Jhelum Industries, Jammu V. The Deputy Commissioner of Income tax, Jammu

ITA 103/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5766 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.103(ASR)/2010. (ASSESSMENT YEAR: 2006-07) M/S.JHELUM INDUSTRIES, SAMBA, THE DY. C.I.T., INDUSTRIAL GROWTH CENTRE, CIRCLE 1, JAMMU. SAMBA, JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI SANJAY GUPTA, C.A. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER MEHAR SINGH, ACCONNTANT MEMBER. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JAMMU DATED 23-12-2009, RELATING TO THE ASS ESSMENT YEAR 2006-07. 2. VIDE GROUND NOS.4 TO 6, THE ASSESSEE HAS CLAIMED THAT THE EXCISE DUTY REFUND OF RS.1,21,78,289/- RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND IS THUS NOT TAXABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS RECEIVED EXCISE DUTY REFUND OF RS.1,21,78,289/- AND ON THIS AMOUNT, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE ACT. THE A.O. REJECTED THE DEDUCTION AND TREATED THE IMPUGNED REFUND AS REVEN UE RECEIPT AND ALSO TAXED THE SAME. 3. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE A. O. FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE 2 BALAJI ALLOYS, KATHUA. THE ASSESSEE (M/S. SHREE BA LAJI ALLOYS) CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT OF J & K. THE ISSUES RAISED BEFORE THE HONBLE J & K HIGH COURT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTEREST SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSES, IN PURSUANCE OF THE IN CENTIVES ANNOUNCED AND SANCTIONED VIDE GOVERNMENT OF INDIA, MINISTRY O F COMMERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POLICY AND PROMO TION)S OFFICE MEMORANDUM NO.1(13)2000-NER DATED JUNE 4, 2002 AND CENTRAL EXCISE NOTIFICATION NOS.56 AND 57, DATED NOVEMBER 1 4,2002 AND OTHER NOTIFICATIONS ISSUED ON THE SUBJECT, PERTAINI NG TO THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU & KASHMIR, IS A CAPITAL RECEIPT AND, THUS, NOT LIABLE TO TAX UNDER THE PROV ISIONS OF THE ACT, OR REVENUE RECEIPT, AS OPINED BY THE AUTHORITIES UNDER THE ACT? 4. THE HONBLE HIGH COURT VIDE JUDGMENT DATED 31-1- 2011 IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA, REPORTED IN (2011) 333 ITR 335 (J&K) DECIDED THE ISSUE OBSERVING AS UNDER:- IN THIS VIEW OF THE MATTER, THE INCENTIVES PROV IDED TO THE INDUSTRIAL UNITS, IN TERMS OF THE NEW INDUSTRIAL PO LICY, FOR ACCELERATED INDUSTRIAL DEVELOPMENT IN THE STATE, FO R CREATION OF SUCH INDUSTRIAL ATMOSPHERE AND ENVIRONMENT, WHICH W OULD PROVIDE ADDITIONAL PERMANENT SOURCE OF EMPLOYMENT T O THE UNEMPLOYED IN THE STATE OF JAMMU AND KASHMIR, WERE IN FACT, IN THE NATURE OF CREATION OF NEW ASSETS OF INDUSTRI AL ATMOSPHERE AND ENVIRONMENT, HAVING THE POTENTIAL OF EMPLOYMENT GENERATION TO ACHIEVE A SOCIAL OBJECT. SUCH INCENT IVES, DESIGNED TO ACHIEVE PUBLIC PURPOSE, CANNOT, BY ANY STRETCH O F REASONING, BE CONSTRUED AS PRODUCTION OR OPERATIONAL INCENTIVE S FOR THE BENEFIT OF ASSESSEES ALONE. THUS, LOOKING TO THE PURPOSE, OF ERADICATION OF THE SOCIAL PROBLEM OF UNEMPLOYMENT IN THE STATE BY ACCELERATIO N OF THE INDUSTRIAL DEVELOPMENT AND REMOVING BACKWARDNESS OF THE AREA THAT LAGGED BEHIND IN INDUSTRIAL DEVELOPMENT, WHICH IS CERTAINLY A PURPOSE IN THE PUBLIC INTEREST, THE INCENTIVES PR OVIDED BY