S. 80IB : DEPB receipt eligible for relief

19 Flora Exports v. ACIT

ITAT ‘E’ Bench, New Delhi

A.Y. : 2001-02. Decided on : 31-1-2008

Counsel on assessee/revenue : Ved Jain/

Amit M. Govli

The issue in dispute in this appeal was against the action of
the CIT(A) in confirming the order of the Assessing Officer to the extent that
the amount of DEPB received by the assessee who was a supporting manufacturer,
was held to be not forming part of the business profits derived from the
manufacturing activity for the purpose of computing deduction u/s.80IB of the
Act.

The Revenue supported the orders of the lower authorities by
relying on the decision of the Delhi High Court in the case of Ritesh Industries
Ltd. where it was held that duty draw back was not income derived from an
industrial undertaking and not entitled to special deduction u/s.80I of the Act.

The Tribunal referred to the Supreme Court decision in the
case of Baby Marine Exports, where it was held that the premium paid by the
export house or the trading house to a supporting manufacturer on FOB was an
integral part of the turnover of the supporting manufacturer and was includible
in the profits of the business and was eligible for deduction u/s.80HHC.
Further, it noted that the Delhi Tribunal in the case of Maharashtra Seamless
Ltd., applying the ratio of the decision of the Supreme Court in the case of
Baby Marine Exports had taken a view that once such receipts were taken as part
of the turnover and formed part of the eligible profits, then the assessee would
be entitled to the deduction u/s.80IB on such DEPB receipts also. Accordingly,
the assessee’s appeal was allowed.