High Court in CIT vs. Metrochem Industries Ltd.(2016) 389 ITR 181 (Guj.) and other decision of this court in D.B.ITA No.294/2008 in CIT Jaipur vs. Suresh Kumar Bajoria decidedon 18.5.2017. 4.3He further contended that in view of the observations madeby the Supreme Court in case of CIT vs. Meghalaya Steels Ltd.(2016) 383 ITR 217 (SC) wherein it has been held as under:- 4.1Counsel for the appellant contended that the bills which arepart of the papers at Annexure-2A, amount which has beenclaimed for insurance and excess amount is part of the income. 4.2Counsel for the appellant has relied upon the two decisionsone by Gujarat High Court in CIT vs. Metrochem Industries Ltd.(2016) 389 ITR 181 (Guj.) and other decision of this court in D.B.ITA No.294/2008 in CIT Jaipur vs. Suresh Kumar Bajoria decidedon 18.5.2017. 4.3He further contended that in view of the observations madeby the Supreme Court in case of CIT vs. Meghalaya Steels Ltd.(2016) 383 ITR 217 (SC) wherein it has been held as under:- “20. Liberty India being the fourth judgment inthis line also does not help Revenue. What thisCourt was concerned with was an exportincentive, which is very far removed fromreimbursement of an element of cost. A DEPBdrawback scheme is not related to the businessof an industrial undertaking for manufacturing orselling its products. DEPB entitlement arises onlywhen the undertaking goes on to export the saidproduct, that is after it manufactures or producesthe same. Pithily put, if there is no export, thereis no DEPB entitlement, and therefore its relationto manufacture of a product and/or sale withinIndia is not proximate or direct but is one stepremoved. Also, the object behind DEPBentitlement, as has been held by this Court, is toneutralize the incidence of customs duty paymenton the import content of the export productwhich is provided for by credit to customs dutyagainst the export product. In such a scenario, itcannot be said that such duty exemption schemeis derived from profits and gains made by theindustrial undertaking or business itself. 28. It only remains to consider one furtherargument by Shri Radhakrishnan. He has arguedthat as the subsidies that are received by theRespondent, would be income from other sourcesreferable to Section56of the Income Tax Act,any deduction that is to be made, can only bemade from income from other sources and notfrom profits and gains of business, which is aseparate and distinct head as recognised bySection14of the Income Tax Act. ShriRadhakrishnan is not correct in his submission that assistance by way of subsidies which arereimbursed on the incurring of costs relatable toa business, are under the head "income fromother sources", which is a residuary head ofincome that can be availed only if income doesnot fall under any of the other four heads ofincome. Section28(iii)(b)specifically states thatincome from cash assistance, by whatever namecalled, received or receivable by any personagainst exports under any scheme of theGovernment of India, will be income chargeableto income tax under the head "profits and gainsof business or profession". If cash assistancereceived or receivable against exports schemesare included as being income under the head"profits and gains of business or profession", it isobvious that subsidies which go toreimbursement of cost in the production of goodsof a particular business would also have to beincluded under the head "profits and gains ofbusiness or profession", and not under the head"income from other sources". 4.4The income of the insurance which is recovered from thepurchaser is part of the income. 5.Counsel for the respondent contended that for the amount,the insurer is already given benefit, the excess amount claimed isnot their business expenses which are received againstapprehended expenses. 5.1The contentions raised by the counsel for the respondent isrequired to be accepted. The amount which has been shown in thebills of the insurer under 80I, excess amount claimed by theinsurer, benefit cannot be given in view of the observations whichare made by the Supreme Court in above cases. 5.2In the facts of the present case, where this is not a businessincome rather this income is collected against apprehended 4.4The income of the insurance which is recovered from thepurchaser is part of the income. 5.Counsel for the respondent contended that for the amount,the insurer is already given benefit, the excess amount claimed isnot their business expenses which are received againstapprehended expenses. 5.1The contentions raised by the counsel for the respondent isrequired to be accepted. The amount which has been shown in thebills of the insurer under 80I, excess amount claimed by theinsurer, benefit cannot be given in view of the observations whichare made by the Supreme Court in above cases. 5.2In the facts of the present case, where this is not a businessincome rather this income is collected against apprehended expenses which is not incurred, therefore, it cannot be treated asbusiness income, it can be treated as income under the head ofother income. Otherwise also, there is concurrent finding by theauthorities. 6.Therefore, the issues are answered in favour of thedepartment and against the assessee. 7.The appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 28-29.