ITO, WD-1(2), JALPAIGURI, Jalpaiguri V. Shri Manoj Garg, Jalpaiguri

ITA 1442/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4491 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2015
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 80IB

Judgement Text

I.T.A. NOS. 1442-1446/KOL./2015 ASSESSMENT YEARS: 2008-2009 & 2012-2013 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NOS.1442, 1443, 1444, 1445 & 1446/KOL/2015 ASSESSMENT YEARS: 2008-09, 2009-10. 2010-11, 2011-1 2 & 2012-2013 INCOME TAX OFFICER,................................ ..................................APPELLANT WARD-1(2), JALPAIGURI, ROOM NO. 103, CENTRAL REVENUE BUILDING, GROUND FLOOR, RACE COURSE PARA, NAYA BASTI, P.O. JALPAIGURI-735101, DIST. JALPAIGURI -VS.- SHRI MANOJ GARG,................................... ..................................RESPONDENT P.O. BANARHAT, DIST. JALPAIGURI, WEST BENGAL-735 202 [PAN :ADHPG 8039 P] APPEARANCES BY: SHRI UDAY KAR SARDAR, JCIT, D.R., FOR THE DEPARTMENT N O N E, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 26, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 21, 2016 O R D E R THESE FIVE APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST A COMMON ORDER OF LD. COMMISSIONER OF INCOME TAX (APP EALS), JALPAIGURI DATED 28.10.2015 FOR ASSESSMENT YEARS 2008-09 TO 20 12-13 AND SINCE A SOLITARY COMMON ISSUE IS INVOLVED THEREIN, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE COMP OSITE ORDER. 2. THE SOLITARY COMMON ISSUE INVOLVED IN THESE APPE ALS OF THE REVENUE IS WHETHER THE LD. CIT(APPEALS) WAS JUSTIFIED IN DI RECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDU CTION UNDER SECTION 80IC IN RESPECT OF CENTRAL EXCISE REFUND AND SALES TAX REMISSION AND THE SAME IS RAISED BY THE REVENUE BY WAY OF THE FOLLOWI NG IDENTICAL GROUNDS RAISED IN THESE APPEALS:- (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A), JALPAIGURI HAS ERRED IN LAW AS WELL AS FACT S IN ALLOWING I.T.A. NOS. 1442-1446/KOL./2015 ASSESSMENT YEARS: 2008-2009 & 2012-2013 PAGE 2 OF 4 THE DISALLOWANCES MADE BY THE ASSESSING OFFICER IN RESPECT OF CENTRAL EXCISE REFUND AND SALES TAX REMISSION. THE LD. CIT(A), JALPAIGURI IN HIS ORDER DIRECTING SUCH ALLO WANCE HAS RELIED ON THE DECISION IN THE CASE OF CIT VS. MEGHA LAYA STEELS LTD. (2011) 332 ITR 91 (GUWAHATI) IGNORING THE FACT THAT THIS ORDER DATED : 16/09/2010 HAS BEEN RECALLED BY THE S AME DIVISION BENCH VIDE JUDGMENT DATED : 08/04/2013 AS MENTIONED IN HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT, GUWAHATI-1 -VS - M/S MEGHALAYA STEELS LTD. [20 15] 60 TAXMANN.COM 260 (SC) MAKING THE RELIED UPON DECISIO N DEVOID OF MERIT AS ON DATE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), JALPAIGURI HAS ERRED IN LAW AS WELL AS FACT S IN ALLOWING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER IN RESPECT OF CENTRAL EXCISE REFUND AND SALES TAX REMISSION AS EV EN THE CASE LAW RELIED