O/TAXAP/184/2008 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 184 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge? UNITED PHOSPHORUS LTD.....Appellant(s) Versus ADDITIONAL COMMISSIONER OF INCOME TAX....Opponent(s) Appearance: MR SN SOPARKAR, SR. ADVOCATE, MR BS SOPARKAR, MRS SWATI SOPARKAR, ADVOCATE for Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 05/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is appeal by appellant- assessee, seeking to challenge order of learned ITAT, Ahmedabad Bench-C, Ahmedabad (for short, Tribunal ), Dated : 03.11.2004, Page 1 of 7 O/TAXAP/184/2008 JUDGMENT rendered in ITA No.2970/Ahd/1997 for A.Y. 1992-93, whereby, it allowed same in part. 2. brief facts of case are that assessee filed its return of income for A.Y. 1992- 93 on 31.12.1992, declaring its total income at Rs.7,92,12,058/-. Subsequent thereto, case of assessee was examined and AO concerned, assessed its income at Rs.9,80,48,251/-. Hence, assessee approached CIT(A) against same and CIT(A) allowed same in part. It appears that, then, assessee carried matter before Tribunal and Tribunal, after hearing parties, allowed appeal of assessee in part for statistical purpose. Hence, present appeal. 3. At time of admitting this Tax Appeal, following questions of law were framed by this Court; (i) Whether, in facts and circumstances of case, Income Tax Appellate Tribunal was right in law in holding that alleged income from Advance License Benefit Receivable is taxable in year under consideration even though said income has accrued to appellant in subsequent years? (ii) Whether, in facts and circumstances of case, Income Tax Appellate Tribunal was right in law Page 2 of 7 O/TAXAP/184/2008 JUDGMENT in holding that premium paid for leasehold land is not revenue expenditure and not allowable as such? (iii) Whether, in facts and circumstances of case, Income Tax Appellate Tribunal was right in law in holding premium of leasehold land cannot be allowed on proportionate basis spread over period of lease which is totally contrary to decision of Honourable Supreme Court in case o Madras Industrial Investment Corporation Limited vs. CIT (225 ITR 802)? (iv) Whether, in facts and circumstances of case, Income Tax Appellate Tribunal was right in law in not holding that income from Advance License Benefit Receivable is derived from industrial undertaking and thus eligible for deduction under Sections 80I and 80IA of Act? 4. At very outset, Mr. Soparkar, learned Sr. Advocate for appellant-assessee, invited our attention to decision of this Court in Tax Appeal No. 344 of 2002 in case of UNITED PHOSPHORUS LIMITED VS. JT. CIT , Dated : 11.11.2014. Mr. Soparkar submitted that this Court has already decided questions raised in this appeal, while disposing of Tax Appeal No. 344 of 2002. 5. In above view of matter, we propose to deal with each question one by one. Page 3 of 7 O/TAXAP/184/2008 JUDGMENT 6. Mr. Soparkar submitted that so far as question No. (i) framed in this Tax Appeal is concerned, it is covered by observation of this Court in Para-3 of Tax Appeal No. 344 of 2002, which reads as under; 3. We have heard learned counsel for both sides. Insofar as questions no.(i) & (ii) are concerned, issues are already concluded by decision of Apex Court in case of Commissioner of Income tax v. Excel Industries Ltd., [2013] 358 ITR 295 wherein, it has been held that where any real business income has not accrued but only hypothetical income has accrued to assessee, then Section 28(iv) of Act would not be applicable. In view of principle propagated by Apex Court, questions no.(i) & (ii) are answered in favour of assessee and against Revenue. 7. Mr. Mehta, learned Advocate for respondent-Revenue, does not dispute aforesaid aspect. Hence, we answer question No.(i) in favour of assessee and against Revenue. 8. Mr. Soparkar, then, submitted that so far as question No.(ii) framed in this Tax Appeal is concerned, same is covered by observations of this Court in Para-4 of Tax Appeal No. 344 of 2002, which reads as under; Page 4 of 7 O/TAXAP/184/2008 JUDGMENT 4. Insofar as question no.(iii) is concerned, issue is already concluded by decision of Apex Court in case of Deputy Commissioner of Incometax v. Sun Pharmaceuticals Ind. Ltd., [2010] 329 ITR 479 (Guj). In that case, Appellate Tribunal found that land in question was not acquired by assessee. It was held that merely because deed was registered, transaction in question would not assume different character. lease rent was very nominal and by obtaining land on lease, capital structure of assessee did not undergo any change. It was further held that assessee only acquired facility to carry on business profitably by paying nominal lease rent and that lease rent paid by assessee to GIDC was allowable as revenue expenditure. In view of above principle, question no.(iii) is answered in favour of assessee and against Revenue. 9. Mr. Soparkar, then, submitted that, since, question No.(ii) is covered by decision of this Court in Tax Appeal No.344 of 2002, question No.(iii) shall not survive. 10. Mr. Mehta is unable to controvert aforesaid aspect, hence, question No..(ii) is answered in favour of assessee, whereas, so far as question No.3 is concerned, as stated above, since, question No.2 is answered in favour of assessee, question No.(iii) will not survive. Page 5 of 7 O/TAXAP/184/2008 JUDGMENT 11. Insofar as question No.(iv), herein, is concerned, Mr. Soparkar, invited our attention to decision of this Court in LIBERTY INDIA VS. CIT , 317 ITR 218, wherein, this Court has observed that DEPB / Duty drawback are incentives which flow from schemes framed by Central Government or from Section 75 of Customs Act, 1962. Incentive profits are not profits derived from eligible business under section 80I-B : they belong to category of ancillary profits of such undertaking. Profits derived by way of incentives such as DEPB / Duty drawback cannot be credited against cost of manufacture of goods debited in profit and loss account and they do not fall within expression profits derived from industrial undertaking under section 80-IB. He, therefore, submitted that question No. (iv), herein, be answered in favour of present assessee, accordingly. 12. In result, question Nos. (i), (ii) and (iv) are answered in favour of assessee and against Revenue, accordingly, whereas, as stated above in view of our answer to question No. (ii), question No. (iii) does not survive. appeal is ALLOWED to aforesaid extent. No order as to costs. (K.S.JHAVERI, J.) Page 6 of 7 O/TAXAP/184/2008 JUDGMENT (K.J.THAKER, J) UMESH Page 7 of 7 United Phosphorus Ltd. v. Additional Commissioner of Income-tax