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TMI Blog2005 (6) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Madras High Court in the case of CIT v. Viswanathan & Co. 261 ITR 737 and CIT v. Jameel Leathers & Uppers, 246 ITR 97 and also the decision of the Hon'ble Delhi High Court in the case of CIT v. Ritesh Industries Ltd. 192 ITR 81 wherein similar issue was decided in favour of the Revenue." 2. The relevant and material facts for the disposal of this ground of appeal are that the assessee claimed deduction under section 80-IB in respect of duty drawback amounting to Rs. 1,74,316. The same was disallowed by the Assessing Officer as according to him this duty drawback was not a profit and gain derived by the assessee from industrial undertaking while placing reliance in the case of CIT v. Sterling Foods [1999] 237 ITR 579 (SC). 3. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of India, then custom duty paid on imported goods is given back to the manufacturer by way of rebate. This duty drawback is given only to manufacturers making export as is apparent from sub-section (2) of section 75. In other words, it is nothing but reimbursement of duty already paid. Whenever such duty is paid, it directly affects the profits of industrial undertaking inasmuch as it is debited to manufacture and profit and loss account. Such payment of custom duty increases the cost of manufacturing but when the same is received back as drawback, it nullifies the effect of aforesaid increase in the cost of manufacturing. Therefore, the duty drawback is inextricably linked with the production cost of the goods manufactured by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourage exports the duty is refunded subsequently by way of 'duty drawback', it cannot be regarded as the profit or gain 'derived' from the industrial undertaking. It may constitute profits or gains of the business by virtue of section 28 of the Income-tax Act, 1961, but, it cannot be construed as profits or gains 'derived' from the industrial undertaking for, its immediate and proximate source is not the industrial undertaking but the scheme for duty draw-back. Hence, the amount of duty draw-back cannot be regarded as income derived from an industrial undertaking so as to entitle the assessee to a deduction under section 80-I". 5. On the other hand, the learned authorised representative for the assessee, contended that as the words "derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction with regard to the grant of subsidy under section 80-IA of the Act whereas in the instant case of the assessee, I am required to adjudicate whether the assessee is entitled to claim deduction with regard to the amount of duty drawback under section 80-IB of the Act. I may further mention here that in order to resolve the issue under consideration before me, the words derived from used in section 80-I or 80-IB are significant. Their Lordships of jurisdictional High Court of Delhi in the case of Ritesh Industries Ltd. (supra) while clearly giving the meaning of the words "derived from" used in section 80-I has come to the conclusion that the amount of duty drawback cannot be regarded as income derived from an industrial undertaking s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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