The main legal point established in the judgment is that 'duty draw back' cannot be considered as 'profits and gains derived from an industrial undertaking' for the purpose of section 80-I of the Income Tax Act, 1961.

( 1 ) THE present appeal under Section 260 A of the Income tax Act, 1961 (hereinafter referred as the Act) is preferred by the Revenue raising the following question:- Whether the amount of "duty draw back" can be regarded as income derived from an industrial undertaking so as to entitle the assessee a deduction under section 80-I of the Income Tax Act, 1961?

( 2 ) IN this matter one need not go into the facts as it is an admitted position that the assessee who is a manufacturer, has received "duty draw back" in view of the export of garments. The question is whether the amount of "duty draw back" which the assessee has received can be considered to be "profits and gains derived from an industrial undertaking" in the context of section 80-I of the Act. Sub-section (1) of Section 80-I of the Act, is relevant for our purpose and, therefore, we reproduce it below:-

"80-I (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof:"

( 3 ) AS aforesaid, we are required to consider whether the expression "profits and gains derived from an industrial undertaking" would include the duty draw back or not. In case of Commissioner of Income Tax v. Jameel leathers and Uppers : (2000) 246 ITR 97 a Division Bench of the Madras High Court had an occasion to consider the similar provisions contained in Section 80-HH as well as in Section 80-J of the Act. The question raised in that case was as under :-

"whether the Appellate Tribunal is right in law in holding that "cash assistance" and "duty drawback" received from the Government by assessee are includible in the profits derived from the industrial undertaking and eligible for relief under sections 80hh and 80j of the Income Tax Act ,1961?"

( 4 ) WE need not set out Section 80hh or Section 80j of the Act as the relevant part is the same as that of section 80-I of the Act. In that case the assessee s claim was negatived by the Income Tax Officer and ultimately the Tribunal upheld the order made by the commissioner, who granted benefits. The Court, considering various decisions, answered the question in favour of the revenue and against the assessee. The division Bench in that case held that:-

"while the "cash assistance", "duty drawback" and import entitlements are undoubtedly attributable to the business carried on by the assessee and the assessee would not have been in a position to receive any of these benefits, had the assessee not been carrying on business, it cannot be said, however, that such income is derived from the business. "

( 5 ) THE Division Bench for the proposition aforesaid, relied on the decisions of the Supreme Court in National organic Chemical Industries Ltd. v. Collector of Central excise: AIR 1997 SC 690 and Cambay Electric Supply industrial Co. Ltd v. Commissioner of Income Tax : (1978) 113 ITR 84 (SC ).

( 6 ) THE Madras High Court had another occasion to examine a similar question in the case of Commissioner of Income tax v. Viswanathan and Co : (2003) 261 ITR 737. In the said judgment the Court pointed out as under:-

"though the assessee s right to receive those benefits under those schemes was attributable to the fact that it was running the industrial undertaking, that however did not render such benefits "derived" from the industrial undertaking the scope of the term "derived from" being narrower than the scope of the term "attributable to".

( 7 ) THE Court also stated that there is no reason to doubt or depart from the law that has been laid down in case of Commissioner of Income Tax vs. Jameel Leathers and Uppers (2000) 246 ITR 97.

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