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Issues involved:
1. Exclusion of modvat/cenvat receipts for 80IB computation. 2. Netting off freight receipts for 80IB computation. Exclusion of modvat/cenvat receipts for 80IB computation: The appeal was filed by the Revenue against the order of the CIT(A)-II, Hyderabad for the assessment year 2006-07. The main issue was whether modvat/cenvat receipts should be excluded for 80IB computation. The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of Liberty India Vs. CIT, stating that duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of deduction u/s 80I/IA/IB of the IT Act, 1961. The Tribunal emphasized that deductions under sections 80IA and 80IB are linked to profits derived from eligible business, not ownership, and any industrial undertaking eligible for deduction is entitled only to the profits derived from that undertaking. DEPB/Duty drawback incentives were deemed ancillary profits and not profits derived from industrial undertakings u/s 80IB. The Tribunal rejected the arguments of the assessee's representative, upholding the Revenue's appeal based on the Supreme Court's judgment. Netting off freight receipts for 80IB computation: The second issue pertained to whether freight receipts should be netted off against gross receipts for 80IB computation. The Tribunal cited a previous order in the case of Nirma Industries Ltd. Vs. ACIT, where it was held that only net transport receipts should be considered for exclusion while computing deduction u/s 80IA. Based on this precedent, the Tribunal confirmed the order of the CIT(A) on this issue. Consequently, the appeal of the Revenue was partly allowed.
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