The Income Tax Appellate Tribunal (ITAT), Vishakhapatnam bench consisting of Duvvuru R L Reddy, Judicial Member, and S Balakrishnan, Accountant Member held that export entitlements (MEIS) and duty drawback of promotion scheme is income assessable under “profits or gains from business or profession.
The assessee, Nekkanti Sea Foods Limited, is a limited company engaged in the business of export of frozen shrimp and other sea foods filed its return of income for the Assessment Year (AY 2017-18) declaring a total income of Rs. 52,30,54,010/-. After processing the return of income U/s. 143(1), the case was selected for complete scrutiny under CASS and accordingly statutory notices U/s. 143(2) and 142(1) were issued in electronic format to the assessee calling for the information. The assessee’s representative filed its reply online through the e-filing portal. The Assessing Officer (AO) on examination of the information furnished by the assessee made a disallowance U/s. 14A and 8D for Rs.28,57,443/-. Thereafter, the Principal Commissioner of Income Tax (Pr. CIT) invoked the powers vested U/s. 263 of the Act noticed that the assessment order passed is prima facie erroneous and prejudicial to the interest of the Revenue. The Pr. CIT issued a show-cause notice to the assessee on 5/3/2021. In response, the assessee-company made its submissions. Considering the submissions made by the assessee, the Pr. CIT directed the Assessing Officer to disallow a sum of Rs. 10,24,00,779/- arising from the receipt of duty drawback and Rs. 6,89,08,253/- arising from the sale of licenses considering it as not derived from the industrial undertaking so as to entitle the assessee to claim the benefit of deduction u/s. 80IB(11A) of the Act. Aggrieved by the order of the Pr. CIT, the assessee is in appeal before the Tribunal.
The Tribunal observed “Respectfully following the decision of the Apex Court in the case of Meghalaya Steel Ltd, we hold that the export entitlements (MEIS) and the duty drawback of promotion scheme is an income assessable under the head “profits or gains from business or profession” as per clause (iiib) and (iiid) to section 28 of the IT Act, 1961.”
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