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2014 (1) TMI 811 - HC - Income TaxWhether amendment to the proviso to sec.43B by the Finance Act, 2003, w.e.f. 01/04/2004 is retrospective nature Held that - Following Commissioner of Income Tax Vs. Alom Extrusions Ltd. 2009 (11) TMI 27 - SUPREME COURT - Particularly when the second proviso to Section 43B came to be deleted and there is amendment in first proviso to section 43B, which is held to be operative retrospectively - When the assessee deposited the amount with the department within extended grace period under the Provident Fund Act, the tribunal has not committed any error and/or illegality in holding that the assessee would be entitled to the deduction as claimed Decided against Revenue. Whether income from duty drawback be excluded from the profits eligible for deduction under Section 80IB Held that - Following Liberty India Vs. Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT - Duty drawback receipt and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of deduction under section 80- I/80-IA/80-IB of the Income Tax Act - Duty drawback receipt and DEPB benefits are incentives which flow from the Scheme framed by the Central Government or from section 75 of the Customs Act, 1962 - Such incentives profits are not profits derived from eligible business under section 80-IB Decided against assessee.
Issues:
1. Interpretation of the amendment to the proviso to sec. 43B by the Finance Act, 2003. 2. Eligibility of income from duty drawback for deduction under Section 80IB. Analysis: Issue 1: Interpretation of the amendment to the proviso to sec. 43B by the Finance Act, 2003 The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the retrospective nature of the amendment to the proviso to sec. 43B by the Finance Act, 2003. The appellant contended that the ITAT erred in granting relief to the assessee for the amount deposited towards employees' contribution within the grace period under the Provident Fund Act. The High Court held that if the assessee deposited the amount within the grace period as allowed under the Provident Fund Act, they were entitled to deduction. Referring to relevant legal precedents, the Court upheld the ITAT's decision, stating that the amendment in the first proviso to section 43B was operative retrospectively. Therefore, the Court ruled in favor of the assessee on this issue. Issue 2: Eligibility of income from duty drawback for deduction under Section 80IB The dispute revolved around whether income of Rs.2,40,667/- from duty drawback should be excluded from the profits eligible for deduction under Section 80IB, considering it was not "derived from" the manufacturing activity of the assessee. The High Court relied on the decision of the Supreme Court in the case of Liberty India vs. Commissioner of Income Tax, where it was held that duty drawback receipts do not form part of the net profits eligible for deduction under section 80-IB of the Income Tax Act, 1961. The Court emphasized that such incentives are ancillary profits and do not fall within the expression "profit derived from industrial undertaking" under section 80-IB. Consequently, the Court ruled in favor of the revenue, stating that duty drawback income should be excluded from the profits eligible for deduction under Section 80IB. Therefore, the appeal was partly allowed in favor of the revenue on this issue. In conclusion, the High Court's judgment addressed the issues of retrospective nature of the amendment to the proviso to sec. 43B and the eligibility of income from duty drawback for deduction under Section 80IB, providing detailed legal analysis and referencing relevant case law to support its decisions.
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