THE COMMISSIONER OF INCOME TAX V. M/S. POINTEC WRITING INSTRUMENTS PVT LTD

ITA/119/2009

AI Insights

The case involves multiple appeals related to the eligibility of the assessee, M/S. Pointec Writing Instruments Pvt. Ltd., for deductions under Section 80IB of the Income Tax Act, 1961, concerning duty drawbacks received from the government. The primary legal question was whether such duty drawbacks could be considered as 'profits derived from industrial undertaking' for the purpose of tax deductions. The Tribunal's decision, which varied between granting and denying relief in different cases, was based on the interpretation of statutory provisions and precedents set by the Supreme Court in the case of Liberty India Vs. Commissioner of Income Tax. The High Court, referencing this Supreme Court decision, affirmed the Tribunal's ruling, emphasizing that the duty drawbacks do not qualify as profits from industrial undertakings under the specified section.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 701485 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-11-2014
• Assessment Year: misc
• Other Referred Cases: Liberty India Vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Customs Act, 1962, Central Excise Act, 1944
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: CHYTHANYA
• Assessee Lawyers: K V ARVIND
• Keywords: Assessment Year; Duty Drawback; Export Incentives; Income tax appeal; Substantial questions of law
• Section: 145A; 80-IB; 80A; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 25TH DAY OF NOVEMBER, 2014 PRESENT: THE HON'BLE Mr.JUSTICE N.KUMAR AND THE HON'BLE Mr.JUSTICE B.MANOHAR INCOME TAX APPEAL NO.119 OF 2009 C/W INCOME TAX APPEAL NOs.118 OF 2009, 112 OF 2009, 389 OF 2011 & 30 OF 2012 IN ITA No.119/2009 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROAD BANGALORE 2. THE INCOME-TAX OFFICER WARD-12(1) C.R.BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARVIND, ADV.) AND: M/S. POINTEC WRITING INSTRUMENTS PVT.LTD., NO.26A, INDUSTRIAL AREA, ATTIBEEL BANGALORE – 562 107 ...RESPONDENT 2 (BY SRI.CHYTHANYA K.K. ADV.) THIS APPEAL IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 23.10.2008 PASSED IN ITA NO.478/BNG/2006, FOR THE ASSESSMENT YEAR 2001-2002, PRAYING TO i. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ii. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.478/BNG/2006, DATED 23.10.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-12(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA No.118/2009 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROAD BANGALORE 2. THE INCOME-TAX OFFICER WARD-12(1) C.R.BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARVIND, ADV.) AND: M/S. POINTEC WRITING INSTRUMENTS PVT.LTD., NO.26A, INDUSTRIAL AREA, ATTIBEEL BANGALORE – 562 107 ...RESPONDENT 3 (BY SRI.CHYTHANYA K.K. ADV.) THIS APPEAL IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 23.10.2008 PASSED IN ITA NO.479/BNG/2006, FOR THE ASSESSMENT YEAR 2002-2003, PRAYING TO i. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ii. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.479/BNG/2006, DATED 23.10.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-12(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA No.112/2009 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROAD BANGALORE 2. THE INCOME-TAX OFFICER WARD-12(1) C.R.BUILDING QUEENS ROAD BANGALORE ...APPELLANTS (BY SRI.K.V.ARVIND, ADV.) AND: M/S. POINTEC WRITING INSTRUMENTS PVT.LTD., NO.26A, INDUSTRIAL AREA, ATTIBEEL 4 BANGALORE – 562 107 ...RESPONDENT (BY SRI.CHYTHANYA K.K. ADV.) THIS APPEAL IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 23.10.2008 PASSED IN ITA NO.477/BNG/2006, FOR THE ASSESSMENT YEAR 2000-2001, PRAYING TO i. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ii. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.477/BNG/2006, DATED 23.10.2008 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-12(1), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA Nos.389/2011 & 30/2012 BETWEEN M/S. POINTECH WRITING INSTRUMENTS (P.) LTD., 26-A, ATTIBELE INDUSTRIAL AREA, ATTIBELE BENGALURU – 562 107 (REPRESENTED BY ITS MANAGING DIRECTOR SRI.V.RENGANATHAN, AGED ABOUT 49 YEARS SON OF SRI.VENKATAPATHY) …APPELLANT (BY SRI.CHYTHANYA K.K., ADVOCATE) AND THE ASSISTANT COMMISSIONER OF INCOME TAX BENGALURU …RESPONDENT 5 (BY SRI.K.V.ARVIND, ADVOCATE) THESE APPEALS ARE FILED UNDER SEC.260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 21.06.2011 PASSED IN M.P.NOs.35 & 36(B)/2011 IN ITA NOs.1143 & 1144(B)/2009, FOR THE ASSESSMENT YEAR 2003-04, PRAYING TO i. