TaxTMI 
TaxTMI 
2011 (11) TMI 511
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....B on Cenvat availed is covered by the decision of Delhi High Court in the case of CIT vs. Dharam Pal Prem Chand Ltd. [2009] 317 ITR 353 being subsequently approved by the Apex Court. That the appellant craves leave to add to and/or amend,modify or withdraw the grounds outlines above before or at the time of hearing of the appeal." 2. Facts, in brief, as per relevant orders are that e-return declaring income of Rs.6,86,420/- filed on 13th October, 2007 by the assessee, manufacturing mentha products, after being processed u/s 143(1) of the Income Tax Act, 1961 [hereinafter referred to as the Act] was selected for scrutiny with the service of a notice under section 143(2) of the Act, issued on 25th September, 2008. During the course of assessment proceedings, the Assessing Officer [AO in short] noticed that the assessee claimed deduction under section 80-IB of the Act. To a query by the AO, the assessee replied that the unit is eligible for deduction under section 80-IB(3)(ii) of the Act, since it fulfilled all the stipulated conditions and a similar claim having been allowed in assessment years 2001-02 and 2003-04. To a further query by the AO, seeking to disallow ded....
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....not be included in the cost of purchase of inventories of raw material consumed. This decision was passed after the decision in the case of Dharam Pal Prem Chand Ltd. [2009] 317 ITR 353 (Del) reversing the ratio laid down by the Delhi High Court regarding treatment of exemption of excise duty by means of Cenvat Adjustment Account. The Hon'ble Apex Court has held that any incentive or rebate including reimbursement amounts to separate items of income or revenue to be accounted for in the profit and loss account accordingly." 4. The assessee is now in appeal before us against the aforesaid finding of the ld. CIT (Appeals). At the outset, the ld. AR on behalf of the assessee while relying upon decision of Hon'ble Delhi High Court in the case of CIT vs. Dharam Pal Prem Chand Ltd. [2009] 317 ITR 353 (Del.) ; decision dated 29th April, 2011 of the ITAT in the case of J.K. Aluminium Co. vs. ITO in I.TA no. 3303 (Del) of 2010; decision dated 4.11.2011 of the ITAT, Mumbai Bench in Addl. CIT vs. Total Packaging Services in ITA no. 5364 (Mum.) of 2009, following the decision of Hon'ble Gauhati High Court in the case of CIT vs. Meghalaya Steels Ltd. 332 ITR 91 (Gauhati), contended that....
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....ce, incentives profits are not profits derived from the eligible business under section 80-IB of the Act. They belong to the category of ancillary profits of such undertaking. Hon'ble Apex Court observed. 6.1 As regards duty drawback, it was observed in Liberty India(supra) that section 75 of the Customs Act, 1962, and section 37 of the Central Excise Act, 1944, empower the Government of India to provide for repayment of customs duty and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or Central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of the duty drawback receipt lies in section 75 of the Customs Act and section 37....
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.... also adjusted against the said Cenvat adjustment recoverable account. The assessee reflected purchases in the profit and loss account inclusive of excise duty and consequently Cenvat availed during the year has been credited in the profit and loss account. As is apparent from undisputed calculations detailed on page 4 and 5 of the paper book, impact of Cenvat is nil on the profits for the purpose of deduction u/s 80IB of the Act. . . 6.5 Hon'ble jurisdictional High Court while adjudicating a claim for deduction u/s 80IB of the Act on account of receipts relating to duty drawback, explained the difference between the language used in sec 80HH and 80I of the Act on the one hand and sec. 80IB of the Act on the other, in the following terms: "A perusal of the above would show that there is a material difference between the language used in s. 80HH of the Act and s. 80-IB of the Act. While s. 80HH requires that the profits and gains should be derived from the industrial undertaking, s. 80-IB of the Act requires that the profits and gains should be derived from any business of the industrial undertaking. In other words, there need not necessarily be a direct nexus betwee....
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.... in the context of the facts obtaining in the said case. In the instant case the proximity with industrial activity is clear and there is no scope for holding otherwise." 6.62 At page 366, the jurisdictional High Court held:- "5.1 An important aspect of the matter which clearly distinguishes the instant case from the facts of the other cases cited before us is, that the net effect of the accounting methodology employed by the assessee was that it did not, in sum and substance, impact the derivation of profits and gains ascertainable for the purposes of deduction under s. 80-IB of the Act. 5.2 As noted by the Division Bench of this Court in Eltek SGS (P) Ltd., the language of s. 80-IB is materially different from those obtaining in the cases cited by the counsel for the Revenue in Sterling Foods, Cambay Electric Supply J.B. Exports, Vishwanathan and Co., as well, as Ritesh Industries. The language with respect to the provisions referred to in such cases except Cambay Electric Supply, read as 'profits and gains derived from an industrial undertaking' as against the language appearing in s. 80-IB of the Act which is 'profit and gains derived from any business'.....
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....nufacturer. Sub-section (2) of Section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported." 7.1 The case of the assessee before us is concerned with the refund of excise duty and consideration of the same for deduction u/s 80IB of the Act. The Scheme as well as the methodology of the operations are all discussed so as to highlight the distinction of this case from the decision of Liberty India. In any case, the decision of Dharam Pal Prem Chand Ltd. of Delhi High Court has been affirmed by the Supreme Court which fact itself cannot be ignored as the case of Dharampal Premchand Ltd. was concerned with the issue relating to section 80-IB of the Act." 6.8 We further find that while examining the issue of deduction 80IB in relation to the amount of Modvat credit, the ITAT in the case of Addl. CIT vs. The Total Packaging Services, while referring to the decision of Hon'ble Gauhati High Court in CIT vs. Meghalaya Steels Ltd., 332 ITR 91, concluded in their order dated 4th Nove....