The Dy.Commissioner of Income-tax, Jammu V. M/s. Singla Cables, Jammu

ITA 146/ASR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80597 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K BANSAL
• Keywords: Capital receipt
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 PAN: AAQFS9604Q DEPUTY COMMISSION OF INCOME VS. M/S SINGLA CA BLES, TAX, CIRCLE-1, AAYAKAR BHAWAN, LANE 2, SIDCO IN DUSTRIAL JAMMU, COMPLEX, BARI BRAHMNA, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL, DR RESPONDENT BY: SH. S.K. BANSAL, ADVOCATE DATE OF HEARING: 31.07.2014 DATE OF PRONOUNCEMENT: 06.08.2014 ORDER PER A.D. JAIN, J.M. 1. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YE AR 2008-09 AGAINST THE ORDER DATED 22.02.2012 PASSED BY LEARNE D CIT(A), JAMMU. 2. THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN: 1 ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING RELIEF ON ACCOUNT OF DEDUCTION U/ S 80IB ON EXCISE DUTY REFUND AND INTEREST SUBSIDY BY RELYING UPON O RDERS OF HON'BLE HIGH COURT J&K, JAMMU WHICH HAS BEEN DELIVERED NOT ON MERITS OF THE ISSUE BUT HOLDING THE RECEIPT TO BE A CAPITAL R ECEIPT ONLY BECAUSE THE POLICY UNDER WHICH THE SAME WAS PAID ENVISAGED TACKLING THE 2 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 UNEMPLOYMENT IN THE STATE, WHICH CANNOT BE SAID TO BE A GOOD TEST FOR DECIDING WHETHER A RECEIPT IS A TRADING RECEIPT OR A CAPITAL RECEIPT. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING THE JUDGMENTS OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF PONNI SUGAR & SAHNEY STEEL AND PRESS WORKS LTD, WHEREIN T HE HON'BLE SUPREME COURT HAD HELD SUCH RECEIPTS TO BE THE REVE NUE RECEIPTS INASMUCH AS IN THAT CASE PAYMENTS WERE MADE ONLY AF TER THE INDUSTRIES HAD BEEN SET UP AND PAYMENTS WERE NOT MADE FOR PURP OSE OF SETTING UP OF INDUSTRIES. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT CONSIDERING THE DECISION IN THE CASE OF SEAHAM HARBOUR DOCK COMPANY WHICH LAYS DOWN TWO IMPORTANT TESTS FOR DETERMINING WHETHER RE CEIPTS IS A TRADING RECEIPT OR A CAPITAL RECEIPT. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIATING AND APPLIED THE PURPOSE TEST AS LAID DOWN BY THE JUDGME NTS OF THE HON'BLE SUPREME COURT. IN THE CASE OF ASSESSEE, THE MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF REFUND OF CENTRAL EXCISE & I NTEREST SUBSIDY WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER FOR PURPOSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. 5. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN TREATING THE A.Y. 2004-05 AS INITIAL YEAR OF COMMENCEMENT OF BUSINESS WHEN THE DATE OF ISSUE OF PERMANENT REGISTRATION CERTIFICATION BY DISTRICT INDUSTRIAL CENTRE, JAMMU IS 12.02.2003 I.E. ASSESSMENT YEAR 2003-04. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MOR E GROUNDS OF APPEAL. 