Deduction u/s 80IB - Duty drawback refund - Nexus with profit - Whether deduction under section 80 IB was available with respect to refund of excise duty - Held that - The assessee is virtually a one hundred percent export oriented undertaking - What clearly emerges from these facts is that the industrial undertaking was used only for the purpose of manufacturing and exporting the export products. In a situation in which an important part of the revenues generated as a result of the exports, which is as high as almost 7.4 of total turnover, is duty drawback itself, it may not really be correct to say that duty drawback receipt is an incidental, unintended, ancillary or independent benefit, which can be seen as a standalone or independent source of income. In a situation in which the duty drawback receipts are nothing but additional or incidental profits, and when even in the absence of duty drawback receipts, operations of industrial undertaking make business sense - In a particular fact situation, even material cost may be required to be adjusted for duty drawback - The industrial undertaking so manufacturing precision equipments is a commercial venture for making profits, and exports or no exports, the industrial undertaking is in business anyway. In such a situation, in case the assessee is able to make some exports of the same product on the similar price, the duty drawback income is an incidental or standalone income. However, in another situation, in which, for example, the assessee is a one hundred percent exporter, and he is operating on the basis of costs duly adjusted by duty drawback, as evident from the fact that but for duty drawback receipts, he will have virtually no profits, the duty drawback receipts could as well have the first degree nexus since these cannot be viewed as incidental or ancillary profits or standalone income - What should have been really examined by the authorities below is whether or not, on the facts of this case, the duty drawback receipts can be said to have first degree nexus with the industrial undertaking or whether these profits can be said to be ancillary, incidental or standalone income. Everything thus hinges on the findings about the degree of nexus between duty drawback receipts and the industrial undertaking, and it is only when there is a clear finding on this aspect that the correctness of assessee s claim can be tested on the principles of law. - That exercise has not been carried out at all - matter is remitted back to CIT for fresh adjudication - Following decision of M/s Liberty India Versus Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT - decided in favor of assessee by way of remand............................... Income Tax - Case Law
↧