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

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 629 of 2009DATE 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 MITTALHON'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 theIncome Tax Act, 1961 (hereinafter referred to as `the Act'), against the orderdated 12.6.2009, passed by the Income Tax Appellate Tribunal, DelhiBench, New Delhi (hereinafter referred to as `the ITAT') in ITA No.788/Del/2009, pertaining to the assessment years 2006-07, raising thefollowing substantial questions of law :- (i)Whether on the facts and circumstances of the case, theappellant-assessee is entitled for deduction claimed u/s80-IB of the Act by treating the export incentive of Rs.3,08,40,231/- including DEPB profits as profits receivedfrom industrial undertaking?appellant-assessee is entitled for deduction claimed u/s80-IB of the Act by treating the export incentive of Rs.3,08,40,231/- including DEPB profits as profits receivedfrom industrial undertaking? (ii)Whether the learned Tribunal was justified in ignoring the judgment of the Hon'ble Delhi High Court in the caseof Eltek SGS Pvt. Ltd., which is based upon a judgmentof the Hon'ble Supreme Court of India in B. Desraj vsCIT? In the present case, the assessee is engaged in the business ofmanufacturing of guar gum. For the assessment year 2006-07, the assesseefiled its returns declaring an income of Rs. 28,25,476/-. The return wasprocessed 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 upfor scrutiny and processed under section 143 (3) of the Act. Vide orderdated 28.3.2008, the Assessing Authority disallowed the claim made by theassessee under section 80-IB of the Act, which was claimed by the assesseebeing the profits derived from industrial undertaking Unit II. According tothe Assessing Authority, the said profit includes export incentives of Rs.3,08,40,231/- including DEPB profits. Feeling aggrieved, the assessee filedan appeal before the Commissioner of Income Tax (Appeals), Rohtak[hereinafter referred to as `the CIT (A)], who vide his order dated23.12.2008 accepted the appeal and while relying upon the judgment of theDelhi High Court inCommissioner of Income Taxv.Eltek SGS Pvt. Ltd.,(2008) 300 ITR 6, held that the assessee is entitled for exemption undersection 80-IB of the Act, in view of the fact that profit of DEPB would betreated to have been derived from eligible business. Against the aforesaidorder, the Assessing Authority, Bhiwani filed an appeal, wherein the learnedITAT vide its order dated 12.6.2009, set aside the order of the CIT (A), while observing as under :- “We have carefully considered the rival submissions in the lightof the material placed before us. According to precedent, thedecision of the Hon'ble jurisdictional High Court will prevailover the decision of another High Court. The decision ofHon'ble jurisdictional High Court in the case of Liberty India(supra) being directly on the issue, respectfully following thesame, we hold that the CIT (A) has erred in holding that exportincentive in the shape of DEPB of Rs. 3,08,40,231/- constitutedprofits derived from industrial undertaking. These findings ofCIT (A) are contrary to the aforementioned decision of Hon'blejurisdictional High Court. Therefore, we reverse the findings ofthe CIT (A) and hold that the AO was right in consideringexport incentive of Rs. 3,08,40,231/- in the shape of DEPBprofits being ineligible for the purpose of deduction undersection 80-IB. The order of the CIT (A) is set aside and that ofthe AO is restored on the issue raised in this appeal. We directaccordingly.” Against the said order, the instant appeal has been filed by the assesseeraising the aforesaid substantial questions of law. During the course of hearing, it revealed that the decision ofthis Court inM/s Liberty Indiav.CIT, Karnal, 2007 CTR 243, which hasbeen relied upon by the learned ITAT in the aforesaid impugned order, hasbeen affirmed by the Hon'ble Supreme Court in Liberty Indiav.Commissioner of Income Tax,(2009) 28 Direct Taxes Reporter Judgments73, wherein while dismissing the appeal of the assessee, it has beenconcluded that Duty Draw Back and DEPB are incentives, which flow from the schemes framed by the Central Govt. or under Section 75 of theCustoms 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 theindustrial undertaking for the purposes of Section 80-IB of the Act. In view of the aforesaid decisions, we are of the opinion that nosubstantial question of law is arising from the order of the ITAT. Thus, theinstant appeal stands dismissed. ( SATISH KUMAR MITTAL )JUDGE November 19, 2009 ndj ( MEHINDER SINGH SULLAR )JUDGE