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Commissioner Of Income Tax ... vs M/S Dharam Pal Prem Chand Ltd on 27 November, 2008
Cites 12 docs - [View All]
The Supreme Court (Number Of Judges) Act, 1956
The Income- Tax Act, 1995
Liberty Group Marketing Division vs Assistant Commissioner Of Income ... on 18 February, 1998
Commissioner Of Income-Tax vs Thirani Chemicals Ltd. on 1 December, 2005
Commissioner Of Income Tax, ... vs Sterling Foods, Mangalore on 15 April, 1999

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Delhi High Court

IN THE HIGH COURT OF DELHI AT NEW DELHI ITA 1441/2006

26.08.2008

Judgment reserved on: 26.08.2008 Judgment delivered on:27.11.2008 COMMISSIONER OF INCOME TAX DELHI-IV ..... Appellant Through : Ms. Prem Lata

Bansal, Advocate

Versus

M/S DHARAM PAL PREM CHAND LTD ..... Respondent Through : Mr.B.Gupta and

Mr.R.K.Chaufla, Advocates

CORAM :-

HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may be allowed to see the judgment ?

2. To be referred to Reporters or not ?

3. Whether the judgment should be reported in the Digest ?

Rajiv Shakdher, J.

1. This is an appeal under Section 260A of the Income Tax Act (hereinafter

referred to in short as the ?Act?) preferred by the Revenue against the judgment dated 31.1.2006, passed by the Income Tax Appellate Tribunal (hereinafter referred to as the ?Tribunal?) in ITA No. 4031/Del/2003, in respect

of, assessment year 2000-01.

1.1 The Revenue is aggrieved by the impugned judgment with respect to two

issues:-

i) deletion of an addition of Rs 2,12,12,644 on account of sale of silver

outside the books of account and, ii) the allowance of deduction under Section 80-IB, in respect of, a sum of Rs

2,61,92,386 received by the assessee towards refund of excise duty, which

according to the Revenue cannot form part of profit and gain ?derived? from the

undertaking.

1st Issue

2. As regards this issue, the Tribunal relied upon its order dated 31.10.2005

for assessment year 1997-98 in ITA No. 3919/Del/2000 passed in the assessee?s

own case. By the said order, the Tribunal had allowed the appeal of the assessee. We find that this court, by an order dated 04.05.2007, has observed

that the first issue has already been decided by this court in ITA No. 1306/2006 and hence, is no longer res integra. We have examined the judgment

dated 04.05.2007 in ITA No. 1306/2006 wherein the said issue is decided against

the Revenue. In view of the said order, the first issue is decided against the

Revenue and in favour of the assessee. 2nd Issue

3. In so far as this issue is concerned, its disposal would require delineation

of certain undisputed facts. These being:- 3.1 The assessee is engaged in the manufacture of flavoured chewing tobacco and

Kiwam. The assessee has manufacturing units located at Barotiwala District

Himachal Pradesh and in Agartala. In respect of the assessee?s unit at Agartala, during the relevant period, the assessee was entitled to exemption

from excise duty. The exemption to which the assessee was entitled, enured to

the assessee by virtue of three notifications issued by the Government of India,

Ministry of Finance being, notification numbers 32/99-CE, 33/99-CE and 48/99-CE

(NT). All these three notifications were dated 8.7.99 (hereinafter referred to

as the ?said notifications?). These notifications were forwarded to the assessee?s company by FICCI vide communication bearing reference No.F.680/CE-N-8

dated 22.7.1999. In terms of the said notifications, the assessee was exempted

from paying excise duty in respect of the product manufactured at its Agartala

unit. The procedure for claiming the exemption was that the assessee would

first clear the goods from its bonded warehouse by paying the requisite excise

duty and thereafter, the assessee would claim refund of excise duty on the

seventh day of the succeeding month in which clearance has been made. The net

result was that in the first instance, excise duty was paid by the assessee

while clearing the goods from the bonded warehouse which, was subsequently

refunded in the succeeding month. 3.2 On 30.11.2000, the assessee filed a return declaring a total income of Rs

