M/s. R.D. Traders Industries, Jammu V. The Income tax Officer, Jammu

ITA 118/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5686 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R JAIN
• Keywords: Question of law; 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.118(ASR)/2010. (ASSESSMENT YEAR: 2006-07) M/S.R.D. INDUSTRIES, THE ASSESSING OFFICER, SWANKHA MORH, VIJAYPUR, RANGE 1(2), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI K.R. JAIN, 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 19 -1-2010, RELATING TO THE ASS ESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW BY REFUSING TO ACCEPT THAT EXCISE REFUND IS INCOME RECEIVED FROM THE MANUFACTURING ACTIVITY OF THE ASSESSEE FIRM. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ACC EPTING THE CONTENTION OF ASSESSEE THAT ASSESSEE BEING ENTITLED TO EXEMPTION OF EXCISE DUTY PAID FROM THE CURRENT ACCOUNT AND RE FUNDED NEXT MONTH WOULD NOT MAKE IT ANY THE LESS INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING. 2 3. THAT THE ORDER OF THE LD. CIT(A) IS NOT SPEAKING ORDER, AS HE HAS NOT BROUGHT ON RECORD AS TO HOW THE REFUND OF EXCIS E DUTY RECEIVED BY THE ASSESSEE IS NOT INCOME DERIVED FROM THE BUSINESS ACTIVITY. 4. THAT THE NUMBER OF JUDGMENTS OF SC, AS MENTIONE D BY THE LD. CIT(A) ARE QUITE DISTINGUISHABLE FROM THE CASE OF A SSESSEE AS THESE JUDGMENT ARE BASED ON SALE OF EXPORT ENTITLEM ENT, WHEREAS CASE OF THE ASSESSEE IS REFUND OF EXCISE DUTY WHICH IS AN INTEGRAL PART OF MANUFACTURING ACTIVITY AND IS CLEA RLY AN INCOME DERIVED FROM THE BUSINESS. 3. VIDE LETTER DATED 18-6-2011, THE ASSSSEE HAS AL SO RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL:- THAT THE AMOUNT OF RS.28,37,010/- RECEIVED AS EXCI SE REFUND DUTY IS CAPITAL RECEIPT AND NOT THE REVENUE RECEIPT. ACCORDINGLY, IT IS PRAYED THAT THE ADDITION MADE MA Y KINDLY BE DELETED. 4. AS REGARDS THE ADMISSION OF ADDITIONAL GROUND IN THE APPEAL IS CONCERNED, WE FIND THAT THE ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. (1998) 2 29 ITR 383 (SC), WHEREIN THE HONBLE SUPREME COURT HELD (HEAD NOTE) AS UNDER:- UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO AL LOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHI CH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECES SARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 4.1 IN OUR VIEW, THE ADDITIONAL GROUND RAISED BY TH E ASSESSEE IS A QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE ON RECORD IN THE ASSESSMENT 3 PROCEEDINGS, AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERM AL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND OF APPEAL A ND PROCEED TO DECIDE THE APPEAL IN THE SUCCEEDING PARAGRAPHS. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF ELECTRIC BULBS. DURING THE ASSESS MENT YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED REFUND OF EXCI SE DUTY AMOUNTING TO RS.28,37,010/-. ON THIS AMOUNT, THE ASSESSEE CLAIME D DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT , THE ACT). HOWEVER, THE A.O. REJECTED THE CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT AND HELD THAT THE EXCISE DUTY REFUND IS A TAXABLE RECEI PT, WHICH IS NOT LIABLE FOR DEDUCTION U/S.80IB OF THE ACT. 6. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA DATED 26-11-2009 DISMISSED THE APPEAL OF THE ASSESSEE. 7. WE HAVE HEARD THE LEARNED D.R. AND HAVE ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S.SHREE BAL AJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE J & K HIGH COURT. THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS UND ER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTERES T 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 8. 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 OFFICE MEMORANDUM AND STATUTORY NOTIFICATIONS ISSUE D IN THIS 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. 5 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. 9. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE HOLD THAT THE AMOUNT OF EXCISE DUTY REFUND AMOUNTING TO RS.28,37,010/- RECE IVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOM E TAX ACT, 1961. 10. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB OF THE ACT IS CONCE RNED, WE DO NOT THINK IT 6 NECESSARY TO DECIDE THE SAME AND HENCE, NO FINDINGS ARE BEING GIVEN. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 22 ND JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.R.D. INDUSTRIES, SWANKHA MORH, VI JAYPUR, JAMMU. (2) THE AO, RANGE I(2), 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.