Duty drawback cannot be a part of total turnover and is separately chargeable – ITAT
In a recent judgment, the Surat ITAT has held that duty drawback received on export sales cannot be a part of total turnover and is separately chargeable.
ABCAUS Case Law Citation:
ABCAUS 4025 (2024) (05) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre, Delhi (NFAC) in confirming addition over and above the estimate of net profit, the amount of duty drawback accrued.
The Assessing Officer while passing the assessment order, considered/assumed export turnover on the basis of amount of sanction of duty drawback. The Assessing Officer estimated the profit at 8.19% which the assessee adopted while filing return on the sale as per the return of income under Section 44AD of the Act.
However, the Assessing Officer considered duty drawback amount as income over and above the estimated profit. The CIT(A) confirmed the action of Assessing Officer.
Before the Tribunal the assessee submitted that the AO erred in making separate addition in respect of drawback received on export sales as the duty drawback is allowed to compensate loss on sales in the international market i.e. on export sale. That the drawback are part and parcel of export sales and no separate addition is justified on drawback which had already been taxed while estimating the profit.
The Tribunal observed that the argument of the assessee that for the purpose of estimating income, duty drawback is to be considered as part of turnover is against the statutory provision of Income-tax Act.
The Tribunal observed that proviso to Explanation (2ba) of Sub-section (4C) of Section 80HHC defines the ‘total turnover’, which prescribe that in relation to any assessment year commencing on or after 1st day of April,1991, the expression total turnover shall have effect as if it is also excluded any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28. Section 28 is a charging section and clause (iiic) thereof specifically deals with the any duty of custom or excise re-paid or re-payable as drawback to any person against export under Customs and Central Excise Duties Drawback Rules,1971; as income of such persons. Thus, such submissions of the assessee is not acceptable.
Accordingly, the Tribunal opined that duty drawback cannot be a part of total turnover and is separately chargeable.
Thus, the addition on account of duty drawback was upheld and the ground of the appeal was dismissed.
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