- (1.) THIS appeal has been preferred under s. 260A of the IT Act, 1961 (for short, the Act") against the order passed by proposing following question of law : "Whether, under the facts and circumstances of the case and on interpretation of s. 80 -IB, whether Tribunal is justified in upholding the action of assessing authority by not allowing deduction under s. 80 -IB on amount of DEPB and duty drawback being export incentives @ 25 per cent of Rs. 22,70,056 being Rs.5,76,514 -
(2.) THE assessee claimed deduction under s. 80 -IB in respect of duty drawback amounting to Rs. 1,74,316, which was disallowed by the AO on the ground that the said income was not "derived from" the business of the assessee as per requirement of s. 80 -IB, as held by the Hon'ble Supreme Court in CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC). On appeal, the CIT(A) allowed the claim of the assessee on the ground that the duty drawback received by the assessee was inextricably linked with the production cost and thus, duty drawback was trading receipt of the industrial undertaking having direct nexus with the activity of such industrial undertaking and, therefore, it formed part of the income derived from such industrial undertaking.
(3.) ON further appeal by the Revenue, the view taken by the AO was restored, following the judgment of Delhi High Court in CIT vs. Ritesh Industries Ltd. (2004) 192 CTR (Del) 81 : (2005) 274 ITR 324 (Del), which in turn is based on judgment of the Hon'ble Supreme Court in Sterling Foods (supra). Learned counsel for the assessee submits that the view taken by Gujarat High Court in CIT vs. India Gelatine & Chemicals Ltd. (2005) 194 CTR (Guj) 492 : (2005) 275 ITR 284 (Guj) supports the stand of the assessee and the SLP against the judgment of Delhi High Court in Ritesh Industries (supra), has been admitted by the Hon'ble Supreme Court being Civil Appeal No. 451 of 2006 and thus, the substantial question of law arises.;