2,33,97,130/-. The return was processed under Section 143(1)(a) of the Act. On

30.7.2001, the assessee filed a revised return. The case of the assessee was

picked up for scrutiny. A notice under Section 143(2) of the Act was served on

the assessee. The Assessing Officer, amongst others, raised an issue with

respect to a claim for deduction under Section 80-IB on an income of Rs 2,56,45,785/- from the assessee?s Agartala Unit which the assessee had arrived

at by virtue of inclusion of the amount refunded as excise duty, amounting to Rs

2,61,92,386/- from Agartala Unit. 3.3 The Assessing Officer came to the conclusion that since the refund received

on account of excise duty was not ?income derived? from any business of the

industrial undertaking, that is, the Agartala Unit, the assessee was not

entitled to include the same in the profit of the Agartala Unit, and consequently, no deduction would be allowed to the assessee in respect of that

part of the income. The Assessing Officer, thus, concluded if the refund of

excise duty was excluded, then, the Agartala Unit would show a loss and hence,

the assessee would not be eligible for any deduction under Section 80-IB of the

Act. Accordingly, by an order dated 28.3.2003/31.3.2003 the Assessing Officer

disallowed the deduction under Section 80-IB of the Act. 3.4 The assessee being aggrieved by the same, preferred an appeal to the

Commissioner of Income Tax (Appeals) [hereinafter referred to in short as

?CIT(A)?]. The CIT(A) returned a finding of fact that the assessee company, at

the relevant point in time, had a unit at Agartala, which was exempted from

payment of excise duty under the notifications referred to hereinabove, and had

debited the profit and loss account and merely on receipt of the refund of

excise duty, credited the amount to the profit and loss of the Agartala Unit.

The CIT(A), thus, came to the conclusion that the net effect was Nil. In other

words, the CIT(A) found that if the assessee had maintained separate excise

account then the excise duty would have to be debited on one side and the refund

would have to be credited on the other. The net effect in any event would be

?Nil?. He accepted the contention of the assessee that it cannot be denied the

benefit of, perhaps, incorrect entries in the accounts. 3.5 The CIT(A) also noted that the procedure prescribed by the excise department

was that the appellant company was required to pay excise duty upon clearance of

goods from the bonded warehouse and could only thereafter receive refund in the

subsequent month. This fact as noted by the CIT(A), was reflected by the

assessee in the books by first debiting the excise duty and upon receipt of the

fund credited in the profit and loss account. Importantly, the CIT(A) returned

a finding that the excise duty was paid during the course of manufacturing

activity which was the immediate and effective source of refund of excise duty.

There was, thus, according to the CIT(A), a direct nexus between the business

activity and the excise duty refund. The CIT(A) concluded by holding that there

was no justification in, the Assessing Officer, excluding the excise duty refund

from the income of the assessee?s Agartala Unit. He accordingly directed the

Assessing Officer to include the excise duty refund in the total income of the

assessee?s Agartala Unit while allowing deduction under Section 80-IB of the

Act.

3.6 The Revenue being aggrieved by the afore-mentioned order of the CIT(A),

amongst others, preferred an appeal to the Tribunal in respect of the two issues

referred to in Paragraph 1.1 hereinabove. As regards this issue, the Tribunal

in Paragraph 15 of the impugned judgment agreed with the findings recorded by

the CIT(A). It noted that the net effect of the entries was ?Nil?, in as much

as what was paid by the assessee, in consonance with the modalities provided

for, under the notification, was refunded on the seventh day of the succeeding

month. It also pointedly noted that had the assessee maintained a single

account of excise duty in its books, in that eventuality, there would have been

no surplus amount as refund of excise duty. In other words, nothing would have

been carried as refund of excise duty. It noted that a mere book entry would

not be decisive in coming to the conclusion that refund of excise duty formed

part of assessee?s income. In fact, what the respondent received as refund was

its own money which it had paid under the scheme. It, thus, concluded that the

amount of Rs2,61,92,386/- credited as refund of excise duty therefore could not

be excluded from the profits and gains of business for the purpose of computing

total income under Section 80-IB. The Tribunal, thus, concluded that the

CIT(A)?s finding that the net effect in the book of entries was ?Nil? was not

perverse, and thus, did not find any reason to interfere with the decision

reached by the CIT(A) in directing allowance of deduction without reduction of

the aforesaid amount of Rs2,61,92,386/- from the income of the respondent/assessee. Accordingly, the Tribunal dismissed the appeal.

4. Having heard the learned counsels for both the Revenue, as well as, the

assessee and perused the orders of the authorities below, we are of the view

that the appeal deserves to be dismissed for the reasons given hereinafter.