3 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 3. AN APPLICATION FOR ADJOURNMENT WAS FILED BY THE ASSESSEE. HOWEVER, AT THE TIME OF HEARING, THE SAME HAS NOT BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSE E. 4. GROUND NOS. 1 TO 4 CHALLENGE THE ACTION OF THE L EARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO RE-COM PUTE THE DEDUCTION ALLOWABLE TO ASSESSEE UNDER SECTION 80IB OF THE INCOME-TAX ACT (IN SHORT THE ACT), ON EXCISE DUTY REFUND AND INTEREST SUBSIDY, FOLLOWING THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN M/S SHREE BALAJI ALLOYS AND ORS. VS. CIT, 333 ITR 335(J&K). 5. GROUND NOS. 1 TO 4 STAND ALREADY DECIDED BY THIS BENCH IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 01 .06.2012, PASSED IN ITA NO. 146(ASR)/2012, FOR THE ASSESSMENT YEAR 2008-09, IN THE FIRST ROUND. THIS APPEAL IS AGAIN B EFORE US, AS IN OUR SAID ORDER, GROUND NO 5 INADVERTENTLY REMAIN ED UNDECIDED. THE DEPARTMENTS APPLICATION IN THIS REG ARD, BEING M.A. 88(ASR)/2013, WAS ALLOWED BY THE BENCH VIDE OR DER DATED 19.05.2014(COPY ON RECORD). 4 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 6. APROPOS GROUND NO. 5, THE ASSESSING OFFICER HELD THE ASSESSMENT YEAR 2003-04 TO BE THE INITIAL YEAR FOR THE ASSESSEE TO CLAIM FOR DEDUCTION UNDER SECTION 80IB OF THE AC T, ON THE BASIS OF THE CERTIFICATE OF REGISTRATION ISSUED BY THE DISTRICT INDUSTRIAL CENTRE, JAMMU, IN WHICH CERTIFICATE, THE DATE OF COMMENCEMENT OF PRODUCTION BY THE ASSESSEE WAS MENT IONED AS 12.02.2003, FALLING IN ASSESSMENT YEAR 2003-04. 7. THE LEARNED CIT(A), ON THE OTHER HAND, FOLLOWING THE CASES OF M/S NESTOR PHARMACEUTICALS LTD DECIDED BY THE HONBLE DELHI HIGH COURT IN I.T.A. NO. 1154/2009 AN D I.T.A. NO. 1204/2009 AND M/S METROPOLITAN SPRINGS PVT. LT D. VS. CIT (CENTRAL), BOMBAY, 132 ITR 893 (BOM.), DIRECTE D THE ASSESSING OFFICER TO TREAT THE ASSESSMENT YEAR UNDE R CONSIDERATION, I.E., THE A.Y. 2008-09 AS THE ASSESS EES 5 TH YEAR OF PRODUCTION AND TO ALLOW THE DEDUCTION UNDER SECT ION 80IB OF THE ACT @ 100%. 8. CHALLENGING THE IMPUGNED ORDER, THE LEARNED DR H AS CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN TREATING THE A SSESSMENT YEAR 2004-05 AS THE ASSESSEES INITIAL YEAR OF COMMENCEMENT OF B USINESS WHEN THE DATE 5 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 OF ISSUE OF PERMANENT REGISTRATION CERTIFICATION BY THE DISTRICT INDUSTRIAL CENTRE, JAMMU, IS 12.02.2003, FOLLOWING IN ASSESSME NT YEAR 2003-04. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER IN THI S REGARD. 10. THE MATTER, IT IS SEEN, IS SQUARELY COVERED BY M/S NESTOR PHARMACEUTICALS LTD. (SUPRA) AND M/S METROPOLITAN SPRINGS PVT. LTD. (SUPRA). IN M/S NESTOR PHARMACEUTICALS LTD. (SUPR A), IT HAS BEEN HELD THAT: IN VIEW OF CONSISTENT VIEW TAKEN BY VARIOUS HIGH C OURTS, WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW AND ARE IN RESPECTFUL AGREEMENT WITH THE DICTA LAID DOWN IN THE AFORESAID JUDGMENTS. IT IS MORE SO WHEN EVEN THIS COURT, WAY BACK IN THE YEAR 1984, IN COMMISSIONER OF INCOME TAX VS. FOOD SPECIALITIES LT D., 15 ITR 790, FOLLOWING THE RATION OF HINDUSTAN