TaxTMI 
TaxTMI 
2008 (11) TMI 231
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.... according to the Revenue, cannot form part of profit and gain "derived" from the undertaking. First issue : 3. As regards this issue, the Tribunal relied upon its order dated October 31, 2005, for the assessment year 1997-98 in I. T. A. No. 3919/Del/2000 passed in the assessee's own case. By the said order, the Tribunal had allowed the appeal of the assessee. We find that this court, by an order dated May 4, 2007-CIT v. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105 (Delhi), has observed that the first issue has already been decided by this court in I. T. A. No.1306 of 2006 and, hence, is no longer res integra. We have examined the judgment dated May 4, 2007, in I. T. A. No.1306/2006 wherein the said issue is decided against the Revenue. In view of the said order, the first issue is decided against the Revenue and in favour of the assessee. Second issue: 4. In so far as this issue is concerned, its disposal would require delineation of certain undisputed facts. These being: 5. The assessee is engaged in the manufacture of flavoured chewing tobacco and kiwam. The assessee has manufacturing units located at Barotiwala District, Himachal Pradesh and in Agartala. In ....
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....as excluded, then the Agartala unit would show a loss and, hence, the assessee would not be eligible for any deduction under section 80-IB of the Act. Accordingly, by an order dated March 28, 2003/March 31, 2003, the Assessing Officer disallowed the deduction under section 80-IB of the Act. 8. The assessee being aggrieved by the same preferred an appeal to the Commissioner of Income-tax (Appeals) (hereinafter referred to in short as "the CIT (A)"). The Commissioner of Income-tax (Appeals) returned a finding of fact that the assessee- company, at the relevant point in time, had a unit at Agartala, which was exempted from payment of excise duty under the notifications referred to hereinabove, and had debited the profit and loss account and merely on receipt of the refund of excise duty, credited the amount to the profit and loss of the Agartala unit. The Commissioner of Income-tax (Appeals) thus came to the conclusion that the net effect was nil. In other words, the Commissioner of Income-tax (Appeals) found that if the assessee had maintained separate excise account then the excise duty would have to be debited on one side and the refund would have to be credited on the other. Th....
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....refund of excise duty formed part of the assessee's income. In fact, what the respondent received as refund was its own money which it had paid under the scheme. It, thus, concluded that the amount of Rs. 2,61,92,386 credited as refund of excise duty, therefore, could not be excluded from the profits and gains of business for the purpose of computing total income under section 80-IB. The Tribunal thus concluded that the Commissioner of Income-tax (Appeals) finding that the net effect in the book of entries was "nil" was not perverse and, thus, did not find any reason to interfere with the decision reached by the Commissioner of Income-tax (Appeals) in directing allowance of deduction without reduction of the aforesaid amount of Rs. 2,61,92,386 from the income of the respondent/assessee. Accordingly, the Tribunal dismissed the appeal. 11. Having heard the learned counsel for both the Revenue as well as the assessee and perused the orders of the authorities below, we are of the view that the appeal deserves to be dismissed for the reasons given hereinafter. 12. A reading of such notifications referred to hereinabove would show that Notification No. 32 of 1999 provides for e....
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....uite evident upon a plain reading of Notification No. 48 of 1999, whereby the Central Government in exercise of its power conferred under section 37 of the Central Excise Act, 1944, has inserted rules 57JJ and 57V in the Central Excise Rules, 1944. The said rule 57JJ as inserted by the said Notification No. 44 of 1999 reads as follows: "57JJ. Special dispensation in respect of inputs manufactured in factories located in specified areas of North East Region-Notwithstanding anything contained in these rules, where a manufacturer has cleared any of the specified inputs notified under rule 57A in terms of notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 32 of 1999-Central Excise, dated 8th July, 1999, or Notification No. 33 of 1999-Central Excise, dated 8th July, 1999, the credit of specified duty under the said rule paid on such inputs shall be admissible as if no portion of the duty paid on such inputs was exempted under any of the said notification." 15. Similarly an amendment was made in respect of capital goods by insertion of rule 57V which reads as follows: "57V. Special dispensation in respect of inputs manufactured in fact....
