CIT, KARNAL vs. M/S ACCENT FOR LIVING C/O M/S DEEPAK WOOLEN MILLS

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date 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. KUMAR HON'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 the Income Tax Act, 1961 (for brevity 'the Act') is directed against order dated 13.3.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 1, New Delhi in ITA No. 1577/Del/2005 in respect of the assessment year 2001-02. The Tribunal has refused to include the amount of Rs. 1,41,06,095/- under the head 'business profit'. The aforesaid issue was decided in favour of the assessee by following the view taken by the Delhi High Court in the case of CIT v. Eltek SGS Pvt. Ltd. (2008)300 ITR 6 (Delhi). The Revenue has claimed that following substantive questions of law would arise for determination of this Court: “i)That in the facts and circumstances of the case, whether the Ld. ITAT was correct in law in allowing deduction u/s 80-1A of the Income Tax Act, 1961 on Duty draw back and profit on sale of licences by holding that Duty draw back and profit on sale of licenses is income derived from business of industrial undertaking; ii)That in the facts and circumstances of the case, given that the language of both Section 801A (which provision is in issue in the instant case) and Section 801B (which provision was in issue in the case of Liberty India) are by and large similar, whether the Ld. ITAT was correct in relying on the ratio of the Hon'ble Delhi High Court in CIT v. Eltek SGS(300 ITR 6) when the Hon'ble Punjab and Haryana High Court, whose decision are binding for this charge, has in the case of Liberty India v. CIT Karnal (237 ITR 52) taken an opposite view, and held that export incentive are not eligible to the benefits of deduction u/s 801B ;and iii)That given the fact that the Department is in SLP against the judgement of the Delhi High Court in Eltek SGS(P) Ltd., whether the Ld. ITAT was correct in basing its decision on an impugned order, which is also not juri ictionally applicable to the Karnal Charge, especially when the juri ictional High Court has taken a diametrically opposite view in the matter?”

We have heard the learned counsel for the parties. The controversy on the question whether the amount of Duty Draw Back and profit on sale of licenses could be regarded as income derived from business of industrial undertaking and would qualify for deduction under Section 80(IA) of Act has been decided by a Division Bench of this Court in the case of Liberty, India v. CIT Karnal (2007)293 ITR 520. The aforesaid view has been upheld by Hon'ble the Supreme Court in the case of Liberty India v. CIT (2009)317 ITR 218(SC). It has been categorically held that Duty Draw Back receipt and DPEB benefits do not form part of the net profits of eligible industrial undertakings for the purposes of deduction under Section 80-1/80-1A/80-IB of the Act. Accordingly shorn of factual details, the issue has to be decided against the assessee and in favour of the Revenue. The same principle of law would apply to profit derived on sale of licences. The counsel for the assessee-respondent has not been able to advance any argument pointing out any distinguishing feature between the facts of the present case and that of the Liberty India's case (supra) decided by Hon'ble the Supreme Court. Accordingly, the appeal is allowed and the questions of law are answered against the assessee- respondent and in favour of the Revenue. (M.M.Kumar) Judge (Jitendra Chauhan) 11.2.2010 Judge okg