ANTIBIOTICS LTD. (SUPRA) AS IS CLEAR FROM THE FOLLOWING: AS REGARDS THE YEAR OF MANUFACTURE, ON THE QUESTION WHETHER THERE CAN BE AN EXPERIMENTAL PERIOD, A REFERENCE WA S MADE TO THE CASE OF HINDUSTAN ANTIBIOTICS LTD, 93 ITR 548 A ND MADRAS MACHINE TOOLS MANUFACTURERS LTD. VS. CIT, 9119 IN B OTH OF WHICH IT WAS HELD THAT MANUFACTURING FOR THE PURPOS E OF SECTION 15C OF THE 1922 ACT AND SECTION 84 OF THE 1961 ACT WAS THE DATE OF COMMERCIAL MANUFACTURE AND THE PERIOD DURING W HICH EXPERIMENTAL WORK, PARTICULARLY MANUFACTURE, WAS EF FECTED HAD TO BE DISREGARDED. IT, THEREFORE, APPEARS THAT THERE IS AN AUTHORITATI VE VIEW THAT SECTION 84 COMMENCES TO OPERATE NOT FROM THE DATE W HEN AN UNDERTAKING PHYSICALLY STARTS TO MANUFACTURE BUT OP ERATES FROM THE DATE ON WHICH COMMERCIAL MANUFACTURE IS TO STAR T. THIS 6 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 OBSERVATION WAS MADE IN THE LIGHT OF SECTION 84(7) WHICH STATES THAT THE PROVISIONS OF THE SECTION IN RELATION TO A N INDUSTRIAL UNDERTAKING IS TO APPLY IS FROM THE ASSESSMENT YEA R RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS T O MANUFACTURE/PRODUCE ARTICLES. IT IS HAPPENED THAT O N EXPERIMENTAL BASIS, THE ASSESSEE, IN THE PRESENT CA SE, STARTED MANUFACTURE IN DECEMBER, 1963, BUT ON COMMERCIAL BA SIS, THIS STARTED ONLY IN JANUARY, 1964, WHICH WOULD BE IN TH E ASSESSMENT YEAR 1965-66. THE CONTROVERSY THAT SEEMS TO HAVE ARISES WAS WHETHER THE EXPERIMENTAL PORTION OF MANU FACTURE WAS TO BE CONSIDERED AS A PERIOD DURING WHICH MANU FACTURE HAD TAKEN PLACE FOR THE PURPOSES OF APPLYING SECTIO N 84(7). 11. IN M/S METROPOLITAN SPRINGS PVT. LTD. (SUPRA), THE TRIBUNALS DECISION, TO THE EFFECT THAT ONCE THE MA TERIALS ARE FED INTO THE MACHINE, WHETHER FOR TRIAL PRODUCTION OR FOR COMMERCIAL PRODUCTION, IT WOULD AMOUNT TO MANUFACTU RE, WAS HELD TO BE INCORRECT, AS BEING INCONSISTENT WITH TH E CASE OF CIT VS. HINDUSTAN ANTIBIOTICS LTD, 93 ITR 548 (BO M.). THE CASE OF HINDUSTAN ANTIBIOTICS LTD (SUPRA), IT IS SEEN, HAS ALSO BEEN FOLLOWED IN THE CASE OF M/S NESTOR PHARM ACEUTICALS LTD.(SUPRA). 12. NO DECISION CONTRARY, EITHER TO M/S NESTOR PHARMACEUTICALS LTD. (SUPRA), OR TO M/S METROPOLI TAN SPRINGS PVT. LTD. (SUPRA), HAS BEEN CITED BEFORE US BY THE DEPARTMENT. THEREFORE, WE UPHOLD THAT THE LEARNED CIT(A) HAS RI GHTLY 7 I.T.A. NO. 146(ASR)/2012 ASSESSMENT YEAR: 2008-09 FOLLOWED THE CASES OF M/S NESTOR PHARMACEUTICALS L TD. (SUPRA) AND METROPOLITAN SPRINGS PVT. LTD. (SUPRA ) TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, T HE CIT(A)S ORDER IN THIS REGARD IS CONFIRMED. GROUND NO. 5, AS SUCH, STANDS REJECTED. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST, 2014 SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH AUGUST, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S SINGLA CABLES, LANE 2, SIDCO INDU STRIAL COMPLEX, BARI BRAHMNA, JAMMU 2. DCIT, CIRCLE-1, AAYAKAR BHAWAN, JAMMU 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.