2006 (9) TMI 79

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....he action of the assessing authority by not allowing deduction under section 80-IB on amount of DEPB and duty drawback being export incentives at 25 per cent. of Rs. 22,70,056 being Rs. 5,67,514 ?" 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 Assessing Officer on the ground that the said income was not "derived from" the business of the assessee as per requirement of section 80-IB. as held by the hon'ble Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579. on appeal, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee on the ground that the duty drawback received by the assessee was inextricably linked with the producti....

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....al question of law arises. It is submitted that the crucial issue was not whether the income of the assessee had the effect of reducing the cost of production, but whether the income was "derived from" the specified business as against the income from any other source, irrespective of the question whether such source was inextricably connected with 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 [1999] 237 ITR 579 (SC), 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 simi....

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.... which it can sell. The sale consideration therefrom cannot, in our view, be held to constitute a profit and gain derived from the assessees 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 learned counsel for the assessee, in income derived from duty drawback and sale or 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 th....