Section 10B: Duty Drawback is not the income derived from undertaking

Brief of the case

ITAT Jaipur held in case of  ACIT Vs. Smt. Ranjana Johari that if change made in the wooden article which resulted in to a new and different article then it would amount to manufacturing activity. The assessee, Ranjana Johari, had undertaken different activities to shape up the purchased semi finished goods and other articles into marketable commodity as artistic item along with different both in character and use than what was purchased. Its amounts to manufacturing and entire sale proceeds of the undertaking is not to be treated as profits but only difference between sale value and face value of article would be allowed as deduction u/s 10BA of I.T Act.

Facts of the Case

The assessee, Smt. Ranjana Johari is a manufacturer of wooden furniture and filed IT return on 30.09.2009 as “NIL” income. In this assessment year the assessee was earning from export of wooden furniture. The assessee in her Profit & Loss account has shown the net profit of Rs.1,85,48,714/- and total turnover of Rs. 15,07,34,997/- and deducting donation and rental income etc., profit comes to Rs. 1,92,52,903/- and claimed exemption under section 10BA of the IT Act. The assessee has claimed that Rs. 98,15,615/- as paid for job work and Rs. 13,33,214/- for labour charges.

The AO was of the opinion that the assessee is not entitled for the deduction u/s 10BA in A.Y. 2004-05, 2005-06, 06-07, 07-08 and 08-09 because input purchases were made for trading purposes on Form 17B of the Sales Tax Act/Rules, no artistic items are manufactured by the assessee and AO held that the assessee does not fulfil the basic condition of manufacturing and hand made artistic wooden articles, as laid down u/s 10BA of the IT Act. Therefore, the exemption claimed u/s 10BA of the IT Act of Rs. 1,92,52,908/- was disallowed. Then the assessee went in to appeal and his appeal was allowed. Then the department went before the ITAT and assessee filed his cross objection.

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