4.1 A reading of the such notifications referred to hereinabove, would show that

the Notification No.32/1999 provides for exemption from payment of excise duty

in respect of goods specified in the first and second Schedules of the Central

Excise Act, 1985 which are cleared from units located in the Growth Centre or an

Integrated Infrastructure Development Centre, Export Promotions Industrial Park

or an Industrial Estates or Industrial Area or Commercial Estate in an area

specified in the annexure appended to the said notification. The exemption

under this notification for the relevant period was available in respect of

excisable goods manufactured by a new industrial unit which had commenced

industrial production on or after 24.12.1997 or had undertaken substantial

expansion by at least 25% in the installed capacity on or after 24th December,

1997. The exemption under the said notification was available for a period of

10 years from the date of the notification or from the date of commencement of

commercial production whichever was later. 4.2 In order to obtain the exemption, the manufacturer was required to submit a

statement to the concerned authorities, i.e., Central Excise, that the duty has

been paid from the current account by the 7th of the succeeding month and the

authorities were required to verify the claims and grant the refund of the

amount of the duty paid from the current account during the month under consideration to the manufacturer by the 15th of the succeeding month. 4.3 Similarly, Notification No.33/1999 was issued in respect of Industrial units

located in the entire North East Region comprising of seven States. The notification, however, extended exemption to specified goods referred to in the

Schedule appended to the said notification. The other conditions were identical

to the Notification No.32/1999. The third Notification being 48/1999, which

was, issued on the same day as the first two i.e. 08th July, 1999 was issued to

amend the modvat rules. The upshot of the said notification was that if the

goods in respect of which exemption was granted by virtue of Notification Nos.

32/1999 and 33/1999 were used as input by another manufacturer then, even

though, first manufacturer would have obtained refund on excise duty by virtue

of the procedure prescribed in Notification Nos. 32/1999 and 33/1999, the

subsequent manufacturer who would use such goods would be entitled to the entire

amount as modvat credit. This is quite evident upon a plain reading of Notification No.48/1999, whereby the Central Government in exercise of its power

conferred under Section 37 of the Central Excise 1994 has inserted Rules 57 JJ

and 57V in the Central Excise Rules, 1944. The said Rule 57 JJ as inserted by

the said Notification No. 44/1999 reads as follows:- ?57 JJ Special dispensation in respect of inputs manufactured in factories located in specified areas of North East Region ? Notwithstanding

anything contained in these rules, where a manufacturer has cleared any of the

specified inputs notified under rule 57A in terms of notification of the

Government of India in the Ministry of Finance (Department of Revenue) No.32/99-

Central Excise dated the 8th July, 1999 or Notification No.33/99-Central Excise,

dated the 8th July, 1999, the credit of specified duty under the said rule paid

on such inputs shall be admissible as if no portion of the duty paid on such

inputs was exempted under any of the said notification.? 4.4 Similarly amendment was made in respect of capital goods by insertion

of Rule 57V which reads as follows:- ??57V Special dispensation in respect of inputs manufactured in factories

located in specified areas of North East Region ? Notwithstanding anything

contained in these rules, where a manufacturer has cleared any of the capital

goods described in rule 57Q, in terms of notification of the Government of India

in the Ministry of Finance, (Department of Revenue) No.32/99-Central Excise,

dated the 8th July, 1999, or Notification No.33/99-Central Excise, dated the 8th

July, 1999, the credit of specified duty referred to in the said rule paid on

such capital goods shall be admissible as if no portion of the duty paid on such

capital goods was exempted under the said notifications.? 4.5 Based on the said notifications, the submissions of the learned counsel for the Revenue has been two fold, (i) that the refund of the excise

duty paid by the assessee has no direct nexus with the industrial activity

carried out by the assessee. The assessee?s entitlement to refund of excise

duty is dependent on the said notification, (ii) in the event the assessee is

allowed to claim deduction under Section 80-IB of the Act then, in a sense, the

assessee would be getting benefit twice over, firstly by virtue of deduction

under Section 80-IB of the Act, and secondly, by virtue of the fact that it

would have passed on the duty on the final product to its customers which would

then be recovered by the assessee alongwith the sale price. Learned counsel for

the Revenue, Ms.Prem Lata Bansal in support of her submissions has cited the

following judgments:-

Commissioner of Income Tax v. Sterling Foods 237 ITR 579; Cambay Electric Supply

Industrial Co Ltd v. Commissioner of Income Tax, Gujarat-II 113 ITR 84; Pandian Chemicals Ltd v. Commissioner of Income Tax (2003) 262 ITR 278; Commissioner of Income Tax v. Ritesh Industries Ltd (2005) 274 ITR 324; CIT v. Vishwanathan

and Co(2003) 261 ITR 737; Commissioner of Income Tax v. J.B.Exports Ltd (2006)

