July 2008
S. 80IB : Customs duty drawback derived from business of industrial undertaking is entitled to deduction
By K. B. Bhujle, Advocate
Reading Time 2 mins
New Page 1
34 Industrial undertaking : Deduction u/s.
80-IB of Income-tax Act, 1961 : A.Y. 2001-02 : Customs duty drawback derived
from business of industrial undertaking is entitled to deduction u/s.80-IB.
[CIT v. ELTEK SGS P. Ltd., 300 ITR 6 (Del.)]
The assessee was engaged in the business of processing prawns
and other seafood which it had exported. For the A.Y. 2001-02, the Assessing
Officer disallowed the claim for deduction of Customs Duty drawback of
Rs.42,92,725 u/s.80-IB of the Income-tax Act, 1961 by relying on the judgment of
the Supreme Court in CIT v. Sterling Foods, 237 ITR 579 (SC) which was
concerned with S. 80HH of the Act. The Tribunal allowed the claim for deduction.
On appeal by the Revenue, the Delhi High Court upheld the
decision of the Tribunal and held as under :
“(i) There is a material difference between the language
used in S. 80HH and S. 80-IB of the Income-tax Act, 1961. 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 between the activity of an industrial
undertaking and the profits and gains. The source of the duty drawback is the
business of the industrial undertaking which is to manufacture and export
goods out of raw material that is imported and on which Customs Duty is paid.
The entitlement for duty drawback arises from S. 75(1) of the Customs Act,
1962, read with the relevant notification issued by the Central Government in
that regard.
(ii) An assessee would be entitled to special deduction
u/s.80-IB in respect of Customs Duty drawback.”
