COMMISSIONER OF INCOME TAX vs. DEEPAK FASTNERS LTD.

PDF · subscribers

ITA/521/2006HC Punjab & HaryanaPHHC01075253200606 December 2010Bench: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages

AI SummaryAllowed

What did the High Court hold?

The High Court held that the issue was covered against the assessee by the Supreme Court's decision in Liberty India v. CIT, (2009) 317 ITR 218. Consequently, the substantial question of law was answered in favour of the revenue and against the assessee. The Tribunal's finding that the DEPB was income derived from the industrial undertaking was thus overturned. The reasoning relied upon the precedent set by the Supreme Court, which likely distinguished between income derived from the business operations of an industrial undertaking and benefits received from government schemes. The appeal was allowed, implying that the DEPB credit would be treated as income not derived from the industrial undertaking, potentially impacting deductions or exemptions related to industrial undertaking profits. No issue was expressly left undecided.

What were the facts?

The Revenue, Commissioner of Income Tax, Ludhiana I, filed an appeal before the High Court of Punjab and Haryana against an order passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench 'A'. The ITAT's order, dated April 28, 2006, in ITA No. 636/Chandi/2005, pertained to the assessment year 2002-03. The dispute revolved around whether a Duty Entitlement Pass Book (DEPB) credit was to be considered as income derived from an industrial undertaking. The High Court admitted the appeal to consider a substantial question of law.

What were the issues?

1. Whether, on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was correct in holding that the DEPB was an income derived from the Industrial undertaking, ignoring the fact that in whatever form the export incentive/benefit flowed to the respondent resulting in some extra profit, the source of DEPB was the particular scheme of the Government and not the business of industrial undertaking? (Question of law) Assessee's contention: The assessee's counsel fairly stated that the issue is covered against the assessee by the judgment of the Hon'ble Supreme Court in Liberty India v. CIT, (2009) 317 ITR 218. Revenue's contention: The revenue argued that the DEPB, being an export incentive flowing from a government scheme, was not income derived from the industrial undertaking itself, but rather from the scheme. They contended that any profit arising from it was not directly attributable to the business of the industrial undertaking.

AI-generated summary — verify with the full judgment below

ITA No.521 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 521 of 2006 Date of decision: 6.12.2010 Commissioner of Income Tax , Ludhiana I, Ludhiana -----Appellant Vs. Deepak Fastners Limited, Ludhiana ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Rajesh Katoch, Advocate for the appellant. Mr. Animesh Sharma, Advocate for the respondent. Adarsh Kumar Goel,J. This appeal was admitted to consider following substantial question of law raised on behalf of the revenue arising out of order passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh in ITA No.636/Chandi/2005 dated 28.4.2006, for the assessment year 2002-03:- “Whether on the facts and law, the Hon’ble Income Tax Appellate Tribunal was correct in holding that the DEPB was an income derived from the Industrial undertaking, ignoring the fact that in whatever form the export incentive/benefit flowed to the respondent resulting in some extra profit, the source of DEPB was the particular scheme of the Government and not the business of industrial undertaking?”

We have heard leaner counsel for the parties and perused the record. 1

ITA No.521 of 2006 Learned counsel for the assessee fairly states that the issue is covered against the assessee by judgment of the Hon’ble Supreme Court in Liberty India v. CIT, (2009) 317 ITR 218. Accordingly, the question is answered in favour of the revenue and against the assessee. The appeal is allowed. (Adarsh Kumar Goel) Judge December 6, 2010

(Ajay Kumar Mittal) ‘gs’ Judge 2

Recent GST High Court judgments

Search GST case law →