M/s. Reliable Plastice., Jammu V. The Income Tax Officer, Jammu

ITA 108/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5822 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2011
• 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: Opportunity of being heard; Capital receipt
• Section: 80IB

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.108(ASR)/2010. (ASSESSMENT YEAR: 2002-03) M/S.RELIABLE PLASTICS, THE INCOME TAX OFFICER, GANGYAL, WARD 1(3), JAMMU. JAMMU. (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 29-12-2009, RELATING TO THE ASS ESSMENT YEAR 2002-03. 2. 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 3 AND 6 AND, THEREFORE, NO FINDINGS ARE GIVEN IN RESPECT OF THESE GROUNDS OF APPEAL. 3. GROUND NOS.4 AND 5 OF THE APPEAL READ AS UNDER:- 4. THAT THE LD. CIT(A) HAS ALSO ERRED IN LAW IN HO LDING 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 IN THE ORDER UNDER APPEAL, THE APPELLANT IN THIS RESPECT WITH RESPECT SUBMITS THAT WHEN THE HONBLE TRIBUNAL DECIDED THE CASES REFERRED TO IN T HE APPELLATE ORDER. THE HONBLE TRIBUNAL DID NOT HAVE BEFORE IT THE JUDGMENT OF SUPREME COURT CIT MADRAS VS. PONI SUGA R AND CHEMICALS LTD. 2008) 306 ITR 392 (SC). THE APPELLA NT 2 SUBMITS THAT IN VIEW OF PONNI SUGAR MILLS CASE THE DEDUCTIONU/S.80IB TO INTEREST SUBSIDY CANNOT BE DEN IED. 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. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS RECEIVED INTEREST SUBSIDY OF RS.88,773/- DURING THE YEAR. T HE A.O. HELD THAT SINCE THE INTEREST SUBSIDY IS A FORM OF RECEIPT AND A TAXABLE ENTITY, THE SAME IS TO BE SUBJECTED TO TAX. HE, THEREFORE, TAXED THE SAME. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE A.O., OBSERVING AS UNDER:- 3. FROM GROUND NOS.3 AND 4, THE APPELLANT HAS CONT ESTED ASSESSING OFFICERS FINDING OF TREATING INTEREST S UBSIDY AS TAXABLE. THE ASSESSING OFFICER HAS GIVEN DETAILED REASONS FO R TREATING SUCH SUBSIDY AS TAXABLE. THE ISSUE HAPPENS TO BE COVERED AGAINST THE APPELLANT VIDE HONBLE ITAT, AMRITSAR BENCHS DECIS ION IN THE CASE OF M/S.KASHMIR TUBES VS. ITO IN ITA NO.145(ASR)/200 5 ON 7-12-2007. THIS ISSUE HAS AGAIN COME UNDER THE CONS IDERATION OF JURISDICTIONAL ITAT IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA VS. ITO, KATHUA IN THEIR ITA NO.255(ASR)/2009 FOR ASSES SMENT YEAR 2005-06 DATED 26-11-2009. AS THE FACTS AND CIRCUM STANCES AND ISSUES OF THE APPELLANT ARE IDENTICAL AND SIMILAR W ITH THE ISSUES INVOLVED IN THE ABOVE JURISDICTIONAL ITATS DECISIO N, THEREFORE, GROUNDS OF APPEAL ARE DISMISSED AND ASSESSING OFFIC ERS FINDING IS CONFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT WHIL E DECIDING THE ISSUE THE CIT(A) HAD FOLLOWED THE DECISION OF THIS BENCH OF T HE TRIBUNAL IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA VS. ITO, KATHUA IN ITA NO.255(ASR)/2009 FOR THE ASSESSMENT YEAR 2005-06 DA TED 26-11-2009. THE 3 ORDER OF THE TRIBUNAL IN THE CASE OF M/S.SHREE BALA JI ALLOYS, KATHUA WAS CHALLENGED BY THE ASSESSEE (M/S.SHREE BALJI ALLOYS, KATHUA) BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. IN OUR VIEW, TH E ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE JURISDICTIONAL J & K HIGH COURT IN THE CASE OF M/S. SHREE BALAJI ALLOYS, KATHUA (2011) 333 ITR 335 (J&K). THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTEREST SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSES, IN PURSUANCE O F THE INCENTIVES ANNOUNCED AND SANCTIONED VIDE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY (DEPARTMENT OF IN DUSTRIAL POLICY AND PROMOTION)S OFFICE MEMORANDUM NO.1(13)2 000- NER DATED JUNE 4, 2002 AND CENTRAL EXCISE NOTIFICAT ION NOS.56 AND 57, DATED NOVEMBER 14,2002 AND OTHER NOT IFICATIONS ISSUED ON THE SUBJECT, PERTAINING TO THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU & KASHMIR, IS A CA PITAL RECEIPT AND, THUS, NOT LIABLE TO TAX UNDER THE PROV ISIONS OF THE ACT, OR REVENUE RECEIPT, AS OPINED BY THE AUTHORITI ES UNDER THE ACT? 7. THE HONBLE HIGH COURT DECIDED THE ISSUE, OBSERV ING 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. 4 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. 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. 5 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. 8. 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 INTEREST SUBSIDY RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT NOT EXIGIBLE TO TAX. IN VIEW OF THE ABOVE, WE ALLOW GROUND NOS. 4 AND 5 OF THE ASSESSEES APPEAL. 9. GROUND NOS.7 AND 8 OF THE APPEAL READ AS UNDER: - 7. THAT THE LD. CIT(A) HAS ALSO NOT BEEN JUSTIFIED IN CONFIRMING THE DEMAND RAISED ON ACCOUNT OF INTEREST U/S.234-B OF R S.25,309/- AS LEGALLY NO DEMAND ON ACCOUNT OF INTEREST CAN BE CREATED AGAINST HE APPELLANT. 8. IN ADDITION AND WITHOUT PREJUDICE TO GROUND NO.( 7) ABOVE IT I SUBMITTED THAT IN ANY CASE INTEREST CHARGED U/S.234 -B IS EXCESSIVE AS IT COULD ONLY BE CHARGED AS PER SUB-SE CTION (3) OF SECTION 234-B UPTO THE DATE OF PROCESSING OF THE CA SE U/S.143(1) AND NOT UP TO DATE OF PASSING OF ORDER U/S.147. 9.1 AFTER HEARING THE LEARNED REPRESENTATIVES OF BO TH PARTIES, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTI ON TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE AND REAS ONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6 10. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 20111. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 14 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.RELIABLE PLASTICS, JAMMU. (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.