{"id":916,"date":"2009-09-02T08:08:20","date_gmt":"2009-09-02T08:08:20","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=916"},"modified":"2009-09-02T08:08:20","modified_gmt":"2009-09-02T08:08:20","slug":"liberty-india-vs-cit-supreme-court","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/liberty-india-vs-cit-supreme-court\/","title":{"rendered":"Liberty India vs. CIT (Supreme Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (liberty_india_depb_duty_drawback_80IB.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n

DEPB and Duty Drawback are not eligible for deduction u\/s 80-IB<\/strong><\/p>\n

The assessee claimed that profit from Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback Scheme are \u201cderived from the business of the Industrial Undertaking\u201d and consequently eligible for deduction u\/s 80-IB. On appeal by the assessee, HELD, rejecting the plea:<\/p>\n

(1) The Act broadly provides for two types of tax incentives, namely, investment linked incentives and profit linked incentives. Ch VI-A essentially belongs to the category of \u201cprofit linked incentives\u201d;<\/p>\n

(2) When ss. 80-IA\/80-IB refer to profits derived from eligible business, it is not the ownership of that business which attracts the incentives but the generation of profits (operational profits)<\/strong>. It is for this reason that Parliament has confined deduction to profits derived from eligible businesses; <\/p>\n

(3) Each of the eligible business in sub-sections (3) to (11A) constitutes a stand-alone item in the matter of computation of profits<\/strong>. That is the reason why the concept of \u201cSegment Reporting\u201d stands introduced in the Indian Accounting Standards (IAS) by the Institute of Chartered Accountants of India (ICAI);<\/p>\n

(4) Ss. 80-IB\/80-IA are a Code by themselves as they contain both substantive as well as procedural provisions. S. 80-IB allows deduction of profits and gains derived from the eligible business. The words \u201cderived from\u201d is narrower in connotation as compared to the words \u201cattributable to\u201d. By using the expression \u201cderived from\u201d, Parliament intended to cover sources not beyond the first degree<\/strong>; <\/p>\n

(5) Though the object behind DEPB etc is to neutralize the incidence of customs duty payment on the import content of export product DEPB credit\/duty drawback receipt do not come within the first degree source<\/strong> as the said incentives flow from Incentive Schemes enacted by the Government or from s. 75 of the Customs Act. Such incentives profits are not profits derived from the eligible business u\/s 80-IB. They are \u2018ancillary profits\u2019 of such undertakings;<\/p>\n

(6) Even as per AS-2 and the ICAI Guidance Note, duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods but have to be shown as an independent source of income beyond the first degree nexus between profits and the industrial undertaking.<\/p>\n","protected":false},"excerpt":{"rendered":"

Though the object behind DEPB etc is to neutralize the incidence of customs duty payment on the import content of export product DEPB credit\/duty drawback receipt do not come within the first degree source as the said incentives flow from Incentive Schemes enacted by the Government or from s. 75 of the Customs Act. Such incentives profits are not profits derived from the eligible business u\/s 80-IB. They are \u2018ancillary profits\u2019 of such undertakings<\/p>\n

Read more ›<\/a><\/div>\n

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