286 ITR 603 (Delhi); Liberty India v. Commissioner of Income Tax 293 ITR 520

(PandH)

4.6 As against this, the counsel for the assessee has relied upon the order of CIT(A) and the Tribunal to bring home the point that no substantial

question of law has arisen in the present case. The counsel for the assessee has

placed reliance on the following judgments:- Liberty India v. Commissioner of Income Tax 293 ITR 520 (PandH); Commissioner of Income Tax v. Eltek SGS P.Ltd (2008) 300 ITR 6 (Delhi); Commissioner of Income

Tax v. Five Star Rugs (2007) 293 ITR 553(PandH); Commissioner of Income Tax vs.

India Gelatine and Chemicals Ltd 275 ITR 284 (Guj.) 4.7 As stated above, the notifications clearly mandate that the exemption

from excise duty is available only if the industrial activity carried out by the

assessee either in a new industrial undertaking or in an industrial undertaking

in which installed capacity is increased by at least by 25%. It is thus clear

that in the first notification, i.e., 32/1999 the exemption is area specific,

while in the second notification, i.e., 33/1999 the exemption is specific to

goods as referred to in the schedule appended to the said notification. It is

thus clear that the exemption is directly relatable to an industrial undertaking

manufacturing goods which are otherwise exgible to duty. The exemption is

available either under Notification No 32/1999 or under Notification No 33/1999

dependent on where the unit is located or the type of goods manufactured by an

assessee as specified in the relevant notification. 4.8 To our mind, the procedure for granting of exemption is, as indicated

above, that the, assessee in the first instance, pays the excise duty from its

current account. The statement with respect to clearances made, is submitted

with the concerned Central Excise authorities by the 7th of the succeeding

month. The Central Excise authorities after verifying the claim of the assessee

are required to grant refund of excise duty paid from the current account during

the month under consideration to the manufacturer/assessee by the 15th of the

succeeding month. The notifications further provided that in the event it was

not possible for the concerned authorities to verify the claim for refund of

excise duty then it had to be made on provisional basis. 4.9 In these circumstances, the submissions of the learned counsel for the

Revenue is that there is no direct nexus between refund of excise duty paid or

that the refund of excise duty paid was dependent on the said notifications is,

to say the least, completely untenable. As a matter of fact as found by the

Tribunal, as well as, the CIT(A) in the instant case, the assessee has adopted

an incorrect accounting methodology. The assessee as found by the authorities

below had on the payment of excise duty debited the profit and loss account and

upon receipt of refund credited the profit and loss account. The net effect on

the profit and loss was ?nil? on account of the methodology followed by the

assessee. There was thus, according to us, no reason to exclude the amount of

refund of excise duty in arriving at ?profit derived? for the purposes of

claiming deduction under Section 80-IB of the Act. 4.10 The other contention of the learned counsel for the Revenue that the

assessee by virtue of Notification No. 48/1999 would claim double benefit by

having passed on the duty paid to its customers then recovering it in the form

of sale price, even while claiming deduction under Section 80-IB of the Act is

also misconceived and deserves to be rejected at the very threshold. The reason

being, firstly, no such case has been set up by the Revenue before any of the

authorities below. This Court cannot be called upon for the first time to

appreciate submissions which have no factual foundation. Secondly, what is

important to note is that the assessee as mentioned hereinabove is in the

business of manufacturing chewing tobacco and kiwam. These goods by themselves

are not inputs for any other goods and hence, the apprehension of the Revenue

that the assessee would claim a benefit of Notification No. 48/1999 has no

substance.