UPON BY THE LD. CIT(A), JALPAIGURI DEALT WITH DEDUCTIONS UNDER SECTION 80LB OF THE ACT AND NOT SE CTION 80LC BOTH OF WHICH ARE SECTIONS WHICH ALLOW FOR DEDUCTIO NS TO ENTIRELY DIFFERENT CATEGORIES OF UNDERTAKINGS. RELY ING ON A CASE LAW DEALING WITH DEDUCTION U/S 80LB WHILE DECI DING ON A CASE WHERE AN ENTIRELY DIFFERENT CATEGORY OF UNDERT AKING IS UNDER REVIEW WOULD LEAD TO PERVERSITY OF JUDGMENT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), JALPAIGURI HAS ERRED IN LAW AS WELL AS FACT S IN ALLOWING THE DISALLOWANCES MADE BY THE ASSESSING OFFICER IN RESPECT OF CENTRAL EXCISE REFUND AND SALES TAX REMISSION BY RE LYING ON THE DECISION IN THE CASE OF MEGHALAYA MINERAL PRODU CTS VS ACIT [2015] 59 ITR 197 (GUWAHATI) STATING THAT IT H AS BEEN HELD THAT BOTH CENTRAL EXCISE REFUND AND VAT PERMIS SION ARE ELIGIBLE FOR DEDUCTION U/S 80RE. THE LD. CIT (A) HA S FAILED TO APPRECIATE THAT IN THIS DECISION THE SUBSTANTIAL IS SUES ALLOWED BY THE HON'BLE ITAT RELATED TO VARIOUS SUBSIDIES VI Z. TRANSPORT, INTEREST, POWER AND INSURANCE AND THE AP PEAL OF THE REVENUE IN RESPECT OF CENTRAL EXCISE REFUND & SALES TAX REMISSION WERE DISMISSED ONLY ON THE BASIS OF EARLI ER DECISION OF THE SAME TRIBUNAL WHICH HAVE NOT YET REACHED THE IR FINALITY. 3. AT THE TIME OF HEARING, NONE HAS APPEARED ON BE HALF OF THE ASSESSEE. THE LD. D.R., HOWEVER, HAS FAIRLY AND FRA NKLY ADMITTED THAT THE SOLITARY COMMON ISSUE INVOLVED IN THESE APPEALS OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE HONBLE GUWAHATI HIGH COURT IN THE CASE OF CIT VS.- MEGHALAYA STEELS LIMITED [356 ITR 235]. IN THE SAID CASE, A SIMILAR ISSUE RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDE R SECTION 80IC HAD I.T.A. NOS. 1442-1446/KOL./2015 ASSESSMENT YEARS: 2008-2009 & 2012-2013 PAGE 3 OF 4 COME UP FOR CONSIDERATION IN RESPECT OF SUBSIDIES G RANTED BY THE GOVERNMENT AND THE SAME WAS DECIDED BY THE HONBLE GUWAHATI HIGH COURT IN FAVOUR OF THE ASSESSEE AFTER RECORDING THE FOLLOWING OBSERVATIONS/FINDINGS AS CONTAINED IN THE HEADER PO RTION OF THE JUDGMENT:- IN ORDER TO CLAIM DEDUCTION EITHER UNDER SECTION 8 0IB OR UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961, AN ASSESSEE HAS TO ESTABLISH THAT THERE IS A DIRECT, I NTRINSIC AND FIRST DEGREE NEXUS BETWEEN A SUBSIDY, ON THE ON E HAND, AND THE PROFITS AND GAINS, ON THE OTHER, DERIVED FR OM, OR DERIVED BY, THE INDUSTRIAL UNDERTAKING CONCERNED. I F A SUBSIDY GOES TO REDUCE THE COST OF PRODUCTION OF AN INDUSTRIAL UNDERTAKING, THE RESULTANT PROFITS AND G AINS ARE DEDUCTIBLE UNDER THE PROVISIONS OF SECTION 80IB OR SECTION 80IC, AS THE CASE MAY BE. THE EXPRESSION DERIVED F ROM HAS BEEN USED IN SECTION 80IB AND IT MEANS THAT IT IS T HE BUSINESS OF THE UNDERTAKING, WHICH IS THE DIRECT SO URCE FROM WHICH THE PROFITS AND GAINS ARE DERIVED. IN TH E CASE OF A SUBSIDY, THE EXPRESSION DERIVED FROM, APPEARING IN SECTION 80IB, WOULD, LOGICALLY EXTENDED, MEAN