Profit from DEPB not eligible for tax benefit.

The Supreme Court held last week that profit from Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback Scheme could not be said to be profit derived from the business of an industrial undertaking eligible for deduction under Section 80-IB of the Income Tax Act. The court thus dismissed a large number of appeals in its common judgement, M/s Liberty India vs Commissioner of Income Tax. In the Liberty case, the company which manufactures fabrics and finished items, claimed deduction on the profits on account of DEPB and Duty Drawback Scheme. The authorities rejected the claim on the ground that the two benefits constituted export incentives and they did not represent profits derived from industrial undertaking. Upholding this view, the Supreme Court stated that these incentives could not be credited against the cost of manufacture of goods debited in the profit and loss account for purposes of Section 80-IA/80-IB as such remissions (credits) would constitute independent source of income.