COMMISSIONER OF INCOME TAX-I V. AMBUJA INTERMEDIATES LTD

TAXAP/1101/2010

AI Insights

The case revolves around the eligibility of export incentives for deductions under Sections 80I and 80HH of the Income Tax Act. The assessee, Ambuja Intermediates Ltd, received export incentives amounting to Rs. 39,66,545 from the government, which they claimed as deductions under the aforementioned sections. The Assessing Officer initially disallowed these deductions, a decision upheld by the CIT(A). However, the ITAT reversed this decision, allowing the deductions. The Commissioner of Income Tax then appealed to the Gujarat High Court, which ultimately ruled in favor of the revenue, citing the Supreme Court's precedent in Liberty India, which clarified that such incentives are ancillary profits and not derived from the industrial undertakings eligible for deductions under the specified sections.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 699792 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 21-12-2013
• Assessment Year: misc
• Other Referred Cases: Liberty India vs. Commissioner of Income Tax (2009) 317 ITR 218(SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: RULE SERVED
• Assessee Lawyers: MAUNA BHATT
• Keywords: Deduction; Export Incentives; Income Tax; Industrial Undertaking
• Section: 80HH; 115JA; 80I

Judgement Text

"O/TAXAP/1101/2010 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1101 of 2010 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH sd/­ and HONOURABLE MR.JUSTICE R.D.KOTHARI sd/­ ============================================= 1. Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2. To be referred to the Reporter or not ? NO 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5. Whether it is to be circulated to the civil judge ? NO ============================================= COMMISSIONER OF INCOME TAX­I....Appellant(s) Versus AMBUJA INTERMEDIATES LTD....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.D.KOTHARI Date : 21/12/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 16.1.2009 passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as “ITAT”) passed in ITA No.80/AHD/2003 AY 1997­98, the revenue has preferred present Tax Appeal to consider the following substantial question. Page 1 of 4 O/TAXAP/1101/2010 JUDGMENT “Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby allowing the deduction u/s 80I and 80HH of the Act on the profit earned from export incentives amounting to Rs. 39,66,545/­?” 2.0. That the assessee filed return of income for the year under consideration declaring regular taxable income at Rs. NIL and deemed income under Section 115JA of the Income Tax Act (hereinafter referred to as the “Act”) at Rs.3709309/­. Thereafter, revised return was filed declaring regular taxable income at Rs.1147060 and deemed income under Section 115JA at Rs.3709309/­. During the assessment proceedings, Assessing Officer observed that assessee had carried out export purchase from outsiders (manufacturing export Rs. 3,66,27,350/­ and trading export Rs. 1,22,85,746/­). Against the aforesaid, the assessee derived income by way of export incentives of Rs. 52,67,026/­ from the Government. The Assessing Officer held that the income of export instead of Rs. 39,66,545/­ earned from the Government was not profit derived from the industrial undertaking and therefore, not eligible for deduction under Section 80HH and 80I of the Act. Therefore, Assessing Officer disallowed the deduction under Section 80HH and 80I of the Act. In Appeal, the learned CIT(A) confirmed the aforesaid additions. 2.1. Feeling aggrieved and dissatisfied with the order passed by the CIT(A), the asssessee preferred appeal before the learned ITAT and by impugned judgment and order has allowed the said appeal deleting the disallowance under Section 80HH and 80 I of the Act on the profit earned from the export incentives amounting to Rs.39,66,545/­ and consequently held the deduction under Section 80 I and 80 HH of the Act on the profit earned from the export incentives amounting to Page 2 of 4 O/TAXAP/1101/2010 JUDGMENT Rs.39,66,545/­. 2.2. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned ITAT, the revenue has preferred present Tax Appeal to consider the following substantial question of law. “Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby allowing the deduction u/s 80I and 80HH of the Act on the profit earned from export incentives amounting to Rs. 39,66,545/­?” 3.0. Ms. Bhatt, learned advocate for the revenue has vehemently submitted the aforesaid question is now not res integra in view of the decision of the Hon’ble Supreme Court in the case of Liberty India vs. Commissioner of Income Tax reported in (2009) 317 ITR 218(SC). It is held by the Hon’ble Supreme Court in the said decision that DEPB/Duty drawback are incentives which flow from the schemes framed by the Central Government and the incentives profits are not profits derived from eligible business under Section 80IB of the Act. It is further held that they belong to the category of ancillary profits of such undertaking. It is further held by the Hon’ble Supreme Court in the said decision that the profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression “profits derived from industrial undertaking” under Section 80­IB of the Act. Therefore, it is requested to allow present appeal. 4.0. Though served, nobody appears on behalf of the respondent­ assessee. 5.0. Having heard Ms. Mauna Bhatt, learned advocate for the Page 3 of 4 O/TAXAP/1101/2010 JUDGMENT revenue and considering the decision of the Hon’ble Supreme Court in the case of Liberty India (supra), it appears that issue / question raised in the present Tax Appeal is squarely covered and held in favour of the revenue by the decision of the Hon’ble Supreme Court in the case of Liberty India (supra). Identical question came to be considered by the Hon’ble Supreme Court in the case of Liberty India (supra), the Hon’ble Supreme Court has specifically observed and held that the duty drawback receipts and DEPB benefits do not from part of the net profits of eligible industrial undertakings for the purpose of the deduction under Section 80­I/ 80­IA/80­IB of the Income Tax Act, 1961. In the aforesaid decision, it is held by the Hon’ble Supreme Court as under: “DEPB/Duty drawback are incentives which flow from the schemes framed by the Central Government of from Section 75 of the Customs Act, 1962. Incentive profits are not profits derived from eligible business under Section 80­IB: they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression “ profits derived from industrial undertaking” under Section 80­IB.” 6.0. Applying the ratio and law laid down by the Hon’ble Supreme Court in the case of Liberty India (supra) to the facts of the case on hand, the issue / question raised in the present appeal is held in favour of the revenue. Consequently, present appeal is allowed and the impugned judgment and order passed by the learned ITAT is hereby quashed and set aside. sd/­ (M.R.SHAH, J.) sd/­ (R.D.KOTHARI, J.) Kaushik Page 4 of 4 "