Pioneer Foods And Agro Industries vs Income Tax Officer-18(3)(2) ...
2023 Latest Caselaw 11014 Bom

2023:BHC-OS:12660-DB
                                                  1/5                       6-7-ositxa-3051-3102-2018+.doc



                              IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                                 ORDINARY ORIGINAL CIVIL JURISDICTION

                                INCOME TAX APPEAL (IT) NO.3051 OF 2018
                                                WITH
                                 INTERIM APPLICATION NO.2972 OF 2021
                                                WITH
                                INCOME TAX APPEAL (IT) NO.3102 OF 2018
                                                WITH
                                 INTERIM APPLICATION NO.2974 OF 2021

                  Pioneer Foods and Agro Industries                            ...Appellant
                        Versus
                  Income Tax Officer-18(3)(2), Mumbai & Anr.                   ...Respondents


                  Mr. K. Gopal with Mr. Akhilesh P. Deshmukh and Mr. Om
                  Kandalkar, i/b. Ms. Neha Paranjpe, for Appellant.
                  Mr. Suresh Kumar, for Respondents.


                                          CORAM:         K. R. SHRIRAM &
                                                         NEELA GOKHALE, JJ.

                                          DATED:         25th October 2023
                  PC:-

1. Interim Application No.2971 of 2021 and Interim Application

No.2974 of 2021 are listed today. We are informed that they are

already disposed.

2. Appellant has proposed the following questions of law:

"A. Whether the Appellate Tribunal is justified in law in upholding the action of lower authorities in treating the profit on sale of VKGUY license and duty draw back as not eligible for claiming deduction under section 80IB of the Act?

B. Whether the Appellate Tribunal is correct in law in disallowing the claim of deduction under section 80IB of the Act without appreciating that the profit on sale of VKGUY License and Duty draw back will reduce the cost of inputs of the Appellant's products. Hence the same is inextricably linked to manufacturing activity carried out of by the industrial Gaikwad RD 2/5 6-7-ositxa-3051-3102-2018+.doc

undertaking of the Appellant. Therefore, disallowance of the claim of deduction under section 80IB of the Act is bad in law?

C. Whether the Appellate Tribunal is justified in holding that the amount received on account of VKGUY license and duty drawback does not represent profits chargeable under section 28(iiib) and 28(iiid) of the Act?"

At the outset, Mr. Gopal stated that he is not pressing the issue

regarding duty drawback as the law is against Appellant.

3. Income Tax Appeal (IT) No.3102 of 2018 pertains to

Assessment Year 2008-09 and Income Tax Appeal (IT) No.3051 of

2018 pertains to Assessment Year 2011-12. In Appellant's own case

for Assessment Year 2009-10 and for Assessment Year 2010-11,

Appellant had preferred two appeals ITXA No.142 of 2017 and ITXA

No.143 of 2017 ("the said two Appeals") on the same issue of

entitlement to claim deduction under Seciton 80IB of Income Tax Act,

1961 ("the Act") in relation to the benefits received by assessee under

VKGUY Scheme upon the export of its agro-products. Mr. Gopal

submits that the appeal so far as the benefit under the VKGUY

Scheme was concerned, was answered in favour of Appellant.

4. The substantial question of law framed in those two appeals

read as under:

"Whether the Tribunal was right in law in rejecting the assessee's claim of deduction under Section 80IB(11A) of the Act in relation to the benefits received by the assessee under VKGUY scheme upon the export of its agro products?"

5. Mr. Gopal and Mr. Suresh Kumar state that the same

substantial question of law would arise in these matters also. Gaikwad RD 3/5 6-7-ositxa-3051-3102-2018+.doc

6. Paragraphs 8 and 9 of the order of this Court dated 22 nd April

2019 in the said two Appeals read as under:

"8. With this background, we may refer to VKGUY Scheme. This Scheme is part of Foreign Trade Policy 2009-2014 framed by the Government of India, Ministry of Commerce and Industry. Relevant portion of this policy reads as under:-

3.13 VISHESH KRISHI AND GRAM UDYOG YOJANA (VKGUY) (SPECIAL AGRICULTURE AND VILLAGE INDUSTRY SCHEME) Objective 3.13.1 Objective of VKGUY is to promote exports of:

(i) Agricultural Produce and their value added products;

(ii) Minor Forest Produce and their value added variants;

(iii)Gram Udyog Products;

(iv)Forest Based Products; and

(v) Other Products, as notified from time to time.

Such products shall be listed in Appendix 37A of HBPv1

Entitlement 3.13.2 Duty Credit Scrip benefits are granted with an aim to compensate high transport costs, and to offset other disadvantages.

Exporters, of products notified in Appendix 37A of HBPv1, shall be entitled for Duty Credit Scrip equivalent to 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards.

However, for exports made w.e.f.27.8.2009, some Flowers, Fruits, Vegetables and other products, as listed in Table 2 of Appendix 37A shall be entitled to an additional duty credit scrip equivalent to 2% of FOB value of exports; over and above the 5% or 3% VKGUY reduced rate entitlement available as per Para 3.13.3 below Applicability 3.13.3 Duty Credit Scrip benefits under of Reduced VKGUY scheme shall be granted only Rate at a reduced rate of 3% of FOB value

Gaikwad RD 4/5 6-7-ositxa-3051-3102-2018+.doc

of exports in such cases where exporter has also availed benefits of

(i)Drawback at rates higher than 1% and/or

(ii)Specific DEPB rate (i.e. other than Miscellaneous Category-Sr.Nos.22C & 22D of Product Group 90) and/or

(iii) Advance Authorization or Duty Free Import Authorization Import of inputs (other than catalysts, consumables and packing materials) for the exported product for which Duty Credit Scrip under VKGUY is being claimed.

9. Perusal of the scheme would suggest that the objective of the scheme was to promote export of agricultural produce and their value added products, minor forest produce and their value added variants, Gram Udyog products, forest based products and other produces as may be notified. In relation to exports of such products, benefits in the form of incentives would be granted at the prescribed rate. The objective behind granting such benefit was in order to compensate high transport cost and to offset other disadvantages. In clear terms, thus, the Government of India realized that the products such as agricultural produce, minor forest produce and Gram Udyog products as also forest based products would have high transport cost and would be accompanied by various other disadvantages. In order to make the export of such products viable, the Government of India decided to grant certain incentives under the said scheme. The clear objective behind the scheme was, thus, to reduce the cost of its procurements and to neutralize certain inherent disadvantages attached to such products. Clearly, thus, the case was covered by the decision of the Supreme Court in the case of Meghalaya Steels Ltd(supra) extensive reference to which has been made earlier. This is not a case akin to export incentives such as DEPB which the Supreme Court in case of Liberty India (supra) held was a benefit far removed from the assessee's business of export."

7. Therefore, the question in these Appeals which is the same as

framed in the said two Appeals is answered in favour of

Appellant/Assessee and against the Revenue. The judgment of the

Tribunal to this limited extent is reversed.

Gaikwad RD 5/5 6-7-ositxa-3051-3102-2018+.doc

8. Appeals are allowed and disposed accordingly.

(NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)

Signed by: Raju D. Gaikwad Designation: PS To Honourable Judge Gaikwad RD Date: 26/10/2023 18:02:59