M/s. Shiva Containers, Jammu V. The Income tax Officer, Jammu

ITA 122/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5758 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 9 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: 08-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R L GUPTA
• Keywords: Capital receipt
• Section: 234B; 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.122(ASR)/2010. (ASSESSMENT YEAR: 2006-07) M/S.SHIVA CONTAINERS, THE INCOME TAX OFFICER, INDUSTRIAL AREA, GANGYAL, WARD 1(3), 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 23-12-2009, RELATING TO THE ASS ESSMENT YEAR 2006-07. 2. GROUND NO.4 READS AS UNDER:- 4. THAT THE LD. CIT(A) HAS ERRED IN MIS-INTERPRET ING THE LEGAL AND FACTUAL ASPECTS OF THE HONBLE SUPREME COURT/HONBL E HIGH COURT AND HONBLE ITAT, AMRITSAR BENCH ARBITRARILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION BY TREATING THE EXCIS E DUTY REFUND AS CAPITAL RECEIPT NOT LIABLE FOR DEDUCTION UNDER S ECTION 80IB. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD RECEIVED AMOUNT OF RS.5,69,640/- BEING REFUND OF EXCISE DUTY . THE ASSESSEE CLAIMED DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) ON THIS AMOUNT. THE A.O. REJECTED THE CLAIM OF THE ASSESSE E AND TREATED THE SAME AS REVENUE RECEIPT AND ALSO TAXED THE SAME. 2 4. 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 UPHELD THE ORDER OF THE AO. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND HAVE ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE FI ND THAT THE ORDER OF THE TRIBUNAL DATED 26-11-2009 PASSED IN THE CASE OF M/S .SHREE BALAJI ALLOYS, KATHUA WAS SUBJECT-MATTER OF ASSESSEES APPEAL (M/S .SHREE BALAJI ALLOYS, KATHUA) BEFORE THE HONBLE JURISDICTIONAL HIGH COUR T. THE ISSUE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT 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 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? 6. 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, 3 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. 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. 4 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. 7. 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 AMOUNT OF RS.5,69,640/- RECEIVED BY THE ASSESSE E ON ACCOUNT OF EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. GROUND NO. 4 STANDS ALLOW ED. 8. GROUND NO.2 READS AS UNDER:- THAT THE LD. CIT(A), JAMMU HAS ERRED IN UPHOLDING THE DISALLOWANCE AMOUNTING TO RS.5,69,640/- BEING REFUND OF EXCISE D UTY FROM THE TOTAL DEDUCTION UNDER SECTION 80IB AMOUNTING TO RS.39,71, 880/- ARBITRARILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION. 8.1 SINCE WE HAVE HELD THAT THE EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND, THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE T HIS GROUND OF APPEAL. 9. GROUND NO.5 OF THE APPEAL IS REGARDING CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT. AT THE TIM E OF HEARING, SHRI R.L. GUPTA, ADV., THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND WE HOLD AC CORDINGLY. 10. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 5 11. IN THE ABOVE TERMS, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 17 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.SHIVA CONTAINERS, INDL. AREA, GAN GYAL, 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.