TMI Blog2006 (1) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... the test report of a sample of a product by Shri Ram Institute of Industrial Research, the AO drew an inference that the total consumption of silver in manufacture of its products should have been 8,460,089 kg. as against the actual consumption of 11,179 kg. shown by the assessee. The AO presumed that excess consumption of 2,718.91 kg., is a sale outside the books. Taking its value @ Rs. 7801.89 per kg. the value of silver deemed to have been sold outside the books at Rs. 2,12,12,644 was treated as income received outside the books and added the same to the income of the assessee. 4. The learned CIT(A), however, following the order of earlier years and for the reasons contained therein deleted the addition. 5. Before us the learned counsel for the assessee contends that an identical issue on similar facts has come for consideration of the Tribunal in various years and its decision to delete the addition has been upheld. While the Revenue contends that in case the AO failed to take larger sample and did not carry out the assessee's request this at best could be termed as a denial of opportunity and would constitute an irregularity. If there was violation to follow a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, on the same test report which was taken as a basis of addition for deeming such silver as sales outside the books. Since no new material or facts have been brought on record, for parity of reasons and for sake of consistency we are not inclined to interfere with the decision reached by the learned CIT(A) in this year as well. We, therefore, reject this ground in appeal by the Revenue. 8. The next ground in appeal relates to the deduction under s. 80-IB on account of income from Agartala unit on the amount of refund of excise duty amounting to Rs. 2,61,92,386 as under: 9. Briefly the facts are that the appellant company has a unit at Agartala and this unit has exemption of excise duty for the year under consideration. The Ministry of Finance issued three Notification Nos. 32/99-CE, 33/99-CE and 48/99-CE (NT) all dt. 8th July, 1999. These notifications were forwarded to the appellant company by the FICCI vide ref. No. F.680/CE-N-8 dt. 22nd July, 1999. In terms of these notifications, the appellant company was absolved from paying any excise duty in respect of Agartala unit. The appellant company has explained that under the procedure evolved in this regard by the Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting cannot nullify the general principles concerning the computation of the profits and gains which are part of the substantive law. Reference was also made in this connection to the Bombay High Court decision in the case of CIT vs. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom). The Supreme Court in the case of CIT vs. Shamji Vallabhdas Co. (1962) 46 ITR 144 (SC) at p. 148, for the purpose of IT Act, held that a mere book keeping entry cannot decide the question whether a particular claim is allowable as a deduction, whatever may be the method of accounting adopted. Therefore, the objection of the learned Departmental Representative that since the liability represented a contractual liability the absence of book entries is fatal to the claim cannot be accepted. 13.1 As far as the payment of excise duty is concerned, the appellant is governed by the Department of Revenue's Notification No. 32/99-CE dt. 8th July, 1999. A perusal of the said notification shows that the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Tarriff Act, 1985 (1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n CIT vs. Eastern Seafoods Exports (P) Ltd. (1995) 215 ITR 64 (Mad). It was held by the Hon'ble Madras High Court that the word "derived" in s. 80-I of the Act, 1961 [which in this regard is pari materia with the provisions of s. 80-IB(1) of the Act] is not term of art. Its use in the definition indeed demands enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the case of the appellant, the effective source of the excise duty refund is the Notification No. 32/99-CE dt. 8th July, 1999 which basically provides the exemption of excise duty in the case of a manufacturer from a unit in specified areas but the modalities of giving effect to the notification are that the excise duty paid will be refunded. It is submitted that the effective source of both the excise duty payment as well as the excise duty refund lies in the said Notification dt. 8th July, 1999 and, therefore, no further enquiry is called for. 14.1 Secondly, he relies on the decision of Madras High Court in CIT vs. Sundaram Industries Ltd. (2002) 253 ITR 396 (Mad). In this case, the issue was whether the assessee from the sale of scrap material was elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, determine the factual aspect whether the FDRs, were purchased by way of commercial expediency or not. If the assessee is found to have purchased the FDRs with view to maintain the overdraft facility with the bank, then such interest income would be considered by him as business income allowable for deduction under ss. 80HHA and 80-I." Now in the case of this appellant, it cannot be gainsaid that both the payment of excise duty as well as the refund of excise duty under Central excise Notification dt. the 8th July, 1999 are part and parcel of assessee's manufacturing activities. 14.3 To the same effect is the decision of Hon'ble Tribunal, Delhi in the case of Media Video Ltd. vs. Jt. CIT (2002) 122 Taxman 28 (Delhi)(Mag). This case has been digested in case No. 490 of Yearly Taxman Digest of Tribunal Orders, Vol. 2, 2003. It has been held in that case that the interest earned by the assessee on short-term deposit even of subscription on moneys would qualify for deduction under s. 80-I of the Act. 14.4 Reliance was also placed on the ratio of decision of Hon'ble Tribunal, Delhi in Bio Foods (P) Ltd. vs. Asstt. CIT Taxman 327 (Del)(Mag) (sic). In this case, the issue was whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that this decision squarely applies to the excise duty refunds obtained by the respondent. 14.6 He also relied on the decision of Hon'ble Gujarat High Court in the case of CIT vs. India Gelatine Chemicals Ltd. (2005) 194 CTR (Guj) 492 : (2005) 275 ITR 284 (Guj), wherein the Gujarat High Court expressly dissented from the decision of CIT vs. Jameel Leathers Uppers (2000) 246 ITR 97 (Mad) and held that as duty drawback is intended to reduce the cost of production, it is an integral part of the pricing of the goods and, therefore, duty drawback has to be treated as "derived from the industrial undertaking." Furthermore the Hon'ble High Court has also followed the decision of Madras High Court in the case of CIT vs. Ritesh Industries Ltd. and has held that duty drawback is not entitled to special deduction under s. 80-I of the Act. In this connection, it was submitted that the facts in the case of the CIT vs. Ritesh Industries Ltd. are not on all fours with the case of the appellant and, therefore, the decision of Hon'ble Delhi High Court in the case of CIT vs. Ritesh Industries Ltd. was not applicable. In the case of CIT vs. Ritesh Industries Ltd. the duty drawback is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the modalities provided for giving effect to the notification of the Revenue Department. Had the assessee maintained a single account of excise duty in its books of account in that case, there will be no such amount that can remain surplus as refund of excise duty. A mere book entry, therefore, could not be decisive to hold that there was a refund of duty forming part of assessee's income. In fact what respondent received as refund is its own money which it paid under the scheme. The amount of Rs. 2,61,92,386 credited as refund of excise duty, therefore, could not be excluded from the profits and gains of business for the purpose of computing total income under s. 80-IB of the Act. Finding reached by the learned CIT(A) that the net effect of book entries is nil is not shown as perverse on facts. We therefore do not find any reason to interfere in the decision reached by him in directing to allow deduction without reduction of the aforesaid amount of Rs. 2,61,92,386 from the income of the respondent assessee. Finding no merit in this ground also raised by Revenue in this appeal, the same stands rejected. 16. In the result, the appeal stands dismissed. - - TaxTMI - TMITax - Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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