Law:

Section:

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertaking other than infrastructure development undertakings - Assessment year 2001-02 - Whether duty drawback is profit or gain derived from business of an industrial undertaking and, therefore, assessee is entitled to deduction under section 80-IB on custom duty drawback - Held, yes FACTS The assessee-company claimed deduction under section 80-IB on custom duty drawback. The Assessing Officer declined to grant the deduction by relying upon the decision of the Supreme Court in case of CIT v.Sterling Foods [1999] 237 ITR 579/ 104 Taxman 204 which related to import entitlement under the Export Promotion Scheme of the Government of India and was on the interpretation of section 80HH. The Commissioner (Appeals) set aside the order of the Assessing Officer holding that case of Sterling Foods(supra ) did not apply to the facts of the instant case and the language used in section 80HH was materially different from the language used in section 80-IB. The Tribunal dismissed the revenue's appeal. On appeal : HELD A perusal of the provisions of section 75 of the Customs Act, 1962 shows that an exporter is entitled to drawback on the duty of customs chargeable under the 1962 Act on any imported materials if those imported materials have been used in the manufacture or processing of goods for export. Of course, this is subject to a notification issued by the Central Government with respect to the goods of any class or description. [Para 11] In other words, duty drawback is in the nature of the reimbursement of the customs duty that an exporter has paid on imported goods, which are subjected to a manufacturing process and then exported. In that sense, the export has a direct nexus with the industrial undertaking itself. [Para 12] That apart, section 80-IB does not use the expression 'Profits and gains derived from an industrial undertaking' as used in section 80HH, but uses the expression 'Profits and gains derived from any business referred to in sub-sections (3) to 11(1), 11A(1) and 11B(1)'. A perusal of section 80-IB would show that there is a material difference between the…

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