Harisons Overseas V. Commissioner of Income Tax, Karnal

ITA/628/2009

AI Insights

The case involves Harisons Overseas, the appellant, contesting the denial of deductions on export incentives received under the Duty Draw Back and DEPB schemes for the assessment years 2004-05 and 2006-07. The Assessing Officer, followed by the Commissioner of Income Tax (Appeals) and the ITAT, denied these deductions based on precedents that such incentives do not qualify as profits derived from an industrial undertaking under Section 80-IB of the Income Tax Act. The High Court's decision, which dismissed the appeals, was influenced by the Supreme Court's affirmation of this interpretation in a similar case.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 679622 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 18-11-2009
• Assessment Year: misc
• Other Referred Cases: CIT v. Sterling Foods, CIT v. Ritesh Industries Ltd., Liberty India v. Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961, Customs Act, 1962
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: PANKAJ JAIN; D K GOYAL
• Keywords: Duty Draw Back; Duty Entitlement Pass Book Scheme; Export Incentives; Income tax appeal; Industrial Undertaking
• Section: 80-IB; 260-A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A.s No. 628 & 630 of 2009 DATE OF DECISION : 18.11.2009 Harisons Overseas, Panipat .... APPELLANT Versus Commissioner of Income Tax, Karnal ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present: Mr. Pankaj Jain and Mr. D.K. Goyal, Advocates, for the appellant-assessee. * * * SATISH KUMAR MITTAL , J. This order shall dispose of Income Tax Appeals No. 628 and 630 of 2009, filed by the assessee under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), directed against the order dated 14.5.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench “C”, New Delhi (hereinafter referred to as `the ITAT') in ITA Nos. 3429 and 3430/(Del)/2008, pertaining to the assessment years 2004-05 and 2006-07, raising the following substantial questions of law :- (i) Whether the Duty draw back received is an amount derived and eligible for claim u/s 80-IB of the Act? (ii) Whether the Duty Entitlement Pass Book Scheme received is an amount derived and eligible for claim u/s 80-IB of the Act? ITA No. 628 of 2009 -2- In these cases, the assessee, who derived income from manufacturing of handloom goods and its export, claimed deduction on the business profit, which included the amount of export incentives received on account of the Duty Draw Back and the Duty Entitlement Pass Book Scheme (hereinafter referred to as `DEPB') under Section 80-IB of the Act. The Assessing Officer, vide his order dated 31.3.2008, while following the decision of the Supreme Court in CIT v. Sterling Foods (1999) 237 ITR 579 and a decision of the Delhi High Court in CIT v. Ritesh Industries Ltd. 192 CTR 81, denied the deduction of the aforesaid export incentives, on the ground that the Duty Draw Back and DEPB are not the income derived from industrial undertaking, which is eligible for deduction under Section 80-IB of the Act. The order of the Assessing Officer was confirmed by the Commissioner of Income Tax (Appeals), Karnal, by following the aforesaid decisions as well as the decision of this Court in Liberty India v. Commissioner of Income-Tax (2007) 293 ITR 520, wherein it was held that the assessee is not eligible to get deduction on export incentives i.e. Duty Draw Back and DEPB under Section 80-IB of the Act. The order of the CIT (Appeals) has further been affirmed by the ITAT vide its order dated 14.5.2009, which is under challenge in these two appeals. During the course of hearing, it revealed that the decision of this Court in the case of Liberty India (supra) has been affirmed by the Hon'ble Supreme Court in Liberty India v. Commissioner of Income- Tax, (2009) 317 Income Tax Reports 218 (SC), wherein while dismissing ITA No. 628 of 2009 -3- the appeal of the assessee, it has been concluded that Duty Draw Back and DEPB are incentives, which flow from the schemes framed by the Central Govt. or under Section 75 of the Customs Act, 1962 and these incentive profits do not fall within expression “profits derived from industrial undertaking in Section 80-IB of the Act. Therefore, Duty Draw Back and DEPB do not form part of net profits of the industrial undertaking for the purposes of Section 80-IB of the Act. In view of the aforesaid decisions, we are of the opinion that no substantial question of law is arising from the order of the ITAT. Thus, both the appeals stand dismissed. ( SATISH KUMAR MITTAL ) JUDGE November 18, 2009 ( MEHINDER SINGH SULLAR ) ndj JUDGE "