COMMISSIONER OF INCOME TAX vs. M/S WIZ CRAFT BATH FURNISHING

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ITA/275/2007HC Punjab & HaryanaPHHC01072963200714 September 2007Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE M.M. KUMAR3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the revenue's appeal. The Court noted that the issue was not res integra, having been settled by the Supreme Court in the case of CIT v. Sterling Foods (supra). The High Court had previously allowed appeals of the revenue involving similar questions of law by following the Supreme Court's judgment in Sterling Foods. Therefore, the instant appeal was allowed in terms of the High Court's judgment dated 26.7.2007 in similar cases. The order of the Tribunal dated 8.6.2006 was set aside, and the order of the Assessing Officer dated 21.11.2005 was restored. The ratio decidendi is that duty drawback income is not income 'derived from' an industrial undertaking for the purpose of Section 80IB deduction, as per the Supreme Court's ruling in Sterling Foods. No issue was expressly left undecided.

What were the facts?

The Commissioner of Income Tax, Karnal (the revenue) filed an appeal under Section 260A of the Income-tax Act, 1961, against an order dated 8.6.2006 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The ITAT's order pertained to assessment year 2001-02 and confirmed the order of the CIT (Appeals). The CIT (Appeals) had directed the Assessing Officer to allow a deduction under Section 80IB on the amount of duty drawback received by the assessee, M/s WIZ Crafts Bath Furnishing. The revenue contended that duty drawback cannot be termed as income 'derived from' an industrial undertaking. The assessee did not appear before the High Court despite service of notice.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT (Appeals) directing the Assessing Officer to allow deduction under Section 80IB 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 (SC)? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the ITAT 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 under which deduction is allowable only from the income derived from the industrial undertaking having a direct nexus with the activity of the industrial undertaking? (Question of law) Assessee's contentions: Not recorded as the assessee did not appear. Revenue's contentions: The duty drawback received by the assessee is not income 'derived from' the industrial undertaking, relying on the Supreme Court's decision in CIT v. Sterling Foods. Deduction under Section 80IB is allowable only on income derived from the industrial undertaking with a direct nexus to its activities, and duty drawback/export incentives do not meet this criterion.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80IB

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 275 of 2007 DATE OF DECISION: 14.9.2007 The Commissioner of Income Tax, Karnal …Appellant Versus M/s WIZ Crafts Bath Furnishing …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.

JUDGMENT M.M. KUMAR, J. This is revenue’s appeal under Section 260A of the Income-tax Act, 1961 (for brevity, ‘the Act’), against order dated 8.6.2006, passed by the Income Tax Appellate Tribunal, Delhi Bench, ‘SMC’, New Delhi (for brevity, ‘the Tribunal), in I.T.A. No. 1217/Del/2006, in respect of assessment year 2001-02. It is claimed that the following substantial questions of law would arise for determination of this Court:-

1.

Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming the order of the CIT (Appeals) directing the Assessing Officer to allow deduction under Section 80IB 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 (SC)?

2.

Whether on the facts and in the circumstances of the case, the ITAT 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 under which deduction is allowable only from the income derived from the industrial undertaking having direct nexus with the activity of industrial undertaking? We have issued dasti notice to the assessee-respondent and according to the office report service is complete. Despite service no one has put in appearance on behalf of the assessee- respondent, therefore, we proceeded to hear the matter. After hearing learned counsel for the appellant and perusing the record we find that the matter is not res integra, inasmuch as, the issue raised in the instant appeal has already been settled by Hon’ble the Supreme Court in the case of Sterling Foods case (supra). We have already allowed appeals of the revenue involving similar questions of law by following the judgment of Hon’ble the Supreme Court rendered in the case of Sterling Foods (supra), being I.T.A. Nos. 495 and 496 of 2006, decided on 26.7.2007. In view of above, instant appeal is allowed in terms of our judgment dated 26.7.2007, in I.T.A. Nos. 495 of 2006 (The Commissioner of Income-tax, Karnal v. Sh. Lakhwinder Singh, Proprietor M/s G.S. Exports, Panipat) and 496 of 2006 (The Commissioner of Income-tax, Karnal v. M/s G.S. Exports, Panipat). Accordingly, the order dated 8.6.2006, passed by the Tribunal is set aside and that of the Assessing Officer, dated 21.11.2005 (A-1) is restored. However, there shall be no order as to costs. (M.M. KUMAR) JUDGE (AJAY KUMAR MITTAL) September 14, 2007 JUDGE Pkapoor 3

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