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TMI Blog2014 (1) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4013/Del/2011, I.T.A.No. 609/DEL/2012 - - - Dated:- 3-1-2014 - Shri I. C. Sudhir And Shri Shamim Yahya,JJ. For the Petitioner : Sh. Suresh Anantharaman, FCA For the Respondent : Ms. Nidhi Srivastava, Sr. D.R. ORDER Per Shamim Yahya: AM. These appeals by the Revenue and Assessee emanate out of order of the Ld. CIT(A) for the respective assessment years. Since the issues are common and the appeals were heard together and these are being consolidated by this common order for the sake of convenience 2. The issue raised in ITA No. 5056/Del/2010 (A.Y. 2006-07) in the Assessee s appeal read as under:- i) The lower authority has erred in not allowing deduction of Rs. 2,04,42,410/- being the sum of CENVAT credit availed as eligible profit u/s. 80-IB. ii)(a) The lower authority has erred in not allowing deduction of Rs. 13,709.67 being the VAT Remission credit availed as eligible profit u/s. 80- IB. (b) Without prejudice to the above, the lower authority has wrongly taken the figure of Rs. 1,92,000/- as VAT Remission in place of actual figure of Rs. 13,790.67. iii) Without prejudice to the above, the lower authority has erred in not treating the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO noted from the profit and loss account of the units that the assessee has credited an amount of Rs. 2,04,42,410/- on account of Cenvat credit to Jammu unit as well as VAT remission amounting to Rs. 1,92,000/-. The Assessing Officer held that the credits on account of excise duty refund and VAT remissions were not eligible for deduction u/s. 80-IB as the same were not the income derived from the industrial undertaking. As per the Assessing Officer, the Cenvat Credit and VAT remissions cannot be said to be profits or gains derived from the industrial undertaking as its immediate and proximate source is not the industrial undertaking but the excise poly for the refund of excise duty. 6. Similar disallowances were also made by the Assessing Officer for asstt. year 2007-08 and 2008-09. For asstt. year 2006-07 the Ld. CIT(A) affirmed the action of the Assesisng Officer. For asstt. year 2007-08 and 2008-09 Ld. CIT(A) deleted the addition by holding that assessee was entitled to deduction u/s. 80-IB on account of Cenvat Credit Availment. Furthermore, Ld. CIT(A) allowed the addition ground of the assessee that excise duty refund was a capital in nature and not taxable to tax. 7. Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Hon'ble Supreme Court in the latest case of Liberty India Ltd. 317 ITR 218 assessee made detailed submissions distinguishing the judgment of the Delhi High Court in Dharampal Premchand Ltd. with the judgment of the Supreme Court in the case of Libel1y India Ltd .. The submissions of the assessee are as under: "1. Your Honour, the judgement given by the Hon'bIe Supreme Court in the case of Liberty India vs. Commissioner of Income Tax (2oo9) 317 ITR 218 (SC) is on the issue whether Duty Draw Back / DEPB allowed u/s. 75 of the Custom Act, i962 are incentive, profit or profit derived from eligible business u/s. 80-IB. The Hon'hle Supreme Court in this regard, held as under: "DEPB / Duty Drawback are incentives, which flow from the schemes framed by the Central Government or from Section 75 of the Customs Act, 1962. Incentive profits are not profits derived from eligible business under section 80-IB : they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentives such as DEPB / Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of each of various classes of goods imported. Basically. the source of the duty drawback receipt lies in Section 75 of the Customs Act and Section 37 of the Central Excise Act. 18. Analyzing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory / policy provisions in the Customs Act/ Scheme (s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression "profits derived from industrial undertaking" in section 80-IB " It has been submitted that the judgment of Hon'ble Supreme Court in the case of Liberty India (Supra) as stated by Hon'ble Supreme Court itself is applicable only on Duty Drawback and DEPB incentives available under the export promotion policy of Government of India. It does not cover the issue of Cenvat Credit/ Refund available to the manufacturer under a separate notification issued by Excise authorities to Industrial Unit set up in the state of Jammu Kashmir. That Cenvat Credit / Duty Drawback is allowed to the manufacturer of goods. This manufacturing facility should be in the State of Jammu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that before the claim of DEPB / Duty Drawback, the most proximate event is export, whereas in case of Cenvat Credit / refund, the most proximate event is the manufacture, hence manufacturing is an in-extricable event for claim of cenvat credit /refund. It is the refund of same excise duty, which is paid by the undertaking in cash. This payment of excise duty is on manufacture of goods by the eligible undertaking and is subsequently refunded. In view of the above, it may kindly be observed that the facts of the appellant's case are entirely different from the facts in the case of Libel1y India Ltd." It was further argued that the Appellant's case is basically covered by the judgment of Hon 'ble Delhi High Court in the case of Dharampal Premchand [Supra]' It was also submitted on behalf of the appellant that the only difference is that the case of Dharampal Premchand is covered by the notification applicable for North East. whereas the case of Appellant is covered by notification issued for the State of Jammu Kashmir. The appellant has also submitted a detailed chart comparing the notifications of both the States and placed at Page No. 83 of the Paper Book. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- I have carefully considered the submissions of the Appellant. From the perusal of the Industrial Policy announced by the Central Government for the state of Jammu Kashmir read with the notification issued by the excise department in the state of Jammu Kashmir, it is found that the concession given in the form of Excise Duty Refund is a production linked incentive. It is also seen that the judgment of Hon'ble Supreme Court in the case of Liberty India Ltd. is on the issue as to whether duty draw back and DEPB could be said to be profit derived from the business of the industrial undertaking u/s 80 IB of the Act. It has been observed by the Supreme Court in this case that Duty Drawback/DEPB was given to encourage export and cannot be said to be inextricably linked with the manufacturing activity. The excise duty refund in the case of the appellant is however directly linked with the manufacturing activity and is production linked incentive, which arises out of manufacturing activity of Appellant's Industrial Undertaking at Jammu. Such excise duty refund is therefore, a first degree source of receipt linked with the manufacturing activity of the undertaking. Hence it is der ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (SLP filed by revenue has been dismissed by the Supreme Court -20 I 0 TIOL,-18 SC-lT), which makes a distinction between the treatment to be given to Excise Duty Refund and Duty Draw Back/DEPB, the AO is directed to treat excise duty refund as profit derived from the business of the Industrial Undertaking, while computing the eligible deduction u/s. 80-IB of the Income Tax Act, of the appellant's Jammu Unit. 11. Against the above order Revenue has filed the appeal. 12. We have heard both the counsel and perused the records. Ld. Counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of the Jurisdictional High Court in the case of Dharampal Premchand (2009) 221 CTR 133 where the Court held the refund of excise duty has a direct nexus with manufacturing activity and therefore such refund is an income derived from industrial undertaking eligible for relief u/s.80-IB. He further submitted that the decision of the Hon ble Apex Court in the case of Liberty India Ltd. 317 ITR 218 (Supra) is not applicable. He further claimed that the decision of the Dharampal (Supra) came after the Liberty India pronouncement by the Apex Court. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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