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TMI Blog2013 (11) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... s a company engaged in manufacturing and sale of finished knitted fabrics and readymade garments. It had filed its return on 29.11.2006 declaring taxable income of Rs.84,49,800/- while claiming deductions under Section 80-IB of the 1961 Act to the tune of Rs.35,91,572/-. The assessment was finalized by the Assessing Officer on 8.12.2008. While framing assessment, the Assessing Officer re-computed deductions under Section 80-IB allowable to the assessee and disallowed various items of receipt including duty draw back (hereinafter referred to, as DDB) for a sum of Rs.4,40,823/-. Aggrieved with this order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-I, Ludhiana which was decided on 11.11.2009. Though the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of Duty Drawback. Thus, on this ground, the assessee succeeds for statistical purposes." Aggrieved with this order, the revenue has filed this appeal, claiming, that the appellate authority was not justified in directing the Assessing Officer to exclude the expenses incurred for realization of DDB for the purpose of computing deductions under Section 80IB as DDB benefits do not form part of the net profits of eligible industrial undertaking for the purpose inter-alia of Section 80IB of the 1961 Act. As per the revenue, the following substantial question of law requires determination in this appeal:- "Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in directing the Assessing Officer to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 37 of the Central Excise Act, 1944, Government of India has provided for repayment of custom and excise duty paid by an assessee. Such refund is allowed on the average amount of duty paid in respect of material of any particular nature or on description of goods used as raw material for manufacture of specified class of goods to be exported. Thus, the source of DDB receipts are statutory provisions coupled with scheme of the Government of India to provide incentive to manufacturers of export goods of specified class. In Liberty India v. Commissioner of Income Tax, (2009) 225 CTR (SC) 233, Hon'ble Apex Court had held that profits derived by way of export incentives such as DDB do not fall within the expression "profits derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of such undertaking should result in direct yield of such income which DDB incentives are not, any expenditure made on recovery of such export incentives would also not qualify for allowable deductions. Merely because some expenses have been incurred on getting DDB incentives, which incentives have neither any direct nexus nor are derived from business of industrial undertaking and are also included in the net profits and gains of such undertaking, any expenditure having nexus with such export incentive as DDB would also not qualify for allowable deduction under Section 57 or 71 of the Act. In short, gross receipt of DDB incentive, without reduction of expenditure spent for its recovery, is to be excluded from allowable deductions unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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