No S. 80-IC Benefit on Duty Drawback as it is not Income Derived from Industrial Undertaking: Delhi HC [Read Order]
The court held that duty drawback is not eligible for Section 80-IC deduction but directed AO to recompute income after adjusting duties paid on raw materials.
In a recent ruling, the Delhi High Court held that duty drawback cannot be allowed as deduction under Section 80-IC of the Income Tax Act because it is not income derived from the industrial undertaking.
Narayan Industries had challenged the ITAT order which denied deduction of Rs. 1,52,07,079 on account of duty drawback. The assessee argued that although the Supreme Court has already held in Liberty India and Sterling Foods that duty drawback is not eligible for deduction under Section 80-IC, still the duties paid on raw materials should be adjusted against the duty drawback received.
The assessee pointed out that in earlier assessment years, the Tribunal had remanded the matter to the Assessing Officer with direction to deduct the excise and customs duty paid on purchases from the duty drawback. Those orders were not challenged by the department and benefit was given after remand.
The Revenue argued that this issue was not properly raised before the High Court and earlier orders were not appealed only because the tax effect was low.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that as per Supreme Court judgment, duty drawback is an independent income and not derived from industrial undertaking, so deduction under Section 80-IC is not allowed.
But the court observed that similar relief was granted in earlier years and there cannot be different treatment for same assessee on same issue. The court partly allowed the appeal and remanded the matter to the Assessing Officer to verify and deduct the excise and customs duties paid on raw materials from the duty drawback and then pass fresh order.
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