C I T vs. VIJAY KUMAR

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ITA/160/2007HC Punjab & HaryanaPHHC01072836200705 November 2007Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE M.M. KUMAR3 pages
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What did the High Court hold?

The High Court held that the matter was no longer res integra, having been decided by a Division Bench of the same Court in M/s Liberty India v. Commissioner of Income Tax, Karnal (ITA No. 590 of 2005, decided on 22.9.2006). This earlier decision, relying on the Supreme Court's judgment in CIT v. Sterling Foods, (1999) 237 ITR 579, had held that income earned by the assessee from duty drawback cannot be considered income 'derived from' a specified business within the meaning of Section 80IB(1) of the Act. The Court noted that similar questions had been decided in other appeals. Therefore, the High Court was of the view that the questions raised could not be reopened. The appeal filed by the revenue was liable to be accepted, and the questions of law were answered in favour of the revenue and against the assessee. The operative direction was to allow the revenue's appeal.

What were the facts?

The Commissioner of Income Tax, Karnal (appellant-revenue) filed an appeal under Section 260A of the Income-tax Act, 1961, against an order dated 23.8.2006 passed by the Income Tax Appellate Tribunal (Tribunal). The Tribunal's order was in relation to ITA No. 1028/DEL/2006 concerning assessment year 2002-2003. The appeal challenged the Tribunal's decision to confirm the CIT (Appeals) order, which directed the Assessing Officer to allow a deduction under Section 80IB of the Act. The dispute centers on whether duty drawback received by the assessee, Vijay Arora (respondent), could be considered income 'derived from' an industrial undertaking for the purpose of this deduction.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT (Appeals) directing the Assessing Officer to allow deduction under Section 80IB of the Income-tax Act, 1961, on the amount of duty drawback received by the assessee, which cannot be termed as income 'derived from' an industrial undertaking, as held by the Supreme Court in CIT v. Sterling Foods, (1999) 237 ITR 579? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in allowing deduction under Section 80IB of the Income-tax Act, 1961, on the total business profits which includes duty drawback/export incentives without considering the provisions of Section 80IB of the Act under which the deduction is allowable only from the income derived from the industrial undertaking having a direct nexus with the activity of the industrial undertaking? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The duty drawback cannot be termed as income 'derived from' an industrial undertaking, relying on the Supreme Court's decision in CIT v. Sterling Foods. The deduction under Section 80IB should only be from income derived from the industrial undertaking with a direct nexus to its activity, and not on total business profits including export incentives.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80IB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 160 of 2007 Date of Decision: 5.11.2007 The Commissioner of Income Tax, Karnal …Appellant Versus Vijay Arora …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present: Mr. Yogesh Putney, Advocate, for the appellant-revenue. M.M. KUMAR JUDGE, J. This is revenue’s appeal filed under Section 260A of the Income-tax Act, 1961 (for brevity, ‘the Act’), challenging order dated 23.8.2006, passed by the Income Tax Appellate Tribunal, New Delhi (for brevity, ‘the Tribunal’), in I.T.A. No. 1028/DEL/2006, in respect of assessment year 2002-2003. The appellant-revenue has claimed that following substantial questions of law would arise for our determination:

1.

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT (Appeals) directing the Assessing Officer to allow deduction under Section 80IB of the Income-tax Act, 1961, on the amount of duty draw back received by the assessee which cannot be termed as income “derived from” an industrial undertaking as held by Hon’ble the Supreme Court in the case of CIT v. Sterling Foods, (1999) 237 ITR 579?

2.

Whether on the facts and in the circumstances of the case the Tribunal is right in law in allowing deduction under Section 80IB of the Income-tax Act, 1961, on the total business profits which includes duty draw back/export incentives without considering the provisions of Section 80IB of the Act under which the deduction is allowable only from the income derived from the industrial undertaking having direct nexus with the activity of industrial undertaking? After hearing learned counsel for the appellant-revenue and perusing various orders placed on record, we find that the matter is no longer res integra and has been duly considered by a Division bench judgment of this Court in the case of M/s Liberty India v. Commissioner of Income Tax, Karnal (ITA No. 590 of 2005, decided on 22.9.2006). While placing reliance on a judgment of Hon’ble the Supreme Court in the case of CIT v. Sterling Foods, (1999) 237 ITR 579, the Division Bench has held that the income earned by the assessee from duty draw back cannot be held to be the income ‘derived from’ specified business within the meaning of Section 80IB(1) of the Act. Matters involving similar questions of law have already been decided by this Court in ITA Nos. 97, 99, 100, 102, 103 and 174 of 2007. We are also of the view that once Hon’ble the Supreme Court in Sterling Food’s case (supra) has rendered the judgment then the questions cannot be reopened. The appeal filed by the revenue is, therefore, liable to be accepted and the questions raised deserves to be answered in favour of the revenue. In view of above, the appeal is allowed and the questions of law raised in the instant appeal are answered in favour of the revenue and against the assessee. (M.M. KUMAR) JUDGE (AJAY KUMAR MITTAL) November 5, 2007 JUDGE Pkapoor 3

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