THE 3 OFFICE MEMORANDUM AND STATUTORY NOTIFICATIONS ISSUE D IN THIS BEHALF, TO THE APPELLANTS-ASSESSEES, CANNOT BE CONS TRUE AS MERE PRODUCTION AND TRADE INCENTIVES, AS HELD BY THE TRI BUNAL. MAKING OF ADDITIONAL PROVISION IN THE SCHEME THAT INCENTIVES WOULD BECOME AVAILABLE TO THE INDUSTRIAL UNITS, ENTITLED THERETO, FROM THE DATE OF COMMENCEMENT OF THE COMMERCIAL PRODUCTION, AND THAT THESE WERE NOT REQU IRED FOR CREATION OF NEW ASSETS CANNOT BE VIEWED IN ISOLATIO N, TO TREAT THE INCENTIVES AS PRODUCTION INCENTIVES, AS HELD BY THE TRIBUNAL, FOR THE MEASURE SO TAKEN, APPEARS TO HAVE BEEN INTENDED TO ENSURE THAT THE INCENTIVES WERE MADE AVAILABLE ONLY TO THE BONA FIDE INDUSTRIAL UNITS SO THAT LARGER PUBLIC INTEREST OF DEALING WITH UNEMPLOYMENT IN THE STATE, AS INTENDED, IN TERMS OF THE OFFICE MEMORANDUM, WAS ACHIEVED. THE OTHER FACTORS, WHICH HAD WEIGHED WITH THE TRIBU NAL IN DETERMINING THE INCENTIVES AS PRODUCTION INCENTI VES MAY NOT BE DECISIVE TO DETERMINE THE CHARACTER OF THE INCEN TIVE SUBSIDIES, WHEN IT IS FOUND, AS DEMONSTRATE IN THE OFFICE MEMORANDUM, AMENDMENT INTRODUCED THERETO AND THE ST ATUTORY NOTIFICATION TOO THAT THE INCENTIVES WERE PROVIDED WITH THE OBJECT OF CREATING AVENUES FOR PERPETUAL EMPLOYMENT , TO ERADICATE THE SOCIAL PROBLEM OF UNEMPLOYMENT IN THE STATE BY ACCELERATED INDUSTRIAL DEVELOPMENT. FOR ALL WHAT HA BEEN SAID ABOVE, THE FINDING OF THE TRIBUNAL ON THE FIRST ISSUE THAT THE EXCISE DUTY RE FUND, INTEREST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCEN TIVES, HENCE REVENUE RECEIPT, CANNOT BE SUSTAINED, BEING A GAINST THE LAW LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN SAHNEY STEEL CASE [1997] 228 ITR 253 AND PONNI SUGARS CASE [2008] 306 ITR 391. THE FINDING OF THE TRIBUNAL THAT THE INCENTIVES WER E REVENUE RECEIPT IS, ACCORDINGLY, SET-ASIDE HOLDING THE INCENTIVES TO BE CAPITAL RECEIPTS IN THE HANDS OF THE ASSESSE E. 4 IN VIEW OF OUR ABOVE FINDING ON THE FIRST ISSUE, TH ERE IS NO NEED TO OPINE ON THE SECOND ISSUE, WHICH WAS RAISED IN THE ALTERNATIVE. 5. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE HOLD THAT THE EXCISE DUTY REFUND OF RS.1,21,78,289/- RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER TH E PROVISIONS OF THE ACT. 6. GROUND NO.3 OF THE APPEAL READS AS UNDER:- THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOL DING THE ACTION OF THE LEARNED OFFICER IN MAKING THE IMPUGNED ADDITION OF RS.1,21,78,289/- ON ACCOUNT OF EXCISE DUTY REFUND B Y TREATING IT AS A REVENUE RECEIPT AND INCOME OF THE APPELLANT AND NO T ALLOWING THE CLAIM OF DEDUCTION U/S.80IB OF THE INCOME TAX ACT O N THIS. 6.1 SINCE WE HAVE HELD THAT THE AMOUNT OF RS.1,21,7 8,289/- BEING EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND, THEREFORE, NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE ACT AND, THEREFORE, WE DO NOT THI NK IT NECESSARY TO DECIDE THIS GROUND OF APPEAL. 7. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 8. IN THE ABOVE TERMS, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT. ACCOUNTANT MEMBER. DATED: 17 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.JHELUM INDS. SAMBA, INDL,. GROWTH CENTRE, SAMBA, JAMMU. (2) THE DCIT, CIRCLE I JAMMU.(3) THE CIT, JAMMU. (4) THE CIT(A), JAMMU. THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER 5