THAT THE SUBSIDY PROVIDED BY THE STATE, DIRECTLY AFFECTS THE BUSINESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING. THE SUPREME COURT IN MEPCO INDUSTIRES CASE HELD THAT IN EACH CASE, TH E NATURE OF SUBSIDY NEEDS TO BE EXAMINED BY THE COURT. CONSEQUENTLY, WITHOUT DETERMINING THE NATURE OF SUB SIDY, INCLUDING THE OBJECT THEREOF, THE IMPACT OF THE SUB SIDY ON THE OPERATION OF THE INDUSTRIAL UNDERTAKING CANNOT BE DETERMINED. THE SUPREME COURT IN SAHNEY STEEL AND P RESS WORKS LTD. VS.- CIT [1997] 228 ITR 253 (SC) LAYS D OWN AN IMMENSELY IMPORTANT ASPECT OF A SUBSIDY VIS-A-VIS L IABILITY TO PAY TAX. WHAT THE SUPREME COURT CLARIFIES IS THA T WHEN A SUBSIDY IS GIVEN FOR THE PURPOSE OF SETTING UP OF A N INDUSTRY, SUCH A SUBSIDY IS A CAPITAL RECEIPT. WHEN , HOWEVER, THE SUBSIDY IS GIVEN FOR THE PURPOSE OF OP ERATION AN INDUSTRY MORE PROFITABLY, THE SUBSIDY WOULD BE R EVENUE RECEIPT AND BEING REVENUE RECEIPT, IT HAS TO BE TAX ED IN ACCORDANCE WITH LAW MEANING THEREBY THAT THE PROFIT S AND GAINS DERIVED FROM, OR DERIVED BY, AN INDUSTRIAL UNDERTAKING IN A CASE, WHERE OPERATIONAL COST IS R EDUCED BY PROVIDING SUBSIDY, IN ANY FORM, THE PROFITS AND GAINS EARNED, BECAUSE OF SUCH SUBSIDY, WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OR SECTION 80IC, AS TH E CASE MAY BE. THE PRINCIPLE DEDUCTIBLE FROM THE CASES OF SAHNEY STEEL AND PRESS WORKS LTD. VS.- CIT [1997] 228 ITR 253 (SC); CIT VS.- RAJARAM MAIZE PRODUCTS [2001] 251 I TR 427 (SC) AND CIT VS.- EASTERN ELECTRO CHEMICAL INDUSTR IES I.T.A. NOS. 1442-1446/KOL./2015 ASSESSMENT YEARS: 2008-2009 & 2012-2013 PAGE 4 OF 4 [1999] 9SCC 20 IS THAT WHEN A SUBSIDY, GRANTED BY T HE GOVERNMENT, IS OPERATIONAL IN NATURE, WHICH HELPS I N GENERATION OF PROFITS FOR ANY INDUSTRIAL UNDERTAKI NG, SUCH A PROFIT IS INDEED, COVERED BY THE PROVISIONS EMBOD IED IN SECTION 80IB OR SECTION 80IC, AS THE CASE MAY BE. SINCE THE RATIO OF THE DECISION OF THE HONBLE GUWA HATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LIMITED (SUPRA) IS SQUAREL Y APPLICABLE TO THE ISSUE INVOLVED IN THE PRESENT CASE RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IC IN RESPECT OF CENTRAL EXCISE REFUND AND SALES TAX REMISSION, I RESPECTFULLY FOLLOW THE SAME AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IC IN RESPECT OF CENT RAL EXCISE REFUND AND SALES TAX REMISSION FOR ALL THE FIVE YEARS UNDER CO NSIDERATION. 4. IN THE RESULT, ALL THE FIVE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 2 1, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF SEPTEMBER, 2016 COPIES TO : (1) INCOME TAX OFFICER, WARD-1(2), JALPAIGURI, ROOM NO. 103, CENTRAL REVENUE BUILDING, GROUND FLOOR, RACE COURSE PARA, NAYA BASTI, P.O. JALPAIGURI-735101, DIST. JALPAIGURI (2) SHRI MANOJ GARG, P.O. BANARHAT, DIST. JALPAIGURI, WEST BENGAL-735 202 (3) COMMISSIONER OF INCOME TAX (APPEALS), JALPAIGU RI; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.