New Delhi: The Supreme Court has said profits
derived from the Duty Entitlement Passbook Scheme and the Duty
Drawback Scheme are incentives and cannot be termed as profits
from business to claim income tax deductions.
A bench headed by Justice S H Kapadia dismissed a batch
of petitions filed by various firms and held that the duty
drawback receipt/DEPB benefits are incentives that flow from
government schemes and the Customs Act, and therefore are not
profits derived from the eligible business under Section
80-IB of the Income-tax Act, 1961.
"In our view, DEPB/Duty Drawback are incentives which
flow from the schemes framed by the Central government or from
Section 75 of the Customs Act 1962, hence incentive profits
are not profits derived from the eligible business under
Section 80-IB. They belong to the category of ancillary
profits of such undertakings," the court said.
Stating that DEPB was an "export incentive," the bench
said it was given under the Duty Exemption Remission Scheme
and to neutralise the customs duty payment on the import
content of export product and the neutralisation was
provided for by credit to customs duty against export product.
"We are satisfied that the remission of duty is on
account of the statutory/policy provisions in the Customs
Act/Schemes framed by the Government of India. In the
circumstances, we hold that profits derived by way of such
incentives do not fall within the expression 'profits derived
from industrial undertaking' in Section 80-IB," Justice
Kapadia writing the judgement for the Bench stated.
Bureau Report
First Published: Wednesday, September 02, 2009, 19:49