COMMISSIONER OF INCOME TAX , KARNAL vs. M/S MITTAL OVERSEAS PANIPAT

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ITA/269/2010HC Punjab & HaryanaPHHC01093185201004 October 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal in terms of its earlier order dated September 29, 2010, in ITA No. 91 of 2010, CIT v. M/s Jawand Sons Udhay Complex Ldh. This implies that the High Court found the matter to be covered by its previous decision, which was stated to be against the assessee. Consequently, the ITAT's order restoring the matter to the AO for allowing deduction under Section 80IB on export incentives was effectively set aside or modified based on the precedent. The reasoning would be that the specific issues raised by the revenue, particularly concerning the applicability of the Baby Marine Exports case and the decision in Liberty India, were addressed in the earlier judgment. The ratio decidendi would be that export incentives like Duty Drawback and DEPB benefits do not form part of the net profits for the purpose of Section 80IB deduction, as per the Supreme Court's decision in Liberty India, and that the ITAT's approach was not in line with established legal principles. The operative direction was to dispose of the appeal in the same terms as the cited precedent.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated May 26, 2009, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The appeal pertains to Assessment Year 2005-06 and concerns the eligibility of deduction under Section 80IB of the Act on export incentives. The ITAT had restored the matter to the Assessing Officer (AO) for further consideration. The High Court noted that the assessee's counsel conceded that the matter was covered against the assessee by a previous order of the High Court dated September 29, 2010, in ITA No. 91 of 2010, CIT v. M/s Jawand Sons Udhay Complex Ldh.

What were the issues?

1. Whether, on the facts and in the circumstances, the ITAT was legally correct in restoring the matter to the AO for allowing deduction under Section 80IB on export incentives? 2. Whether the ITAT was justified in applying the ratio of the Supreme Court judgment in CIT v. Baby Marine Exports (290 ITR 323) to the assessee's case, which deals with eligibility of Section 80IB on premium from supporting manufacturers, to the present case concerning export incentives from government schemes? 3. Whether the ITAT was justified in allowing Section 80IB deduction by applying a Supreme Court decision with factually different circumstances? 4. Whether the ITAT was justified in distinguishing between an exporter and a supporting manufacturer for allowing Section 80IB deduction on Duty Drawback and DEPB, especially when the analogy of Baby Marine Exports was inappropriate, and considering the Supreme Court's decision in Liberty India v. CIT (2009) 317 ITR 218, which held that Duty Drawback receipts/DEPB benefits do not form part of net profits for Sections 80-I/80-IA/80-IB? Assessee's contentions: The assessee's counsel fairly stated that the matter is covered against the assessee by an earlier order of the High Court. (No specific arguments are recorded for the assessee on the merits of the issues). Revenue's contentions: The Revenue questioned the ITAT's decision to restore the matter to the AO and its reliance on the Baby Marine Exports case, arguing it was applied in a different context. The Revenue also challenged the distinction drawn between exporters and supporting manufacturers and highlighted the Supreme Court's ruling in Liberty India regarding Duty Drawback and DEPB benefits.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 4.10.2010 The Commissioner of Income Tax. -----Appellant. Vs. M/s Mittal Overseas. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Yogesh Putney, Sr. Standing Counsel for the appellant. Mr. Pankaj Jain, Advocate for the respondent. --- ADARSH KUMAR GOEL, J. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 26.5.2009 of the Income Tax Appellate Tribunal, New Delhi in I.T.A. No.3087/Del)/2008 for the assessment year 2005-06 proposing to raise following substantial questions of law:- “i) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in law in restoring the matter to the file of the AO on the issue of allowing deduction u/s 80IB of the Income Tax Act, 1961 on export incentives?

ii) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in applying the Schemes of the Government? iii) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in allowing section 80IB deduction to the assessee by applying the ratio of the apex Court’s decision in a case which is totally different on facts from the case of the assessee? iv) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in drawing an artificial distinction between the case of an exporter and a supporting manufacturer for allowing claim of deduction u/s 80IB on Duty Drawback and DEPB when, given the inappropriateness of the analogy of the Baby Marine Exports case, there is no such distinction and when, at the level of the Supreme Court, it has been held in the case of Liberty India Vs. CIT (Karnal) (2009) 317 ITR 218 that “Duty Drawback receipts/DEPB benefits do not form part of the net profits of eligible industrial undertaking for purposes of Sections 80-I/80-IA/80-IB of the 1961 Act?” Learned counsel for the assessee fairly states that the matter is covered against the assessee by earlier order of this Court dated 29.9.2010 in I.T.A. No.91 of 2010 CIT v. M/s Jawand Sons Udhay Complex Ldh.

In view of above, the appeal is disposed of in same terms. (ADARSH KUMAR GOEL) JUDGE October 4, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3

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