The Commissioner Of Income Tax, Karnal v. M/S Accent For Living

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 626 of 2009Date of decision 11 .2.2010 The Commissioner of Income Tax, Karnal... Appellant Versus M/s Accent For Living... Respondent CORAM:HON'BLE MR. JUSTICE M.M. KUMARHON'BLE MR. JUSTICE JITENDRA CHAUHAN Present:Mr. Yogesh Putney,Advocate for the appellant Mr. Rajiv Sharma, Advocate for respondent 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The instant filed by the Revenue under Section 260 A of theIncome Tax Act, 1961 (for brevity 'the Act') is directed against order dated13.3.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 1,New Delhi in ITA No. 1577/Del/2005 in respect of the assessment year2001-02. The Tribunal has refused to include the amount of Rs.1,41,06,095/- under the head 'business profit'. The aforesaid issue wasdecided in favour of the assessee by following the view taken by the DelhiHigh Court in the case of CIT v. Eltek SGS Pvt. Ltd. (2008)300 ITR 6(Delhi). The Revenue has claimed that following substantive questions oflaw would arise for determination of this Court: “i)That in the facts and circumstances of the case, whether theLd. ITAT was correct in law in allowing deduction u/s 80-1Aof the Income Tax Act, 1961 on Duty draw back and profit onsale of licences by holding that Duty draw back and profit on sale of licenses is income derived from business of industrialundertaking; ii)That in the facts and circumstances of the case, given that thelanguage of both Section 801A (which provision is in issuein the instant case) and Section 801B (which provision wasin issue in the case of Liberty India) are by and large similar,whether the Ld. ITAT was correct in relying on the ratio ofthe Hon'ble Delhi High Court in CIT v. Eltek SGS(300 ITR6) when the Hon'ble Punjab and Haryana High Court, whosedecision are binding for this charge, has in the case ofLiberty India v. CIT Karnal (237 ITR 52) taken an oppositeview, and held that export incentive are not eligible to thebenefits of deduction u/s 801B ;andlanguage of both Section 801A (which provision is in issuein the instant case) and Section 801B (which provision wasin issue in the case of Liberty India) are by and large similar,whether the Ld. ITAT was correct in relying on the ratio ofthe Hon'ble Delhi High Court in CIT v. Eltek SGS(300 ITR6) when the Hon'ble Punjab and Haryana High Court, whosedecision are binding for this charge, has in the case ofLiberty India v. CIT Karnal (237 ITR 52) taken an oppositeview, and held that export incentive are not eligible to thebenefits of deduction u/s 801B ;and iii)That given the fact that the Department is in SLP against thejudgement of the Delhi High Court in Eltek SGS(P) Ltd.,whether the Ld. ITAT was correct in basing its decision onan impugned order, which is also not jurisdictionallyapplicable to the Karnal Charge, especially when thejurisdictional High Court has taken a diametrically oppositeview in the matter?”judgement of the Delhi High Court in Eltek SGS(P) Ltd.,whether the Ld. ITAT was correct in basing its decision onan impugned order, which is also not jurisdictionallyapplicable to the Karnal Charge, especially when thejurisdictional High Court has taken a diametrically oppositeview in the matter?” We have heard the learned counsel for the parties. The controversy on the question whether the amount of Duty DrawBack and profit on sale of licenses could be regarded as income derivedfrom business of industrial undertaking and would qualify for deductionunder Section 80(IA) of Act has been decided by a Division Bench of thisCourt in the case of Liberty, India v. CIT Karnal (2007)293 ITR 520. The ITA No. 626 of 2009 We have heard the learned counsel for the parties. The controversy on the question whether the amount of Duty DrawBack and profit on sale of licenses could be regarded as income derivedfrom business of industrial undertaking and would qualify for deductionunder Section 80(IA) of Act has been decided by a Division Bench of thisCourt in the case of Liberty, India v. CIT Karnal (2007)293 ITR 520. The ITA No. 626 of 2009 aforesaid view has been upheld by Hon'ble the Supreme Court in the caseof Liberty India v. CIT(2009)317 ITR 218(SC). It has been categoricallyheld that Duty Draw Back receipt and DPEB benefits do not form part ofthe net profits of eligible industrial undertakings for the purposes ofdeduction under Section 80-1/80-1A/80-IB of the Act. Accordingly shorn offactual details, the issue has to be decided against the assessee and in favourof the Revenue. The same principle of law would apply to profit derived onsale of licences. The counsel for the assessee-respondent has not been able toadvance any argument pointing out any distinguishing feature between thefacts of the present case and that of the Liberty India's case(supra) decidedby Hon'ble the Supreme Court. Accordingly, the appeal is allowed and thequestions of law are answered against the assessee- respondent and infavour of the Revenue. (M.M.Kumar) Judge 11.2.2010okg (Jitendra Chauhan)Judge