Nahar Spinning Mills Limited, Ludhiana v. Commissioner Of Income Tax (Central), Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 46 of 2002DATE OF DECISION : 14.12.2009 Nahar Spinning Mills Limited, Ludhiana .... APPELLANT Versus Commissioner of Income Tax (Central), Ludhiana ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present:Mr. Sanjay Bansal, Senior Advocate, with Ms. Shweta Malhotra, Ms. Harpreet Kaur andMr. Prashant Bansal, Advocates,for the appellant-assessee. Mr. K.K. Mehta, Advocate,for the respondent-revenue. * * * 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 28.8.2001, passed by the Income Tax Appellate Tribunal, ChandigarhBench (A), Chandigarh (hereinafter referred to as `the ITAT') in ITA No.337/Chandi/1992, pertaining to the assessment year 1988-89, raising thefollowing substantial questions of law :- (i)Whether on a proper construction of Section 80-I of theAct and proper understanding of the Supreme Court'sAct and proper understanding of the Supreme Court's decision reported in ITR 237 Page 579, in the case ofSterling Foods, the ITAT did not err in law in holdingthat the income received by the assessee by way of CCAdid not qualify for exemption from tax to the extentindicated in the said section ? (ii)Whether on the facts and circumstances of the case, theITAT did not err in law in holding that the incomereceived by the assessee being of very nature, that isadditional price for exports could not be said to beincome derived from the industrial undertaking of theassessee within the meaning of Section 80-I of the Act?ITAT did not err in law in holding that the incomereceived by the assessee being of very nature, that isadditional price for exports could not be said to beincome derived from the industrial undertaking of theassessee within the meaning of Section 80-I of the Act? (iii)Whether on the facts and circumstances of the case, theITAT did not err in holding that profits on sale of importentitlements were of the same nature as CCA received?ITAT did not err in holding that profits on sale of importentitlements were of the same nature as CCA received?(iv)Whether the ITAT did not err in holding that only suchprofits of an industrial undertaking were exempt from taxu/s 80-I as were obtained from sale of manufacturedgoods? profits of an industrial undertaking were exempt from taxu/s 80-I as were obtained from sale of manufacturedgoods? Learned counsel for the appellant states that in this appeal, he is pressing only first three questions. We have heard the learned counsel for the parties. The assessee has raised the aforesaid three questions withregard to the amount received by it on exports as Cash CompensatoryAllowance. It is the case of the assessee that it has received the said CashCompensatory Allowance from the Central Government against its export ofgoods manufactured by industrial undertaking during the year, therefore, thesaid Allowance is an additional price received from Government for theexports made and thus is profits and gains derived from the industrial Learned counsel for the appellant states that in this appeal, he is pressing only first three questions. We have heard the learned counsel for the parties. The assessee has raised the aforesaid three questions withregard to the amount received by it on exports as Cash CompensatoryAllowance. It is the case of the assessee that it has received the said CashCompensatory Allowance from the Central Government against its export ofgoods manufactured by industrial undertaking during the year, therefore, thesaid Allowance is an additional price received from Government for theexports made and thus is profits and gains derived from the industrial undertaking. The ITAT has disallowed the said deduction while coming tothe conclusion that there is no direct nexus between receipt of CashCompensatory Allowance and the industrial undertaking. The source ofCash Compensatory Allowance received by the assessee was only a receipton account of export promotion scheme of the Central Government. But thesaid receipt has no nexus between profits and gains derived from anindustrial undertaking, therefore, the said benefits cannot be permitted to bededucted under Section 80-I of the Act. The similar benefits received by theassessee i.e. DEPB, have been disallowed by this Court inLiberty Indiav.Commissioner of Income-Tax(2007) 293 ITR 520, which has beenaffirmed by the Hon'ble Supreme Court inLiberty Indiav.Commissioner-of IncomeTax,(2009) 317 Income Tax Reports 218 (SC). Learned counsel for the appellant could not controvert that theCash Compensatory Allowance is similar to DEPB, therefore, he could notmake out a case for deducting the said amount as eligible deduction underSection 80-I of the Act. Since the controversy is no longer res integra,therefore, no substantial question of law arises in this appeal from the orderof the ITAT. Dismissed. ( SATISH KUMAR MITTAL )JUDGEJUDGE December 14, 2009 seema/ndjseema/ndj ( MEHINDER SINGH SULLAR )JUDGEJUDGE