Jai Bharat Gum And Chemicals Ltd. vs Additional Commissioner of Income Tax

Satish Kumar Mittal, J.—The assessee has filed this appeal u/s 260A 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 I. T. A. 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 appel-lant-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 the judgment of the honble Delhi High Court in the case of The Commissioner of Income Tax Vs. Eltek SGS (P) Ltd., which is based upon a judgment of the honble Supreme Court of India in B. Desraj v. 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 return declaring an income of Rs. 28,25,476. The return was processed u/s 143(1) of the Act and a refund of Rs. 24,80,660 was granted vide order dated September 14, 2007. Thereafter, the case was taken up for scrutiny and processed u/s 143(3) of the Act. Vide order dated 28-3-2008, the assessing authority disallowed the claim made by the assessee u/s 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 (Appeals), Rohtak (hereinafter referred to as "the Commissioner (Appeals)"), who, vide his order dated 23-12-2008, accepted the appeal and while relying upon the judgment of the Delhi High Court in The Commissioner of Income Tax Vs. Eltek SGS (P) Ltd., , held that the assessee is entitled for exemption u/s 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 Income Tax Appellate Tribunal, vide its order dated 12-6-2009, set aside the order of the Commissioner (Appeals), 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 honble jurisdictional High Court will prevail over the decision of another High Court. The decision of the honble jurisdictional High Court in the case of Liberty India Vs. Commissioner of Income Tax, being directly on the issue, respectfully following the same, we hold that the Commissioner (Appeals) 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 the Commissioner (Appeals) are contrary to the aforementioned decision of the honble jurisdictional High Court. Therefore, we reverse the findings of the Commissioner (Appeals) and hold that the assessing officer was right in considering the export incentive of Rs. 3,08,40,231 in the shape of DEPB profits being ineligible for the purpose of deduction u/s 80-IB. The order of the Commissioner (Appeals) is set aside and that of the assessing officer 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 Liberty India Vs. Commissioner of Income Tax, , which has been relied upon by the learned Income Tax Appellate Tribunal in the aforesaid impugned order, has been affirmed by the honble Supreme Court in Liberty India Vs. Commissioner of Income Tax, 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 the schemes framed by the Central Government or u/s 75 of the Customs Act, 1962 and these incentive profits do not fall within the expression "profits derived from industrial undertaking in Section 80-IB of the Act". Therefore, duty draw back and DEPB do not form part of the 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 Income Tax Appellate Tribunal. Thus, the instant appeal stands dismissed.