Smt. Manju Aggarwal, Jammu V. The Income tax Officer, Kathua

ITA 169/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5716 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: HARDEEP AGGARWA L CAS; SSH ARUN GUPTA
• Keywords: Capital receipt

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.169(ASR)/2010. (ASSESSMENT YEAR: 2006-07) SMT. MANJU AGGARWAL, THE INCOME TAX OFFICER, PROP. M/S.GAURAV AGRO KATHUA. CHEM INDUS.,13-A,SICOP, INDUSTRIAL AREA, KATHUA (J& K). (APPELLANT) VS. (RESPONDENT) APPELLANT BY: S/SH. ARUN GUPTA & HARDEEP AGGARWA L, CAS. 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. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW AN D FACTS OF THE CASE. 2. THE CIT(A) HAD DISPOSED OFF THE APPEAL IN A HAST E MANNER WITHOUT PROVIDING SUFFICIENT OPPORTUNITY TO THE ASS ESSEE BEING IN GROSS VIOLATION TO THE PRINCIPLES OF NATURAL JU STICE & FAIRNESS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW THE CIT(A) HAD GROSSLY ERRED IN CONFIRMING THE DECI SION OF AO IN NOT ALLOWING DEDUCTION U/S.80IB ON EXCISE DUTY R EFUND OF RS.2,80,77,057/-. 2 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW THE CIT(A) HAD GROSSLY ERRED IN CONFIRMING THE DECI SION OF AO IN NOT ALLOWING DEDUCTION U/S.80-IB ON FDR INTEREST OF RS.6,663/-. 5. THAT ANY INCENTIVE GIVEN UNDER INDIRECT TAXES BY THE GOVT. OF INDIA CANNOT BE TAXED UNDER DIRECT TAXES, WHICH WAS NEVER THE INTENTION OF THE STATUE. 6. THAT THE HONBLE HIGH COURT OF JAMMU & KASHMIR I N THE CASE OF SHREE BALAJI ALLOYS VS. CIT (333 ITR 335) HAS CO NCLUDED THAT THE EXCISE DUTY REFUND IS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND THUS IS NOT LIABLE TO TAX. 7. THAT THE APPELLANT CRAVES LEAD TO ADD OR AND/OR AMEND, MODIFY OR WITHDRAW THE GROUNDS OF OUTLINED ABOVE, BEFORE O R AT THE TIME OF HEARING OF THE APPEAL. 3. GROUND NOS.1, 2AND 7 ARE GENERAL IN NATURE AND H ENCE NO FINDINGS ARE BEING GIVEN. 4. AS REGARDS GROUND NOS.5 AND 6 OF THE APPEAL, THE FACTS ARE THAT THE ASSESSEE FIRM IS MANUFACTURING MENTHOL FLAKES. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED REFUND OF EXCI SE DUTY AT RS.2,80,77,057/- AND CLAIMED DEDUCTION UNDER SECTIO N 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). THE A.O. DENIE D THE CLAIM OF THE ASSESSEE AND TREATED THE IMPUGNED ADDITION AS REVENUE RECEIP T AND TAXED THE SAME. 5. 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. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S. SHREE BALAJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE JURISDICTIONAL J & K 3 HIGH COURT. THE ISSUE BEFORE THE HONBLE JURISDIC TIONAL 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? 7. 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. 4 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. 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. 5 8. 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 EXCISE DUTY REFUND AMOUNTING TO RS.2, 80,77,057/- RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSI DERATION IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVIS IONS OF THE INCOME TAX ACT, 1961. GROUND NOS.5 AND 6 STAND ALLOWED. 9. SINCE WE HAVE ALLOWED GROUND NOS.5 AND 6 OF THE APPEAL, WE, THEREFORE, DO NOT THINK IT NECESSARY TO ADJUDICATE GROUND NO.3 OF THE APPEAL. 10. AT THE TIME OF HEARING, SHRI ARUN GUPTA, C.A., THE LEARNED COUNSEL FOR THE ASSESSEE, DID NOT PRESS FOR THIS GROUND NO.4 OF THE APPEAL AND HENCE WE DISMISS THE SAME AS NOT PRESSED. 11. IN THE ABOVE TERMS, THE APPEAL IS ALLOWED PARTL Y AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST JUNE, 20 11. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 21 ST JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: SMT. MANJU AGGARWAL, PROP.GAURAV AGRO CHEM INDS, 13-A, SICOP, INDUSTRIAL AREA, KATHUA (J&K), (2) THE ITO, KATHUA. (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. 6