TMI Blog2008 (11) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... URREZ ARMED and RAJIV SHAKDHER JJ. Ms. Prem Lata Bansal for the appellant. B. Gupta and R. K. Chauflaf for the respondent. JUDGMENT The judgment of the court was delivered by RAJIV SHAKDHER J.- This is an appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to in short as the Act ) preferred by the Revenue against the judgment dated January 31, 2006, passed by the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) in I. T. A. No. 4031/Del/2003, in respect of the assessment year 2000-01. 2. The Revenue is aggrieved by the impugned judgment with respect to two issues : (i) deletion of an addition of Rs. 2,12,12,644 on account of sale of silver outside the books of account, and (ii) the allowance of deduction under section 80-IB in respect of a sum of Rs. 2,61,92,386 received by the assessee towards refund of excise duty which, according to the Revenue, cannot form part of profit and gain derived from the undertaking. First issue : 3. As regards this issue, the Tribunal relied upon its order dated October 31, 2005, for the assessment year 1997-98 in I. T. A. No. 3919/Del/2000 passed in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d return. The case of the assessee was picked up for scrutiny. A notice under section 143(2) of the Act was served on the assessee. The Assessing Officer, amongst others, raised an issue with respect to a claim for deduction under section 80-IB on an income of Rs. 2,56,45,785 from the assessee's Agartala unit which the assessee had arrived at by virtue of inclusion of the amount refunded as excise duty, amounting to Rs. 2,61,92,386 from the Agartala unit. 7. The Assessing Officer came to the conclusion that since the refund received on account of excise duty was not income derived from any business of the industrial undertaking, that is, the Agartala unit, the assessee was not entitled to include the same in the profit of the Agartala unit, and, consequently, no deduction would be allowed to the assessee in respect of that part of the income. The Assessing Officer thus concluded if the refund of excise duty was excluded, then the Agartala unit would show a loss and, hence, the assessee would not be eligible for any deduction under section 80-IB of the Act. Accordingly, by an order dated March 28, 2003/March 31, 2003, the Assessing Officer disallowed the deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved by the aforementioned order of the Commissioner of Income-tax (Appeals), amongst others, preferred an appeal to the Tribunal in respect of the two issues referred to in paragraph 1.1 hereinabove. As regards this issue, the Tribunal in paragraph 15 of the impugned judgment agreed with the findings recorded by the Commissioner of Income-tax (Appeals). It noted that the net effect of the entries was nil , inasmuch as what was paid by the assessee, in consonance with the modalities provided for, under the notification, was refunded on the seventh day of the succeeding month. It also pointedly noted that had the assessee maintained a single account of excise duty in its books, in that eventuality, there would have been no surplus amount as refund of excise duty. In other words, nothing would have been carded as refund of excise duty. It noted that a mere book entry would not be decisive in coming to the conclusion that refund of excise duty formed part of the assessee's income. In fact, what the respondent received as refund was its own money which it had paid under the scheme. It, thus, concluded that the amount of Rs. 2,61,92,386 credited as refund of excise duty, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued in respect of industrial units located in the entire North Eastern Region comprising of seven States. The notification, however, extended exemption to specified goods referred to in the Schedule appended to the said notification. The other conditions were identical to Notification No.32 of 1999. The third notification being 48 of 1999, which was issued on the same day as the first two, i.e., July 8, 1999, was issued to amend the modvat rules. The upshot of the said notification was that if the goods in respect of which exemption was granted by virtue of Notification Nos. 32 of 1999 and 33 of 1999 were used as input by another manufacturer then, even though, the first manufacturer would have obtained refund on excise duty by virtue of the procedure prescribed in Notification Nos. 32 of 1999 and. 33 of 1999, the subsequent manufacturer who would use such goods would be entitled to the entire amount as modvat credit. This is quite evident upon a plain reading of Notification No. 48 of 1999, whereby the Central Government in exercise of its power conferred under section 37 of the Central Excise Act, 1944, has inserted rules 57JJ and 57V in the Central Excise Rules, 1944. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons has cited the following judgments: CIT v. Sterling Foods [1999] 237 ITR 579 (SC) ; Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC); Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 (SC) ; CIT v. Ritesh Industries Ltd. [2005] 274 ITR 324 (Delhi) ; CIT v. Viswanathan and Co. [2003] 261 ITR 737 (Mad); CIT v. J. B. Exports Ltd. [2006] 286 ITR 603 (Delhi) and Liberty India v. CIT [2007] 293 ITR 520 (P H). 