Decided on October 11,1993



M.A. Ajinkya, Accountant Member - (1.) THIS is an appeal by the assessee for the assessment year 1982-83 in which several grounds are agitated. They are dealt with seriatim.
(2.) The first ground is that the learned Commissioner of Income-tax (Appeals) erred in holding that the central excise refund of Rs. 70,649 is taxable under Section 28(iv). The appellant is a firm. Its accounting year is Samvat year 2037, i.e., the period from November 8, 1980, to October 27, 1981. The firm was constituted under a deed of partnership dated January 17, 1980, and it came into operation form January 3, 1980. Earlier, it was a proprietary concern of one Hiralal Padamshi who died on January 2, 1980. As per the will of the deceased, his proprietary business was converted into a partnership firm consisting of five partners. The firm received central excise refund of Rs. 70,649 in respect of exports effected in Samvat years 2035 and 2036. This refund was brought to tax in the hands of the partnership under Section 28(iv). The appellant, before the Commissioner of Income-tax (Appeals), relied on a decision of the Bombay High Court in Arvind Bhogilal's case [1976] 105 ITR 764, and another decision of the Bombay High Court in P.L. Paruck's case [1978] 113 ITR 869 to argue that this income was due to the deceased. It was received after his death and could not be taxed in the hands of the legal representative. The Commissioner of Income-tax (Appeals), after considering the various decisions cited, held in paragraph 3 of his order that the duty drawback was due not to the individual but to the concern in lieu of the exports made. He also noticed that the amount was received in the trade name of the concern and not in the name of the legal heirs of the deceased. No legal formalities were insisted upon by the authorities to establish that the recipient of the duty drawback was the legal heir of the deceased. The duty drawback had been paid in the name of Padamshi Meghji which was the trade name of the proprietary concern as well as of the partnership. On these facts, we are satisfied that the order of the Commissioner of Income-tax (Appeals) is correct and has to be confirmed. We are supported in this view by a decision of the Calcutta High Court in Kesoram Industries and Cotton Mills Ltd.'s case [1978] 115 ITR 143, where the court held that the amount received under an export incentive scheme is an amount received in the course of carrying on of the business and is, therefore, taxable income. In the present case, the business carried on by Padamshi Meghji was continued by the firm. The excise refund was received not by any individual but by the business name and it was received by the firm not in its capacity as heir or legal representative of the deceased but as an entity which was carrying on the same business. It has, therefore, in our opinon, been rightly taxed in the hands of the firm. This ground is, therefore, rejected. For the same reasons, we would reject grounds Nos. 5, 6, 7 and 8 in which the assessee is objecting to the Commissioner of Income-tax (Appeals)' decision confirming the addition of Rs. 6,41,168 as excise duty drawback, Rs. 82,402 as customs duty drawback, Rs. 2,36,568 as Handloom Export Council incentives and Rs. 2,83,627 as cash incentives from the Indian Cotton Mills' Federation. We are supported in this finding by a decision of the Special Bench of the Tribunal reported in 25 ITD 193, apart from the decision of the Calcutta High Court referred to hereinabove. The only other ground in this appeal is that the learned Commissioner of Income-tax (Appeals) erred in not allowing weighted deduction on expenditure of Rs. 91,012 on the ground that none of the items of expenditure falls under any of the sub-clauses of Section 35B(1)(b). The details of such expenses have been given in paragraph 10 of the Income-tax Officer's order. The appellant's representative pressed the claim for brokerage on export sales amounting to Rs. 53,134, which, according to the assessee, fell in Clause (iv) of Section 35B(1). In support of its claim, the assessee has filed a copy of the order of the A-Bench of the Tribunal for the assessment years 1977-78 to 1980-81 in the case of the executors of the late Shri Hiralal Padamshi. After going through the papers filed, we are satisfied that weighted deduction under Section 35B(1)(b)(iv) on item 10 of the expenditure, namely, brokerage on export sales, should be allowed.
(3.) IN the result, the appeal will be allowed in part.;

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