ORAL ORDER
(Per: HONOURABLE MR. JUSTICE AKIL KURESHI)
1. Leave to amend.
2. Assessee is in appeal against the judgment of the Tribunal dated 30th June, 2010 raising following questions for our consideration:
i. Whether on the facts and in law the Tribunal is justified in denying deduction under Section 80IA of the Act on export benefits receivable by the appellant by replying upon the Hon'ble Apex Court in the case of Liberty India at 317 ITR 218?
ii. Whether on the facts and in law the Tribunal is right in interpretation of section 80IA and section 80HHC of the Income-Tax Act, 1961 while denying deduction towards interest income amounting to Rs. 11,52,074/-?
iii. Whether in the facts and circumstances of the case, the Tribunal erred in law in disallowing claim of the assessee as regard to netting of interest on the allowance of deduction under Section 80IA and 80HHC of the Act?
3. Insofar as question No. 1 is concerned, the same pertains to deduction claimed by the assessee under section 80IA of the Income Tax Act, 1961 on certain export benefits received by the assessee. The Tribunal relying on the decision of the Apex Court in case of Liberty India v. Commissioner of Income Tax reported in 317 ITR 218 held against the assessee.
4. Counsel for the assessee submitted that Tribunal erred in applying the decision of Apex Court in case of Liberty India (supra). He submitted that in the present case, there was no instance of sale of any license granted on the basis of exports made. It was pointed out that the amount receivable was towards advance license benefits.
5. However, we are of the opinion that the Tribunal correctly applied the decision of Apex Court in case of Liberty India (supra). It is true that in Liberty India, the Apex Court was examining whether profit from Duty Entitlement of Passbook Scheme (DEPB) and Duty Drawback Scheme could be said to be profit derived from the business of the industrial undertaking eligible for deduction under Section 80-IB of the Act. It may also be true that in the present case, the amount in question may not be profit derived from DEPB scheme or duty draw back scheme. Nevertheless, as contended by the assessee itself, the amount receivable was in relation to advance license benefit on account of exports made by the assessee. The Apex Court in case of Liberty India held that the benefits derived from DEPB scheme or duty draw back scheme cannot be stated to be income derived from an industrial undertaking. It was on this basis that such benefits were not held eligible for deduction for the purpose of Sections 80IB and 80IA of the Act which pertain to deduction in respect of profits and gains from industrial undertakings. The Apex Court concluded that duty draw back receipts or DEPB receipts do not form part of net profit for eligible industrial undertaking for the purpose of sections 80IA and 80IB of the Act.
6. In the present case, the assessee claims deduction under Section 80IA of the Act with respect to the amount received or receivable from the license issued on account of exports made by the assessee. Insofar as all material facts are concerned since there is no distinction, we have no hesitation to hold that the Tribunal rightly applied ratio in case of Liberty India (supra). Question No. 1 is, therefore, not required to be considered.
7. Question No. 2 represents the deduction denied to the assessee to the total of Rs. 11.52 lacs under Section 80IA and 80HHC of the Act which has three different limbs.
8. The first pertains to the question whether for the purpose of Sections 80IA and 80HHC of the Act the net or the gross interest can be disallowed. This question is separately re-framed in the amended form as question No. 3, such issue is, therefore, not decided.
9. Second aspect of question No. 2 is with respect to interest income received from customers on delayed payments. Tribunal while allowing such claim following this Court's decision reported in 328 ITR 40, however, clarified that such deduction shall be subject to provision of sub-section (9) of Section 80IA of the Act since deduction is already allowed. This question is not required to be considered. Tribunal only provided that such deduction shall be subject to the provisions of Sub-Section (9) of Section 80IA of the Act. We see no infirmity in such a view. We are sure that the Assessing Officer while giving effect to, shall examine the same. The third aspect of this issue is with respect to interest on margin money. The assessee claimed deduction for the same under Section 80IA of the Act. However, the Tribunal relying on the case of this very assessee, ruled against the assessee.
10. Counsel for the appellant candidly stated that such decision of the Tribunal has not carried further in appeal. We find that amount is not substantial. In that view of the matter, this issue is not considered in the present appeal.
11. Adverting into the sole surviving question No. 3, counsel for the appellant pointed out that such an issue was decided by Delhi High Court in favour of the assessee reported in 289 ITR 475; whereas, subsequently Bombay High Court ruled in favour of the revenue in case of Asian Star Co. Ltd. However, there is no decision of this court and several tax appeals on this issue are pending. Under the circumstances, this tax appeal is admitted only for question No. 3.