Alpha Menthol, Jammu V. The Income tax Officer, Jammu

ITA 120/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5711 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R L GUPTA
• Keywords: Business expenditure; Capital receipt
• Section: 234B

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.120(ASR)/2010. (ASSESSMENT YEAR: 2006-07) M/S.ALPHA MENTHOL, THE INCOME TAX OFFICER, GANGYAL, WARD 1(1), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI R.L. GUPTA, 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 2006-07. 2. GROUND NOS.1 AND 2 ARE GENERAL IN NATURE AND HEN CE NO FINDINGS ARE BEING GIVEN. 3. GROUND NOS.3(A) & 3(B) OF THE APPEAL READ AS UND ER:- 3. WITHOUT PREJUDICE TO THIS GENERALITY, THE LD. C IT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE FOLLOWING IMPUGNE D ADDITIONS MADE TO THE INCOME OF THE ASSESSEE BY THE LD. AO:- (A) IN BRINGING TO TAX RS.1,39,54,068/- ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED U/S.80IB ON THE GROUND THAT THESE ARE THE PROFITS ATTRIBUTABLE TO E XCISE DUTY REFUND AND NOT DERIVED FROM THE MANUFACTURING 2 ACTIVITY. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE IMPUGNED ADDITION IS OTHERWISE ALS O NOT A CAPITAL RECEIPT. B) IN BRINGING TO TAX RS.91,080/- DUE TO THE DISALL OWANCE OF THE EXPENDITURE ON COMMISSION U/S.40(A)(IA) TREATIN G IT AS A SEPARATE DISALLOWANCE AND NOT A DISALLOWANCE OF BUSINESS EXPENDITURE RESULTING IN HIGHER BUSINESS I NCOME ENTITLED FOR DEDUCTION U/S.80IB OF THE INCOME TAX A CT, 1961. 4. AT THE TIME OF HEARING, SHRI R.L. GUPTA, C.A., T HE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUND NO.3(B) OF TH E APPEAL AND ACCORDINGLY WE DISMISS THE SAME AS NOT PRESSED. 5. AS REGARDS GROUND NO.3(A), THE FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING MENTHOL AND MENTH OL FLAKES IN THE STATE OF JAMMU & KASHMIR. DURING THE ASSESSMENT YEAR UNDER C ONSIDERATION, A SUM OF RS.1,39,54,068/- ON ACCOUNT OF EXCISE DUTY REF UND WAS RECEIVED. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF T HE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). HOWEVER, THE A.O. DID NOT AC CEPT THE CLAIM OF THE ASSESSEE AND TAXED THE ENTIRE AMOUNT. 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, KAHUA DATED 26-11-2009 DISMISSED THE APPEAL OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S. SHREE BALAJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL IN APPEAL BEFO RE THE HONBLE J & K HIGH COURT. THE ISSUE BEFORE THE HONBLE HIGH CO URT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTERES T SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSES, IN PURSUANCE OF THE IN CENTIVES ANNOUNCED 3 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? 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 4 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. 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.1,39,54,068/- RE CEIVED BY THE ASSESSEE 5 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. GROUND NO.3(A) STANDS ALLOWED. 10. GROUND NO.5 OF THE APPEAL RELATES TO CHARGING O F INTEREST UNDER SECTION 234B OF THE ACT. AT THE TIME OF HEARING, SRI R.L. GUPTA C.A., THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND WE HOLD ACCORDINGLY. 11. NO OTHER POINT WAS ARGUED OR RAISED BEFORE US. 12. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY IN THE TERMS, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 23 RD JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.ALPHA MENTHOL, JAMMU. (2) THE ITO, WARD 1(1), 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.