COMMISSIONER OF INCOME TAX-I vs. AMBUJA INTERMEDIATES LTD

TAXAP/1101/2010HC GujaratGJHC24027040201021 December 2013Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.D.KOTHARI4 pages
AI SummaryAllowed

What were the facts?

The assessee, Ambuja Intermediates Ltd., filed returns for AY 1997-98. The Assessing Officer (AO) noted export purchases and income from export incentives amounting to Rs. 52,67,026. The AO disallowed deduction under Sections 80I and 80HH on export incentives of Rs. 39,66,545, holding it was not profit derived from the industrial undertaking. The CIT(A) upheld the AO's order. The assessee appealed to the ITAT, which allowed the appeal, deleting the disallowance and allowing the deduction. The revenue has appealed this ITAT order to the High Court.

What did the High Court hold?

The High Court allowed the appeal filed by the revenue. The Court noted that the issue was squarely covered by the decision of the Hon'ble Supreme Court in Liberty India (supra). The Supreme Court had held that DEPB/Duty drawback are incentives flowing from government schemes or Section 75 of the Customs Act, 1962. These incentive profits are not profits derived from the eligible business under Section 80IB, but rather ancillary profits. The Court further held that such incentive profits cannot be credited against the cost of manufacture of goods debited in the profit and loss account and do not fall within the expression 'profits derived from industrial undertaking' under Section 80IB. Applying this ratio, the High Court held the issue in favour of the revenue and quashed the ITAT's order.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby allowing the deduction u/s 80I and 80HH of the Act on the profit earned from export incentives amounting to Rs. 39,66,545? (Question of law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that the issue is covered by the Supreme Court decision in Liberty India vs. Commissioner of Income-Tax (2009) 317 ITR 218 (SC). The revenue contended that DEPB/Duty drawback are incentives not derived from the eligible business, but are ancillary profits, and therefore, not eligible for deduction under Section 80IB (and by extension, 80I and 80HH) of the Act.

Which sections of the Income-tax Act were involved?

Section 80I,Section 80HH,Section 115JA,Section 80IB

AI-generated summary — verify with the full judgment below

O/TAXAP/1101/2010 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL  NO. 1101 of 2010 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH ­ and HONOURABLE MR.JUSTICE R.D.KOTHARI ­ =============================================

1.

Whether   Reporters   of   Local   Papers   may   be allowed to see the judgment ? NO 2. To be referred to the Reporter or not ? NO 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5. Whether it is to be circulated to the civil judge ? NO ============================================= COMMISSIONER OF INCOME TAX­I....Appellant(s) Versus AMBUJA INTERMEDIATES LTD....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.D.KOTHARI Date : 21/12/2

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