TMI Blog2009 (12) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... elivered by A.K. Sikri J.- Three following questions of law are sought to be raised in this appeal : "(a) Whether the Income-tax Appellate Tribunal was correct in law in confirming the order passed by Commissioner of Income-tax (Appeals) and thereby deleting the addition of Rs. 1,06,52,765 made by the Assessing Officer out of total claim of Rs. 4,26,11,059 on account of royalty expenses, treating the same as revenue expenditure ? (b) Whether Income-tax Appellate Tribunal was correct in law in holding that the entire payment of royalty as well as foreign technician fee made by the assessee was revenue expenditure and no part of it can be regarded as capital expenditure ? (c) Whether Income-tax Appellate Tribunal was correct in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction under section 80HHC. This aspect is not agitated and in fact, stands decided in favour of the assessee by two judgments of the Supreme Court, viz., CIT v. Lakshmi Machine Works [2007] 290 ITR 667 and CIT v. Catapharma (India) P. Ltd. [2007] 292 ITR 641 (SC). However, we are not concerned with this part. The Assessing Officer also noticed that the other income, which included interest on FDR and interest received on security deposit with Government Department, was not included in the total turnover, but was treated as exempted under section 80HHC of the Act. The Assessing Officer held that this was to be included in the total turnover for the purpose of computing deduction under section 80HHC of the Act. The Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection, reliance has been placed on Accounting Standard2 issued by the ICAI on 'valuation of inventories' which indicates that while determining cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition should be considered and that trade discounts, rebates, duty drawback and such other similar items have to be deducted in determining the cost of purchase. Placing reliance on AS-2, it was submitted that where excise duty paid was subsequently recoverable by way of drawback, the same would not form part of the manufacturing cost. It was submitted on behalf of the appellant(s) that the payment of excise duty/customs duty on inputs consumed in manufacture of goods by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by such industrial undertaking by way of payment of customs/excise duty in respect of duty paid inputs used in the manufacture of goods meant for export and in such circum-stances, profit from sale of import entitlements/REP licence was in the nature of windfall and it was in those circumstances, that the apex court held that the source of profit on sale of import entitlements was not the industrial undertaking but the source was the Export Promotion Scheme. According to the appellant(s), in the case of sale of import entitlements/REP licence, the source was the scheme framed by the Government of India whereas in the case of DEPB/duty draw-back, the source was the fact of payment of duty in respect of inputs consumed/utilized in the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s when the same industrial undertaking when it opts for duty draw-back is denied the benefit of deduction under section 80-IB on the duty remitted. On behalf of the appellant(s) it was submitted that section 80-IB was different from section 80-I in the sense that under section 80-IB, income derived from the business of an industrial undertaking was admissible for deduction whereas under section 80-I deduction was allowable to income derived from industrial undertaking. Hence, according to the appellant(s), the provisions of section 80-IB were much wider in scope than section 80-I. According to the appellant(s), section 80-IB was wider than section 80-I as the Legislature intended to give the benefit of deduction not only to the profits de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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