1. This appeal has been preferred by the Revenue against the order dated November 30, 2005 of the Income-tax Appellate Tribunal, New Delhi Bench “SMC” in I.T.A No. 5707.Del/2004 in respect of the assessment year 2001-02 proposing the following substantial question of law:
“1. Whether, on the facts and in the circumstances of the case, the hon'ble Income-tax Appellate Tribunal was right in law in sustaining the order of the Commissioner of Income-tax (Appeals) directing the Assessing Officer to allow deduction under section 80-IB on the amount of duty drawback received by the assessee which cannot be termed as income ‘derived from’ an industrial undertaking as held by the hon'ble Supreme Court of India in the case of Commissioner Of Income Tax, Karnataka v. Sterling Foods, Mangalore, [1999] 237 ITR 579 followed by the hon'ble Madras High Court in the cases of CIT v. Jameel Leathers and Uppers, [2000] 246 ITR 97 and CIT v. Viswanathan and Co., [2003] 261 ITR 737 and the hon'ble Delhi High Court in the case of CIT v. Ritesh Industries Ltd., [2005] 274 ITR 324 and also by the hon'ble Tribunal SMC Bench in the case of Asst. CIT v. Liberty India, Panipat, for the assessment year 2001-02 vide order dated June 28, 2005 ?”
2. In spite of service, none appears for the assessee.
3. We have heard learned counsel for the Revenue.
4. Learned counsel for the Revenue relies upon the judgment of this court dated September 22, 2006, in Liberty India v. Commissioner Of Income-Tax, [2007] 293 ITR 520 (P&H), wherein, the question raised was examined and it was held that the amount of duty drawback received by the assessee could not be treated as income “derived from” an industrial undertaking. The relevant observations in Liberty India's case, [2007] 293 ITR 520 (P&H) are as under (pages 522-23),:
“section 80-IB(1) is as under:
‘(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11) and (11A) (such business being hereinafter referred to as the eligible business), 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 such percentage and for such number of assessment years as specified in this section.’
Interpreting the identical language in section 80HH, the hon'ble Supreme Court in Sterling Foods' case, [1999] 237 ITR 579 observed (page 584):
‘We do not think that the source of the import entitlements can be said to be the industrial undertaking of the assessee. The source of the import entitlements can, in the circumstances, only be said to be the Export Promotion Scheme of the Central Government where-under the export entitlements become available. There must be, for the application of the words “derived from”, a direct nexus between the profits and gains and the industrial undertaking. In the instant case, the nexus is not direct but only incidental. The industrial undertaking exports processed sea food. By reason of such export, the Export Promotion Scheme applies. Thereunder, the assessee is entitled to import entitlements, which it can sell. The sale consideration therefrom cannot, in our view, be held to constitute a profit and gain derived from the assessee's industrial undertaking.’
We are of the view that for the reasoning adopted by the hon'ble Supreme Court, income of the assessee from duty drawback cannot be held to be income ‘derived from’ specified business.
The distinction sought to be made by learned counsel for the assessee in income derived from duty drawback and sale of import entitlement cannot be accepted as a relevant distinction, as the core question before the court was that such income was ‘derived from’ specified business, which reasoning is fully applicable to the present situation.
For the above reasons, we are of the view that the matter being covered by the judgment of the hon'ble Supreme Court in Sterling Foods' case, [1999] 237 ITR 579, no substantial question of law arises in the appeal.”
5. We find merit in the contentions raised. For the reasons recorded in Liberty India's case, [2007] 293 ITR 520 (P&H), the question raised is answered in favour of the Revenue and against the assessee.
6. Accordingly, the appeal is allowed and the order of the Tribunal is set aside.
7. Before parting with the order, we are constrained to deprecate the manner in which the issue has been dealt with by the Tribunal which is against the settled norms of judicial discipline and propriety. The Departmental Representative had cited various judgments of the hon'ble Supreme Court and different High Courts on the issue, such as Commissioner Of Income Tax, Karnataka v. Sterling Foods, Mangalore, [1999] 237 ITR 579 (SC), CIT v. Viswanathan and Co., [2003] 261 ITR 737 (Mad), CIT v. Jameel Leathers and Uppers, [2000] 246 ITR 97 (Mad) and CIT v. Ritesh Industries Ltd., [2005] 274 ITR 324 (Delhi), but still, the Tribunal chose to follow the earlier orders passed by it without even adverting to these judgments and pointing out any point of distinction therein vis-avis the facts of the present case. Still further, the Tribunal in its wisdom has chosen to ignore the order passed by it earlier in the case of Liberty India, [2007] 293 ITR 520 (P&H) upheld by this court vide order dated September 22, 2006, on the basis of the judgment of the Delhi High Court in Ritesh Industries' case, [2005] 274 ITR 324, merely for the reason that there is no judgment of this court on this issue. It lost sight of the fact that the earlier order of the Tribunal was pertaining to the area within the jurisdiction of this court.
8. As against this, the Tribunal has chosen to follow the orders passed by it in other cases. The reason given by the Tribunal for ignoring the earlier order passed by it in the case of Liberty India, [2007] 293 ITR 520 (P&H) is not at all convincing. An order passed, following a judgment of the High Court, should not have been ignored in the manner it has been done. Such a practice has already been deprecated by this court in its judgment in Commissioner Of Income-Tax v. Abhishek Industries Ltd., [2006] 286 ITR 1.
9. We are hopeful that the Tribunal, which is the highest statutory appellate authority under the Act will keep these principles in view while deciding lis between the parties so as to curb avoidable litigation.