17. As against this, the counsel for the assessee has relied upon the orders of Commissioner of Income-tax (Appeals) and the Tribunal to bring home the point that no substantial question of law has arisen in the present case. The counsel for the assessee has placed reliance on the following judgments: Liberty India v. CIT [2007] 293 ITR 520 (P H); CIT v. Eltek SGS P. Ltd. [2008] 300 ITR 6 (Delhi); CIT v. Five Star Rugs [2007] 293 ITR 553 (P H) and CIT v. India Gelatine and Chemicals [2005] 275 ITR 284 (Guj). 18. As stated above, the notifications dearly mandate that the exemption from excise duty is available only if the industrial activity carried out by the assessee either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of claiming deduction under section 80-IB of the Act. 21. The other contention of the learned counsel for the Revenue that the assessee by virtue of Notification No. 48 of 1999 would claim double benefit by having passed on the duty paid to its customers then recovering it in the form of sale price, even while claiming deduction under section 80-IB of the Act is also misconceived and deserves to be rejected at the very threshold. The reason being, firstly, no such case has been set up by the Revenue before any of the authorities below. This court cannot be called upon for the first time to appreciate submissions which have no factual foundation. Secondly, what is important to note is that the assessee as mentioned hereinabove is in the business of manufacturing chewing tobacco and kiwam. These goods by themselves are not inputs for any other goods and hence, the apprehension of the Revenue that the assessee would claim a benefit of Notification No. 48 of 1999 has no substance. 22. In so far as the judgments referred to by the learned counsel for the Revenue are concerned, according to us, they have no relevance with respect to the issue at hand. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [2003] 262 ITR 278 (SC). In this case, the Supreme Court was called upon to construe the provisions of section 80HH of the Act, in the background of the claim of the assessee, that interest on deposits with the Tamil Nadu Electricity Board be treated as income derived by the industrial undertaking of the assessee for the purposes of deduction under section 80HH of the Act. The Supreme Court came to the conclusion that the expression derived from had a much narrower connotation than the expression attributable to as observed in the earlier decision of the Supreme Court noted hereinabove, i.e., Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. The Supreme Court affirmed the decision of the Madras High Court which disallowed inclusion of interest on deposits made with the Tamil Nadu Electricity Board for the purposes of claiming deduction under section 80HH of the Act. The Supreme Court held that the derivation of the profits on the deposits made with the Electricity Board cannot be said to flow directly from the industrial undertaking of the assessee. As observed by us, while discussing the decision of the Sterling Foods [1999] 237 ITR 579 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from an industrial undertaking . As against this under section 80-IB the assessee is entitled to claim deduction from profits and gains derived from any business referred to in business . . The Division Bench relied upon Ritesh Industries [2005] 274 ITR 324 and allowed the appeal of the Department by holding that money received on account of duty drawback could not be included in arriving at profits and gains derived from an industrial under taking for the purposes of claiming deduction under section 80-I of the Act. As discussed above, the provision as well as the language of the provisions in issue in the case of J. B. Exports Ltd. [2006] 286 ITR 603 (Delhi) and the instant case are materially different. 27. As against this, the learned counsel for the assessee drew our attention to a judgment of another Division Bench of this court in the case of CIT v. Eltek SGS P. Ltd. [2008] 300 ITR 6 (Delhi). In the said case, this court was called upon to adjudicate as to whether the assessee would be entitled to include duty drawback in deduction of profits and gains under section 80-IB of the Act for the purposes of claiming deduction. The Division Bench, after tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits and gains ascertainable for the purposes of deduction under section 80-IB of the Act. 30. As noted by the Division Bench of this court in Eltek SGS P. Ltd. [2008] 300 ITR 6, the language of section 80-IB is materially different from those obtaining in the cases cited by the counsel for the Revenue in Sterling Foods [1999] 237 ITR 579 (SC), Cambay Electric Supply [1978] 113 ITR 84 (SC), J. B. Exports [2006] 286 ITR 603 (Delhi), Viswanathan and Co. [2003] 261 ITR 737 (Mad) as well as Ritesh Industries [2005] 274 ITR 324 (Delhi). The language with respect to the provisions referred to in such cases except Cambay Electric Supply [1978] 113 ITR 84 (SC), read as profits and gains derived from an industrial undertaking as against the language appearing in section 80 of the Act which is profit and gains derived from any business . We respectfully agree with the view of the Division Bench in Eltek SGS [2008] 300 ITR 6 (Delhi) which has held that the test of proximity, i.e., direct nexus with the industrial activity is not necessary while claiming deduction under section 80-IB of the Act. 31. In the circumstances, we are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
