COMMISSIONER OF INCOME TAX, KOTTAYAM vs. SRI.GEORGE VARGHESE, GENERAL RUBBERS,KTM

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ITA/149/2011HC KeralaKLHC01026497201107 October 2013Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the substantial question of law, as modified to restrict the entitlements to DEPB credit and duty credit, should be answered in favour of the Revenue. The Court's reasoning was based on the law laid down by the Apex Court in Liberty India v. CIT (317 ITR 218). Consequently, the High Court allowed the appeal, setting aside the order of the Income Tax Appellate Tribunal. The ratio decidendi is that export entitlements like DEPB credit and duty credit are not eligible for deduction under Section 80-IB, as per the Supreme Court's ruling in Liberty India. The operative direction was to set aside the ITAT's order.

What were the facts?

This case involves an appeal by the Commissioner of Income Tax, Kottayam, against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The ITAT had ruled in favour of the assessee, Sri. George Varghese, General Rubbers, concerning deductions under Section 80-IB of the Income Tax Act. The dispute revolves around whether DEPB credit and duty credit, which are export entitlements, are eligible for such deductions. The specific assessment year(s) are not explicitly stated in the provided text. The procedural history indicates that the ITAT's order was under challenge before the High Court.

What were the issues?

The primary question of law before the High Court was: Whether, on the facts and in the circumstances of the case, the order of the ITAT holding that the assessee is entitled to deduction under Section 80-IB for DEPB credit and duty credit is illegal and unsustainable in light of the Supreme Court's decision in Liberty India vs. CIT (317 ITR 218)? The assessee's contention, as implied by the ITAT's order being challenged, was that export entitlements, including DEPB credit and duty credit, should be considered for deduction under Section 80-IB. The revenue's contention, as argued before the High Court, was that such credits are not eligible for deduction under Section 80-IB, citing the Supreme Court's decision in Liberty India vs. CIT (317 ITR 218). The High Court noted that export entitlements include benefits beyond just DEPB credit and duty credit, but the substantial question of law was to be restricted to these two specific items.

Which sections of the Income-tax Act were involved?

Section 80-IB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 7TH DAY OF OCTOBER 2013/15TH ASWINA, 1935 ITA.No. 149 of 2011 ( ) ------------------------ AGAINST THE ORDER/JUDGMENT IN ITA 729/2009 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 19-12-2008 APPELLANT(S)/APPELLANT/RESPONDENT: ---------------------------------- THE COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: ------------------------------------------------ SRI.GEORGE VARGHESE,GENERAL RUBBERS, P.J.JOHN ZACHARIA BUILDING, KOTTAYAM 680 001. BY ADV. SRI.V.ABRAHAM MARKOS BY ADV. SRI.MATHEWS K.UTHUPPACHAN BY ADV. SRI.BINU MATHEW BY ADV. SRI.TERRY V.JAMES BY ADV. SRI.B.J.JOHN PRAKASH BY ADV. SRI.TOM THOMAS (KAKKUZHIYIL) BY ADV. SRI.JOSEPH KODIANTHARA (SR.) THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 07-10-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A.No. 149 of 2011 ---------------------------------------------- Dated this the 7th October, 2013 JUDGMENT Manjula Chellur, C.J. Having gone through the factual situation and in the light of the fact that export entitlements not only include DEPB credit and duty credit, but the other benefits also, the substantial question of law needs to be modified restricting the entitlements only to DEPB credit and duty credit. Accordingly, the following substantial question of law arise for consideration: Whether on the facts and in the circumstances of the case is not the order of the ITAT holding that the assessee is entitled to deduction u/s 80 IB DEPB credit and duty credit against law, illegal and unsustainable in the light of the decision of the Supreme Court in Liberty India vs. CIT (317 ITR 218)? 2. Having regard to the law laid sown by the Apex Court in Liberty India v. CIT (317 ITR 218), the substantial question of law is answered in favour of Revenue.

ITA.No.148/11 2 Accordingly, the appeal is allowed setting aside the order of the Income Tax Appellate Tribunal. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs7.10

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