4.11 In, so far as, the judgments referred to by the learned counsel for

the Revenue are concerned, according to us, they have no relevance with respect

to the issue at hand. In the case of Commissioner of Income Tax v. Sterling

Foods : 237 ITR 579, the Supreme Court was interpreting the provisions of

Section 80 HH of the Act. The Supreme Court was called upon to adjudicate

income derived from the sale of import entitlements granted by the Central

Government under the Export Promotion Scheme which the assessee could use itself

or sell the same to others. The issue before the Supreme Court was whether the

income from such import entitlements could be included in the total income for

the purposes of claiming relief under Section 80 HH of the Act. The Supreme

Court came to the conclusion in the said case that the source of import entitlements was not the industrial undertaking of the assessee. According to

the Supreme Court, the source of import entitlement in the circumstances was

Export Promotion Scheme of the Central Government whereunder the export entitlements became available. The Supreme Court further went on to hold that

the expression ?derived from? entailed a direct nexus between profit and gains

and the industrial undertaking. In that case, the Supreme Court found that the

nexus was not direct but only incidental. According to us, the ratio of this

judgment has no application to the case in the instant case. In the instant

case both the CIT(A), as well as, the Tribunal found that the refund of excise

duty had a direct nexus with the manufacturing activity carried out by the

assessee.

4.12 The second case which was cited by the counsel for the Revenue was Cambay Electric Supply Industrial Co Ltd v. Commissioner of Income Tax, Gujarat-

II: 113 ITR 84. In this case, the Supreme Court was called upon to adjudicate

as to whether the assessee would be required to deduct an unabsorbed development

rebate while arriving at eligible profits under Section 80E of the Act. It is

important to note that at the relevant point of time under Section 80E of the

Act, the expression which obtained in the said provision on which deduction

could be claimed, was, profits and gains ?attributable to? the business specified in the provision. In the instant case, we are not only dealing with a

different expression which is ?derived from? but also facts which are completely

different from those in the said case. According to us this case is completely

distinguishable.

4.13 The third case cited by the learned counsel for the Revenue is Pandian Chemicals Ltd v. Commissioner of Income Tax : (2003) 262 ITR

278. In

this case the Supreme Court was called upon to construe the provisions of

Section 80-HH of the Act, in the background of the claim of the assessee, that

interest on deposits with Tamil Nadu Electricity Board be treated as income

derived by the industrial undertaking of the assessee for the purposes of

deduction under Section 80 HH of the Act. The Supreme Court came to the conclusion that the expression ?derived from? had a much narrower connotation

than the expression ?attributable to? as observed in the earlier decision of the

Supreme Court noted hereinabove, i.e., Cambay Electric Supply Industrial Co Ltd

(supra). The Supreme Court affirmed the decision of the Madras High Court which

disallowed inclusion of interest on deposits made with the Tamil Nadu Electricity Board for the purposes of claiming deduction under Section 80-HH of

the Act. The Supreme Court held that the derivation of the profits on the

deposits made with the electricity Board cannot be said to flow directly from

the industrial undertaking of the assessee. As observed by us while discussing

the decision of the Sterling Foods (supra), in the instant case there is a

finding of fact to the contrary. Hence, ratio of the decision of the Supreme

Court in the said case has no applicability to the facts of the present case.

4.14 The fourth case cited by the learned counsel for the Revenue was Commissioner of Income Tax v. Ritesh Industries Ltd :(2005) 274 ITR

324. A

Division Bench of this Court was called upon to construe the provisions of

Section 80-I of the Act in the context of the claim of the assessee for inclusion of amounts received as ?duty drawback? for the purposes of ascertainment of profits or gains derived from the industrial undertaking within

the meaning of provision of Section 80-I of the Act. The Division Bench of this

Court applying the ratio of the judgments of the Supreme Court in the case of

Sterling Foods (supra), Cambay Electric Supply (supra) as also the judgment of

Madras High Court in the case of Commissioner of Income Tax v. Vishwanathan and

Co : (2003) 261 ITR 737 came to the conclusion that ?duty drawback? could not be

regarded as profit or gain derived from an industrial undertaking as the

immediate and proximate source was not the industrial undertaking but the claim

for ?duty drawback?. The view of the Division Bench of this Court to which one

of us, (i.e., Badar Durrez Ahmed J.) was a party, was based in the context of

the facts obtaining in the said case. In the instant case the proximity with

industrial activity is clear and there is no scope for holding otherwise.

4.15 The fifth case which was cited by the Revenue was of Vishwanathan and Co (supra) : 261 ITR 737. This case need not detain us any further as the

Division Bench of this Court in Ritesh Industries (supra) has referred to the

same. The said case also refers to the provisions of the Act under Section 80

HH of the Act. This case does not deal with the provision of 80 IB of the Act.

