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2005 (6) TMI 475 - AT - Income TaxDeductions u/s 80-IB - The amount of duty drawback is eligible or not for deduction u/s 80-IB - industrial undertaking - HELD THAT - The issue involved in the instant case of the assessee under consideration before me is also identical because in this case also the assessee has claimed deduction for the amount of duty drawback u/s 80-IB of the Act claiming the same to be an income derived from a business of industrial undertaking u/s 80-IB of the Act. Ratio of the decision of the Hon ble Delhi High Court in the case of Ritesh Industries Ltd. 2004 (9) TMI 36 - DELHI HIGH COURT fully applies to the facts and the issue involved in the instant case of the assessee and so respectfully following the decision ( supra ) which is binding upon this Tribunal being a decision of jurisdictional High Court it is held that a sum received by the assessee on account of duty drawback cannot be considered as income derived from the business of an industrial undertaking so as to entitle the assessee to a deduction u/s 80-IB and hence the order of the CIT (Appeals) in allowing the impugned deduction is set aside. Ground of appeal taken by the Revenue is allowed. In the result the appeal filed by the Revenue is allowed.
Issues:
- Allowance of deduction under section 80-IB on duty drawback - Interpretation of "derived from" in the context of duty drawback for industrial undertakings Analysis: 1. The main issue in this case was the allowance of deduction under section 80-IB on duty drawback. The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) directing the Assessing Officer to allow the deduction under section 80-IB on duty drawback. The Revenue contended that duty drawback was not a profit derived by the assessee from the industrial undertaking. The Assessing Officer disallowed the claim of deduction under section 80-IB related to duty drawback based on the case law precedent. 2. The CIT(Appeals) allowed the deduction claim of the assessee under section 80-IB for duty drawback, stating that it was linked to the production cost of goods manufactured by the assessee and formed part of the income derived from the industrial undertaking. The CIT(Appeals) relied on a Tribunal decision emphasizing the direct nexus between income and the industrial undertaking. The duty drawback was considered a trading receipt of the industrial undertaking directly related to its activities. 3. The Revenue argued that the duty drawback should not be considered income derived from the industrial undertaking based on a recent High Court decision and the interpretation of the term "derived from." The Revenue contended that duty drawback was not directly linked to the industrial undertaking's profits and gains but rather to a scheme for duty drawback, thus not qualifying for deduction under section 80-IB. 4. The authorized representative for the assessee argued that the duty drawback was directly linked to the income of the business of the industrial undertaking, making it eligible for deduction under section 80-IB. The representative highlighted the importance of the specific wording in the section and distinguished the High Court decision cited by the Revenue, stating it was not directly applicable to the issue at hand. 5. The Tribunal analyzed the submissions of both parties, reviewed the relevant case law, and emphasized the significance of the term "derived from" in sections 80-I and 80-IB. Referring to a jurisdictional High Court decision, the Tribunal concluded that duty drawback could not be considered income derived from the business of an industrial undertaking for the purpose of claiming a deduction under section 80-IB. Accordingly, the order of the CIT (Appeals) allowing the deduction was set aside, and the appeal filed by the Revenue was allowed. 6. In conclusion, the Tribunal held that the duty drawback amount received by the assessee could not be classified as income derived from the business of an industrial undertaking, thus not qualifying for a deduction under section 80-IB. The decision was based on the interpretation of the term "derived from" and the specific context of duty drawback in relation to industrial undertakings, as clarified by the jurisdictional High Court ruling.
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