2009 (11) TMI 59 - HC - Income Tax

Export incentives not deductible under Section 80-IB: High Court decision

Harisons Overseas, Panipat Versus Commissioner of Income Tax, Karnal

Harisons Overseas, Panipat Versus Commissioner of Income Tax, Karnal - tmi Issues:1. Whether Duty Draw Back received is eligible for claim u/s 80-IB of the Income Tax ActRs.2. Whether Duty Entitlement Pass Book Scheme received is eligible for claim u/s 80-IB of the Income Tax ActRs.Analysis:The High Court judgment addressed Income Tax Appeals concerning the eligibility of export incentives, specifically Duty Draw Back and Duty Entitlement Pass Book Scheme (DEPB), for deduction under Section 80-IB of the Income Tax Act, 1961. The assessee, engaged in manufacturing handloom goods for export, claimed deduction on business profit, including export incentives. The Assessing Officer, following precedents, denied the deduction, stating that these incentives were not derived from an industrial undertaking eligible for Section 80-IB deduction. This decision was upheld by the Commissioner of Income Tax (Appeals) and subsequently by the Income Tax Appellate Tribunal (ITAT).The Court referenced the Supreme Court's decision in Liberty India v. Commissioner of Income-Tax, affirming that Duty Draw Back and DEPB are incentives under government schemes and do not constitute profits derived from an industrial undertaking as per Section 80-IB of the Act. Consequently, the Court concluded that these incentives do not form part of the net profits of the industrial undertaking for Section 80-IB purposes. As a result, the Court found no substantial question of law arising from the ITAT's order and dismissed both appeals.In summary, the judgment clarified that Duty Draw Back and DEPB are not eligible for deduction under Section 80-IB of the Income Tax Act as they do not qualify as profits derived from an industrial undertaking. The decision was based on established legal precedents and the interpretation of relevant provisions.