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. ii. ALLOW THE APPEAL AND SET ASIDE THE ORDER DATED 21/06/2011 PASSED BY THE ITAT BEARING IN M.P. NOs.35 & 36(B)/2011 IN ITA NOs.1143 & 1144(B)/2009 IN THE INTEREST OF JUSTICE AND EQUITY. THESE APPEALS COMING ON FOR HEARING THIS DAY, N.KUMAR, J., DELIVERED THE FOLLOWING: J U D G M E N T As the assessee in all these five cases is one and the same and as the substantial questions of law involved arises for consideration in all these appeals is the same, they are taken up for consideration together and disposed of by this common order. 2. The assessee is carrying on the business in manufacture and export of ball point pens. In the return filed by the assessee, he claimed deduction 6 under Section 80A of the Act in respect of duty draw back received / export incentives. The Assessing Authority held that the duty draw back and export incentives received by the assessee was not derived from the business of the assessee and cannot be treated as part of the total income for the purpose of computation of deduction under Section 80 IB of the Act. Aggrieved by the said order, assessee preferred an appeal to the Commissioner of Income Tax (Appeals). In two cases the First Appellate Authority upheld the contention of the assessee and granted relief, whereas in other three cases, the order of the Assessing Authority was upheld. Both, the assessee and the revenue preferred the appeals. The Tribunal in two cases relying on the judgment of the Apex Court in the case of Liberty India Vs. Commissioner of Income Tax reported in 317 ITR 218 denied relief to the assessee, whereas, in three appeals the Tribunal granted the relief. That is how 7 three appeals are preferred by the revenue and two appeals are preferred by the assessee. 3. The substantial question of law that arises for consideration in all these appeals is as follows; Whether the Tribunal was correct in holding that the assessee would be entitled to deduction under Section 80IB of the Act in respect of duty draw back received by the assessee? 4. The Apex Court in the case of Liberty India Vs. Commissioner of Income Tax, after noticing the statutory provisions, by a detailed order has held as under: Para17: The next question is – what is duty drawback? Sec.75 of the Customs Act, 1962 and S.37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The refund is of the average amount of duty paid goods of specified class. The rules do not envisage a refund of an 8 amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub- s.(2) of s.75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. D Basically, the source of duty drawback receipt lies in s.75 of the Customs Act and s.37 of the Central Excise Act. Para 18: Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/policy provisions in the Customs Act / Scheme(s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression “profits derived from industrial undertaking” in s.80-IB. 5. However, the learned counsel appearing for the assessee submitted that while delivering the 9 aforesaid judgment, the Apex Court has not taken into consideration Section 145A of the Income Tax Act, which, if taken would have decided the case otherwise and therefore, he submits that the aforesaid deduction rendered by the Apex Court is per-incuriam or sub- silentio and therefore, the Court has to decide the appeals on merits by taking into consideration the aforesaid statutory provisions. 6. Per contra, learned counsel appearing for the revenue supported the impugned judgment. 7. In the judgment of the Apex Court, it is true that there is no reference to Section 145A of the Act. But the High Court cannot refuse to follow the judgment of the Apex Court on the ground that it is per-incuriam or a statutory provision is not considered and in ignorance of the said provisions, the judgment is rendered. Therefore, we are not inclined to accept the said submission as the Apex Court by a considered 10 order has held that the assessee is not entitled to the benefit of Section 80IB of the Act in respect of the duty draw back. The substantial question of law framed in these appeals is answered in favour of the revenue and against the assessee. Accordingly, we pass the following; ORDER i) ITA Nos.119/2009, 112/2009 and 118/2009 are allowed. ii) The order of the Appellate Authority is set- aside and the order of the Assessing Authority is restored. iii) ITA Nos.389/2011 and 30/2012 are dismissed. iv) Parties to bear the costs. Sd/- JUDGE Sd/- JUDGE GH "