M/s. S.M. Plstics, Jammu V. The Income Tax Officer, Jammu

ITA 107/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5796 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K BANSAL
• Keywords: Difference of opinion; Capital receipt; Change of opinion
• Section: 234B; 80IB; 2

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.107(ASR)/2010. (ASSESSMENT YEAR: 2002-03) M/S.S.M. PLASTICS, THE INCOME TAX OFFICER, 124, PHASE-II, WARD 1(3), JAMMU. INDUSTRIAL AREA, GANGYAL, JAMMU (J&K). (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI S.K. BANSAL, ADV. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JAMMU DATED 14-12-2009, RELATING TO THE ASS ESSMENT YEA 2002-03. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. THAT THE IMPUGNED ORDER IS AGAINST LAW AND FAC TS OF THE CASE. 2. THAT THE LD. CIT(A), JAMMU HAS NOT BEEN JUSTIFIED I N EJECTING THE CONTENTION OF THE APPELLANT THAT HE PROCEEDINGS U/S.147 OF THE INCOME TAX ACT, 1961 HAVE WRONGLY BEEN INITIATE D MERELY ON CHANGE OF OPINION. 3. THAT THE LD. CIT(A) HA ERRED IN LAW IN CONFIRMING T HE REOPENING OF THE CASE U/S.148 MERELY ON THE CHANGE OF OPINION WHEN HE HAS HIMSELF ADMITTED THAT THE APPELLANT HAD DIVULGE D THE FIGURE OF INTEREST SUBSIDY IN THE ORIGINAL RETURN AND IT W AS ACCEPTED 2 U/S.143(1) OF THE INCOME TAX ACT, 1961. THE APPELL ANT SUBMITS THAT THE REOPENING OF THE CASE U/S.148 IS NOT JUSTI FIED IN LAW. 4. THAT THE LD. CIT(A) HAS ALSO ERRED IN LAW IN HOLDIN G THAT THE INTEREST SUBSIDY IS NOT ALLOWABLE AS DEDUCTION U/S. 80IB AND IT IS LIABLE TO TAX IN VIEW OF THE JUDGMENTS OF THE HONB LE TRIBUNAL, AMRITSAR BENCH MENTIONED THE ORDER UNDER APPEAL; TH E APPELLANT IN THIS RESPECT WITH RESPECT SUBMITS THAT WHEN THE HONBLE TRIBUNAL DECIDED THE CASES REFERRED TO IN THE APPEL LATE ORDER. THE HONBLE TRIBUNAL DID NOT HAVE BEFORE IT THE JUD GMENT OF SUPREME COURT CIT MADRAS VS. PONI SUGAR AND CHEMICA LS LTD. (2008) 306 ITR 392 (SC). THE APPELLANT SUBMITS THA T IN VIEW OF PONI SUGAR MILLS CASE THE DEDUCTION U/S.80IB TO INTEREST SUBSIDY CANNOT BE DENIED. 5. THAT IN ADDITION AND WITHOUT PREJUDICE TO GROUND NO .4 IT IS SUBMITTED THAT INTEREST SUBSIDY IS GIVEN WHEN THE U NIT INCREASES ITS PRODUCTION, THE INTEREST SUBSIDY THEREFORE IS C APITAL IN NATURE AND NO TAX CAN BE IMPOSED ON IT. 6. THAT STILL IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO GROUND NOS.4 AND 5 ABOVE IT IS SUBMITTED THAT THE LD. CIT( A) HAS ERRED IN NOT CONSIDERING AND ACCEPTING THE ALTERNATE SUBM ISSION OF THE APPELLANT THAT INTEREST SUBSIDY RECEIVED IN ANY CAS E IS ENTITLED TO NETTING AGAINST INTEREST PAID TO THE BANK FOR INCRE ASE OF PRODUCTION. 7. THAT THE LD. CIT(A) HAS ALSO NOT BEEN JUSTIFIED IN CONFIRMING THE DEMAND RAISED ON ACCOUNT OF INTEREST U/S.234A, 234B AND 234C OF RS.1081,5815 AND 1252 RESPECTIVELY AS LEGALLY IN TEREST DEMANDED ONLY UPTO DATE OF PASSING THE ORDER U/S.14 3(3) AND THE SAID INTEREST STANDS ALREADY DEPOSITED BY THE A PPELLANT. 8. ANY OTHER GROUND WHICH MAY BE URGED AND ALLOWED AT THE TIME OF ARGUMENTS. 3. AT THE TIME OF HEARING OF THE APPEAL, SHRI S.K. BANSAL, ADVOCATE, THE LEARNED COUNSEL FOR THE ASSESSEE, DID NOT PRESS FOR GROUND NOS.1 TO 4, 6, 7 & 8 AND HENCE, WE DISMISS THE SAME AS NOT PRESSED, 3 4. GROUND NO.5 OF THE APPEAL RELATES TO INTEREST SU BSIDY. WHILE FRAMING THE ASSESSMENT, THE A.O. TREATED THE INTEREST SUBSI DY OF RS.47,960/- AS A TAXABLE RECEIPT AND SUBJECTED TO TAX. 5. IN THE FIRST APPEAL, THE CIT(A) DISMISSED THE AP PEAL OF THE ASSESSEE FOLLOWING THE DECISION OF THE I.T.A.T., AMRITSAR BE NCH IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA VS. ITO, KATHUA IN I.T.A. NO.255(ASR)/2009 FOR THE ASSESSMENT YEAR 2005-06 DA TED 26-11-2009. THE ASSESSEE CHALLENGED THE ORDER OF THE TRIBUNAL PASSE D IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA(SUPRA) BEFORE THE HONBLE JUR ISDICTIONAL J&K HIGH COURT AND THE HONBLE HIGH COURT IN THE CASE OF M/S .SHREE BALAJI ALLOYS, KATHUA VS. C.I.T. AND ANOTHER (2011) 333 ITR 335(J& K) HELD AS UNDER:- IN THIS VIEW OF THE MATTER, THE INCENTIVES PROVID ED 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 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. 4 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. 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 7. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY TH E HONBLE J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA ), WE HOLD THAT THE INTEREST SUBSIDY IS OF CAPITAL NATURE AND NO TAX CA N BE IMPOSED ON IT. 8. IN THE ABOVE TERMS, THE APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 9 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 9 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE M/S.S.M. PLASTICS,124 PHASE-II, INDUSTRIAL AREA , GANGYAL, JAMMU (J&K). (2) THE ITO, WARD 1(3), JAMMU. (3) THE CIT, JAMMU. (4) THE CIT(A), JAMMU. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.