TMI Blog2023 (12) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be the profits and gains of the business of the assessee. The Hon ble Gujarat High Court in SHREE RAMA MULTI TECH LTD. [ 2013 (10) TMI 306 - GUJARAT HIGH COURT] after duly considering the decision of Sportking India Ltd. [ 2009 (8) TMI 29 - DELHI HIGH COURT] has held that such compensation received from insurance company for the damage incurred by the assessee would be the profit/loss from such industrial undertaking, for the reason that if not for such loss, the assessee would have earned income which is otherwise eligible for deduction u/. 80IB, It is evident that on identical facts, the Hon'ble High Court has held that the assessee is eligible for deduction u/s. 80IA/80IB of the Act on compensation received due to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. The assessee had filed its return of income dated 30.10.2001, declaring total income at Rs. 3,2560,300/- and the same was processed u/s. 143(1) of the Act. The assessee s case was selected for scrutiny and the assessment order u/s. 143(3) of the Act was passed by the ld. Assessing Officer ('A.O.' for short) dated 27.02.2004, determining the total income at Rs. 3,77,10,303/- after making a disallowance u/s. 80IB of the Act amounting to Rs. 6,56,151/- being the insurance claim and compensation received by the assessee along with the other disallowances. 4. The assessee was in appeal before the ld. CIT(A), challenging the order of the ld. A.O. 5. The ld. CIT(A) deleted the impugned addition/disallowance on this ground. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... franchisees account to the extent of the cost of the goods where the claims and compensation are credited in the assessee s account during the year under consideration amounting to Rs. 8,76,817/-. The ld. AR conteded that these are compensation for lost goods which have to be credited to the material consumed by the assessee rather than crediting the same in the P L account. The ld. AR placed reliance on the decision of the Hon ble Gujarat High Court in the case of CIT(4) vs. Shree Rama Multi Tech Ltd. [2013] 33 taxmann.com 194 (Guj) holding that compensation received by industrial undertaking from insurance company due to loss suffered by it as business income is eligible for deduction. 12. The learned Departmental Representative (& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Gujarat High Court in the case of Shree Rama Multi Tech Ltd . (supra), wherein it has been held that the compensation received by the industrial undertaking from insurance company on account of loss of raw material and finished goods would be eligible for deduction u/s. 80IA of the Act. The relevant extract of the said decision is cited hereunder for ease of reference: 6. Section 80-IA of the Act, as is well known, provides for deduction in respect of profit and gains from industrial undertakings or enterprise engaged in the infrastructure development. The fact that the assessee's profits are eligible for such deduction is not in dispute. Short question is, can the insurance claim in the circumstances under which the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ITR 6 (Delhi), and CIT v. Dharam Pal Prem Chand Lid. [2009] 317 ITR 353 (Delhi): (2009] 221 CTR (Del) 133. In the Eltek SGS (P) Lid. case [2008] 300 ITR 6 (Delhi) duty drawback was held to be profits/gains derived from an industrial undertaking and hence eligible for deductions under section 80-IB. In the case of CIT v. Dharam Pal Prem Chand Ltd. [2009] 317 ITR 353 (Delhi) refund of excise duty was held to be profits and gains derived from an industrial undertaking within the meaning of an expression under section 80-IB. 7. We have no reason to take a different view. If the assessee had either consumed the raw material in its industrial activity or sold the finished good but for the unfortunate fire, surely the assessee would have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee would have earned income which is otherwise eligible for deduction u/. 80IB of the Act. 16. From the above observation, it is evident that on identical facts, the Hon'ble High Court has held that the assessee is eligible for deduction u/s. 80IA/80IB of the Act on compensation received due to destruction of goods before sale had taken place. We find that on destruction of raw materials, the assessee was paid insurance claim, the cost of raw material is already considered as cost while working out the profit of eligible undertaking and the claim tantamount to sale of raw materials. As regards to loss of goods at franchisee and the amount paid by such franchisee would also be sale of goods. Thus, both the above sums are p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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