Pee Ell Alloys, Jammu V. The Additional Commissioner of Income Tax, Jammu

ITA 17/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5681 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA; RAJAT MEN GI
• Keywords: Capital receipt
• Section: 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.17(ASR)/2011. (ASSESSMENT YEAR: 2007-08) M/S.PEE ELL ALLOYS, THE ADDL. C.I.T., JAMMU. RANGE I, JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: S/SHRI P.N. ARORA, ADV. & RAJAT MEN GI, C.A. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER MEHAR SINGH, ACCONNTANT MEMBER. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JAMMU DATED 2-11-2010, RELATING TO THE ASSE SSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSSSEE HAS TAKEN THE FOLLOW ING GROUND:- 1. THE LD. CIT(A) AND THE A.O. HAVE ERRED ON FACTS AND IN LAW ON FACTS AND IN LAW IN PASSING THE IMPUGNED ORDER WHIC H IS CONTRARY TO LAW, EQUITY AND JUSTICE AND FACTS & MAT ERIAL ON RECORD, ARBITRARY, BASED ON CONJECTURES AND SURMISE S. 2. THE APPELLANT DENIES HIS LIABILITY TO TAX AS DET ERMINE AND COMPUTED AND THE MANNER IN WHICH IT HAS BEEN SO DET ERMINED OR COMPUTED. 3. THE CIT(A) ERRED ON FACTS AN IN LAW IN UPHOLDING THE ACTION OF LD. A.O. IN DISALLOWING DEDUCTION UNDER SECTION 80I (B) ON THE FOLLOWING: 2 A) RS.2,76,12,340/- ON ACCOUNT OF CENTRAL EXCISE DUTY REFUND. B) RS.3,21,040/- BEING INTEREST EARNED ON FDRS. 4. THE LD. A.O. HAS ERRED IN LAW IN CHARGING INTERE ST OF RS.782644/- ON ACCOUNT OF INTEREST U/S.234B OF THE INCOME TAX ACT, 1961. 5. THE APPELLANT CRAVES LEAVES TO AND PERMISSION TO ADD, TO ALTER OR DELETE ANY OF THE GROUNDS OF APPEAL AT ANY TIME UPTO THE FINAL DECISION OF THE APPEAL. 6. THE APPELLANT CRAVES LEAVE AND SANCTION TO FILE ADD ITIONAL EVIDENCE, IF SO REQUIRED PROPER PROSECUTION OF THE CASE, BASED ON FACTS AN CIRCUMSTANCES, WHICH HAS NOT BEEN OR COULD NOT BE EDUCED OR FILED BEFORE LOWER AUTHORITI ES EITHER BECAUSE PROPER AN SUFFICIENT OPPORTUNITY/TIM E WAS NOT PROVIDED OR BECAUSE IT WAS NOT SOLICITED OR ITS NEED WAS NOT PROVIDED OR BECAUSE IT WAS NOT SOLICITED OR ITS NEED WAS APPRECIATED. 3. GROUND NOS.1 AND 2 ARE GENERAL IN NATURE AND HEN CE NO FINDINGS ARE BEING GIVEN. 4. THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GROU ND OF APPEAL, WHICH READS AS UNDER:- THAT THE LD. CIT(A), JAMMU, WAS NOT JUSTIFIED IN T REATING THE SUM O RS.2,76,12,340/- AS REVENUE RECEIPT. THE LD. CIT(A) , DID NOT APPRECIATE THAT THIS AMOUNT RECEIVED WAS A CAPITAL RECEIPT WHICH WAS NOT SUBJECT TO TAX. 5 THE TEXT AND INTENT OF THIS ADDITIONAL GROUND GOE S TO THE ROOT OF THE ISSUE BEING LEGAL IN NATURE, THEREFORE, RESPECTFULL Y FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. (1998) 229 ITR 383 (SC), THE SAME IS ADM ITTED. 3 6. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFAC TURE OF FERRO CHROME AND FERRO SILICON, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED EXCISE DUTY REFUND OF RS.2,76,12,340/- AND ON THIS AMOUNT, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX, 1961 (IN SHORT, THE ACT). THE A.O. DID NOT ALLOW DEDUCTION AND TR EATED THE IMPUGNED AMOUNT AS REVENUE RECEIPT AND ALSO TAXED THE SAME. 7. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE A. O. FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA. THE ASSESSEE (M/S. SHREE BA LAJI ALLOYS) CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT OF J & K. THE ISSUES RAISED BEFORE THE HONBLE J & K HIGH COURT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTEREST 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? 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 4 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 BEHALF, TO THE APPELLANTS-ASSESSEES, CANNOT BE CONS TRUE AS MERE 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. 5 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 JUDGEMENT OF THE HON BLE JURISDICTIONAL J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLO YS (SUPRA), WE HOLD THAT THE EXCISE DUTY REFUND OF RS.2,76,12,340/- RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER TH E PROVISIONS OF THE ACT. 10. THE ASSESSEE HAS ALSO CLAIMED DEDUCTION UNDER S ECTION 80IB OF THE ACT ON THE AMOUNT OF EXCISE DUTY REFUND. AS WE HAVE RESPECTFULLY FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA) ON THE ISSUE IN QUE STION, WHEREBY THE HONBLE HIGH COURT HAS ADJUDICATED THAT THE EXCISE DUTY REFUND IS CAPITAL IN NATURE AND NOT ELIGIBLE TO TAX. FURTHER THE HON BLE HIGH COURT THOUGHT IT FIT TO ADJUDICATE THE GROUND U/S.80IB IN RESPECT OF THE SAID AMOUNT. CONSEQUENTLY, THE SAME CANNOT BE ADJUDICATED AT THI S STAGE. 11. SHRI P.N. ARORA, ADVOCATE, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO.3(B) AND ACCORDINGLY, WE DISMIS S THE SAME AS NOT PRESSED. 6 12. GROUND NO.4 OF THE APPEAL IS STATED TO BE CONSE QUENTIAL IN NATURE, WE HOLD ACCORDINGLY. 13. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 14. IN THE ABOVE TERMS, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT. ACCOUNTANT MEMBER. DATED: 22 ND JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.PEE ELL ALLOYS, JAMMU. (2) THE ADDL. CIT, RANGE I, 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,