Jai Bharat Gum & Chemicals Ltd., Siwani Mandi, District Bhiwani V. Addl. Commissioner of Income Tax, Bhiwani Range, Bhiwani

ITA/629/2009

AI Insights

Jai Bharat Gum & Chemicals Ltd., engaged in the manufacturing of guar gum, appealed against the ITAT's decision which reversed the CIT (A)'s order allowing deduction under section 80-IB for export incentives. The ITAT had set aside the CIT (A)'s decision based on the jurisdictional High Court's precedent in Liberty India v. CIT, which was affirmed by the Supreme Court. The main legal contention was whether export incentives, including DEPB profits, qualify as profits derived from an industrial undertaking under section 80-IB of the Income Tax Act. The High Court dismissed the appeal, agreeing with the ITAT's application of the legal precedent.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 797003 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 19-11-2009
• Assessment Year: misc
• Other Referred Cases: Eltek SGS Pvt. Ltd. vs. Commissioner of Income Tax, B. Desraj vs. CIT, Liberty India vs. CIT, Karnal
• Laws Referred To: Income Tax Act, 1961, Customs Act, 1962
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: RISABH KAPOOR
• Keywords: Deduction under section 80-IB; Export incentive; Industrial Undertaking; DEPB profits
• Section: 143(3); 143(1); 75; 80-IB; 260-A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 629 of 2009 DATE OF DECISION : 19.11.2009 Jai Bharat Gum & Chemicals Ltd., Siwani Mandi, District Bhiwani .... APPELLANT Versus Addl. Commissioner of Income Tax, Bhiwani Range, Bhiwani ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present: Mr. Risabh Kapoor, Advocate, for the appellant-assessee. * * * SATISH KUMAR MITTAL , J. The assessee has filed this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), against the order dated 12.6.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as `the ITAT') in ITA No. 788/Del/2009, pertaining to the assessment years 2006-07, raising the following substantial questions of law :- (i) Whether on the facts and circumstances of the case, the appellant-assessee is entitled for deduction claimed u/s 80-IB of the Act by treating the export incentive of Rs. 3,08,40,231/- including DEPB profits as profits received from industrial undertaking? (ii) Whether the learned Tribunal was justified in ignoring ITA No. 629 of 2009 -2- the judgment of the Hon'ble Delhi High Court in the case of Eltek SGS Pvt. Ltd., which is based upon a judgment of the Hon'ble Supreme Court of India in B. Desraj vs CIT? In the present case, the assessee is engaged in the business of manufacturing of guar gum. For the assessment year 2006-07, the assessee filed its returns declaring an income of Rs. 28,25,476/-. The return was processed under section 143 (1) of the Act and a refund of Rs. 24,80,660/- was granted vide order dated 14.9.2007. Thereafter, the case was taken up for scrutiny and processed under section 143 (3) of the Act. Vide order dated 28.3.2008, the Assessing Authority disallowed the claim made by the assessee under section 80-IB of the Act, which was claimed by the assessee being the profits derived from industrial undertaking Unit II. According to the Assessing Authority, the said profit includes export incentives of Rs. 3,08,40,231/- including DEPB profits. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Rohtak [hereinafter referred to as `the CIT (A)], who vide his order dated 23.12.2008 accepted the appeal and while relying upon the judgment of the Delhi High Court in Commissioner of Income Tax v. Eltek SGS Pvt. Ltd., (2008) 300 ITR 6, held that the assessee is entitled for exemption under section 80-IB of the Act, in view of the fact that profit of DEPB would be treated to have been derived from eligible business. Against the aforesaid order, the Assessing Authority, Bhiwani filed an appeal, wherein the learned ITAT vide its order dated 12.6.2009, set aside the order of the CIT (A), ITA No. 629 of 2009 -3- while observing as under :- “We have carefully considered the rival submissions in the light of the material placed before us. According to precedent, the decision of the Hon'ble jurisdictional High Court will prevail over the decision of another High Court. The decision of Hon'ble jurisdictional High Court in the case of Liberty India (supra) being directly on the issue, respectfully following the same, we hold that the CIT (A) has erred in holding that export incentive in the shape of DEPB of Rs. 3,08,40,231/- constituted profits derived from industrial undertaking. These findings of CIT (A) are contrary to the aforementioned decision of Hon'ble jurisdictional High Court. Therefore, we reverse the findings of the CIT (A) and hold that the AO was right in considering export incentive of Rs. 3,08,40,231/- in the shape of DEPB profits being ineligible for the purpose of deduction under section 80-IB. The order of the CIT (A) is set aside and that of the AO is restored on the issue raised in this appeal. We direct accordingly.” Against the said order, the instant appeal has been filed by the assessee raising the aforesaid substantial questions of law. During the course of hearing, it revealed that the decision of this Court in M/s Liberty India v. CIT, Karnal, 2007 CTR 243, which has been relied upon by the learned ITAT in the aforesaid impugned order, has been affirmed by the Hon'ble Supreme Court in Liberty India v. Commissioner of Income Tax, (2009) 28 Direct Taxes Reporter Judgments 73, wherein while dismissing the appeal of the assessee, it has been concluded that Duty Draw Back and DEPB are incentives, which flow from ITA No. 629 of 2009 -4- 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, the instant appeal stands dismissed. ( SATISH KUMAR MITTAL ) JUDGE November 19, 2009 ( MEHINDER SINGH SULLAR ) ndj JUDGE "