2004 (9) TMI 36

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....61?" In this matter, one need not go into the facts as it is an admitted position that the assessee, who is a manufacturer, has received "duty drawback" in view of the export of garments. The question is whether the amount of "duty drawback" which the assessee has received can be considered to be "profits and gains derived from an industrial undertaking" in the context of section 80-I of the Act. Sub-section (1) of section 80-I of the Act, is relevant for our purpose and, therefore, we reproduce it below: "80-I. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, or the business of repairs to ocean-going vessels or other powered cra....

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.... 'cash assistance', 'duty drawback' and 'import entitlements' are undoubtedly attributable to the business carried on by the assessee and the assessee would not have been in a position to receive any of these benefits, had the assessee not been carrying on business, it cannot be said, however, that such income is 'derived' from the business." The Division Bench for the proposition aforesaid, relied on the decisions of the Supreme Court in National Organic Chemical Industries Ltd. v. Collector of Central Excise, AIR 1997 SC 690; [1997] 106 STC 467 (SC) and Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC). The Madras High Court had another occasion to examine a similar question in the case of CIT v. Viswanathan a....

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....therefrom cannot, in our view, be held to constitute a profit and gain derived from the assessee's industrial undertaking." In our view, this would apply with equal vigour to duty drawback. It is required to be understood that on the raw materials utilised as inputs, the assessee pays duty (D) and on the total component of costs the assessee adds his profits component (P) to arrive at the sale price. It is this profit (P) which is included in the expression "profits and gains derived from an industrial undertaking". Merely because under the scheme to encourage exports the duty (D) is refunded subsequently by way of "duty drawback", it cannot be regarded as the profit or gain "derived" from the industrial undertaking. It may constitute pr....