The other case on which reliance has been placed by the learned counsel for the

Revenue was Commissioner of Income Tax v. J.B.Exports Ltd : (2006) 286 ITR 603

(Delhi) . A Division Bench of this court was called upon to construe Section

80-I of the Act. A bare perusal of the Section 80-I when compared with Section

80-IB would show that the language of the two provisions is materially different. Section 80-I of the Act allows an assessee to claim deduction in

respect of ?profits and gains derived from an industrial undertaking ??.? As

against this under Section 80-IB, the assessee is entitled to claim deduction

from ?profits and gains derived from any business referred to in business??..?.

The Division Bench relied upon Ritesh Industries (supra) and allowed the appeal

of the Department by holding that money received on account of duty drawback

could not be included in arriving at profits and gains derived from an industrial undertaking for the purposes of claiming deduction under Section 80-I

of the Act. As discussed above, the provision, as well as the language of the

provisions in issue in the case of J.B.Exports (supra) and the instant case are

materially different.

4.16 As against this, the learned counsel for the assessee drew our attention to a judgment of another Division Bench of this Court in the case of

Commissioner of Income Tax v. Eltek SGS P.Ltd : (2008) 300 ITR 6 (Delhi) In

the said case, this Court was called upon to adjudicate as to whether the

assessee would be entitled to include ?duty drawback? in deduction of profits

and gains under Section 80-IB of the Act for the purposes of claiming deduction.

The Division Bench after taking into account the ratio of the judgment of the

Supreme Court in Cambay Electric Supply (supra), as well as, Sterling Food

(supra) came to the conclusion that the expression ?derived from? which the

Supreme Court was called upon to construe in the aforementioned cases and the

expression ?profits and gains derived from any business? were materially

different. The Division Bench went on to hold that for claim of deduction under

Section 80-IB of the Act, there was no requirement that there ought to be a

direct nexus between the activity of industrial undertaking and the profit and

gain in respect of which deduction was sought. In this regard the Division

Bench of this Court in Eltek SGS (supra) has agreed with the observations of the

Division Bench of the Gujarat High Court in the case of Commissioner of Income

Tax v. India Gelatine and Chemicals Ltd : (2005) 275 ITR 284 .

5. Having considered the decisions cited by the learned counsel for the Revenue, as well as, by the counsel for the assessee, we are of the view that in

the instant case, as noted above, the factual aspects are required to be kept in

mind. The finding of the authorities below is, that the, refund of excise duty

is pivoted on the manufacturing activity carried on by the assesse. Once such a

finding of fact has been returned we need not go further and examine the

immediate and proximate source of refund of excise duty. In other words, as to

whether there was direct nexus between the refund of excise duty and industrial

activity. As a matter of fact, in the questions proposed by the Revenue, there

is no specific question, that this finding of the authorities below is perverse.

There is of course a very broad based and general question that the order

passed by the ITAT is perverse in law and on facts. According to us, such a

question is vague. A perusal of the grounds of appeal would substantiate this

aspect of the matter. There is no ground taken by the Revenue whereby the

substantial findings of fact have been challenged by the Revenue as being

perverse.

5.1 An important aspect of the matter which clearly distinguishes the instant case from the facts of the other cases cited before us is, that the net

effect of the accounting methodology employed by the assessee was that it did

not, in sum and substance, impact the derivation of profits and gains ascertainable for the purposes of deduction under Section 80-IB of the Act.

5.2 As noted by the Division Bench of this Court in Eltek SGS (supra), the

language of Section 80-IB is materially different from those obtaining in the

cases cited by the counsel for the Revenue in Sterling Foods (supra), Cambay

Electric Supply (supra) J.B. Exports (supra), Vishwanathan and Co (supra), as

well, as Ritesh Industries (supra). The language with respect to the provisions

referred to in such cases except Cambay Electric Supply (supra), read as

?profits and gains derived from an industrial undertaking? as against the

language appearing in Section 80-IB of the Act which is ?profit and gains

derived from any business?. We respectfully agree with the view of the Division

Bench in Eltek SGS (supra) which has held that the test of proximity, i.e.,

direct nexus with the industrial activity is not necessary while claiming

deduction under Section 80-IB of the Act.

6. In the circumstances, we are of the opinion that the judgment of Tribunal deserves to be sustained. No substantial question of law has arisen

for our consideration. In the result, the appeal is dismissed. RAJIV SHAKDHER, J

BADAR DURREZ AHMED, J

November 27, 2008

mb

ITA 83/2008 1 of 20

REPORTABLE