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....j). 18. As stated above, the notifications dearly mandate that the exemption from excise duty is available only if the industrial activity carried out by the assessee either in a new industrial undertaking or in an industrial under taking in which installed capacity is increased by at least by 25 per cent. It is thus clear that in the first notification, i.e., 32 of 1999 the exemption is area specific, while in the second notification, i.e., 33 of 1999 the exemption is specific to goods as referred to in the schedule appended to the said notification. It is thus clear that the exemption is directly relatable to an industrial undertaking manufacturing goods which are otherwise exigible to duty. The exemption is available either under Notification No. 32 of 1999 or under Notification No. 33 of 1999 dependent on where the unit is located or the type of goods manufactured by an assessee as specified in the relevant notification. 19. To our mind, the procedure for granting of exemption is, as indicated above, that the assessee in the first instance, pays the excise duty from its current account. The statement with respect to clearances made, is submitted with the concerned Central....
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.... far as the judgments referred to by the learned counsel for the Revenue are concerned, according to us, they have no relevance with respect to the issue at hand. In the case of CIT v. Sterling Foods [1999] 237 ITR 579, the Supreme Court was interpreting the provisions of section 80HH of the Act. The Supreme Court was called upon to adjudicate income derived from the sale of import entitlements granted by the Central Government under the Export Promotion Scheme which the assessee could use itself or sell the same to others. The issue before the Supreme Court was whether the income from such import entitlements could be included in the total income for the purposes of claiming relief under section 80HH of the Act. The Supreme Court came to the conclusion in the said case that the source of import entitlements was not the industrial undertaking of the assessee. According to the Supreme Court, the source of import entitlement in the circumstances was the Export Promotion Scheme of the Central Government whereunder the export entitlements became available. The Supreme Court further went on to hold that the expression "derived from" entailed a direct nexus between profit and gains and t....
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.... directly from the industrial undertaking of the assessee. As observed by us, while discussing the decision of the Sterling Foods [1999] 237 ITR 579 (SC), in the instant case, there is a finding of fact to the contrary. Hence, the ratio of the decision of the Supreme Court in the said case has no applicability to the facts of the present case. 25. The fourth case cited by the learned counsel for the Revenue was CIT v. Ritesh Industries Ltd. [2005] 274 ITR 324 (Delhi). A Division Bench of this court was called upon to construe the provisions of section 80-I of the Act in the context of the claim of the assessee for inclusion of amounts received as "duty drawback" for the purposes of ascertainment of profits or gains derived from the industrial undertaking within the meaning of the provision of section 80-I of the Act. The Division Bench of this court, applying the ratio of the judgments of the Supreme Court in the case of Sterling Foods [1999] 237 ITR 579, Cambay Electric Supply [1978] 113 ITR 84 (SC) as also the judgment of the Madras High Court in the case of CIT v. Viswanathan and Co. [2003] 261 ITR 737, came to the conclusion that "duty drawback" could not be regarded as prof....
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....ins under section 80-IB of the Act for the purposes of claiming deduction. The Division Bench, after taking into account the ratio of the judgment of the Supreme Court in Cambay Electric Supply [1978] 113 ITR 84, as well as, Sterling Foods [1999] 237 ITR 579, came to the conclusion that the expression "derived from" which the Supreme Court was called upon to construe in the aforementioned cases and the expression "profits and gains derived from any business" were materially different. The Division Bench went on to hold that for a claim of deduction under section 80-IB of the Act, there was no requirement that there ought to be a direct nexus between the activity of industrial undertaking and the profit and gain in respect of which deduction was sought. In this regard the Division Bench of this court in Eltek SGS P. Ltd. [2008] 300 ITR 6 has agreed with the observations of the Division Bench of the Gujarat High Court in the case of CIT v. India Gelatine and Chemicals Ltd. [2005] 275 ITR 284. 28. Having considered the decisions cited by the learned counsel for the Revenue as well as by the counsel for the assessee, we are of the view that, in the instant case, as noted above, the ....