2006 (9) TMI 487

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....terpretation of Section 80IB, whether Tribunal is justified in upholding the action of assessing authority by not allowing deduction under Section 80-IB on amount of DEPB and duty drawback being export incentives @ 25 per cent of Rs. 22,70,056 being Rs. 5,76,514? 2. The assessee claimed deduction under Section 80-IB in respect of duty drawback amounting to Rs. 1,74,316, which was disallowed by the AO on the ground that the said income was not "derived from" the business of the assessee as per requirement of Section 80IB, as held by the Hon'ble Supreme Court in CIT v. Sterling Foods . On appeal, the CIT(A) allowed the claim of the assessee on the ground that the duty drawback received by the assessee was inextricably linked with the p....

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....me of the assessee had the effect of reducing the cost of production, but whether the income was "derived from" the specified business as against income from any other source, irrespective of the question whether such source was inextricably connected to the business activity of the assessee. It was submitted that the nature of income derived from duty drawback was similar to the nature of income derived by the assessee in Sterling Foods' case (supra), which was considered by the Hon'ble Supreme Court. Before the Hon'ble Supreme Court, the question for consideration was in respect of income from import entitlements, which was similar to income from duty drawback. 6. We have considered the rival submissions and perused the rec....

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.... gain derived from the assessee's industrial undertaking. 8. We are of the view that for the reasoning adopted by the Hon'ble Supreme Court, income of the assessee from duty drawback cannot be held to be income "derived from" specified business. 9. Distinction sought to be made by the learned Counsel for the assessee, in income derived from duty drawback and sale of import entitlement cannot be accepted as relevant distinction, as the core question before the Court was that such income was "derived" from specified business, which reasoning is fully applicable to the present situation. 10. For the above reasons, we are of the view that the matter being covered by the judgment of Hon'ble Supreme Court in Sterling Foods (s....