The DCIT, Jammu V. Sh. Rajinder Kumar Prop., Jammu

ITA 175/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5668 (ITAT-AMRITSAR)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BANSAL
• 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. NOS.175 & 176(ASR)/2011. (ASSESSMENT YEARS: 2006-07 & 2007-08) THE DY. C.I.T., SHRI RAJINDER KUMAR, CIRCLE 2, PROP. M/S.RAJDHANI INTERNATIONAL, JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI S.K. BANSAL, ADV. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THESE TWO APPEALS FILED BY THE REVENUE INVOLVING COMMON ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. COMMON GROUNDS OF APPEALS ARE AS UNDER:- 1 ON THE FACTS AND THE CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING RELIEF ON ACCOUNT OF DEDUCTION U/ S.80IB ON CENTRAL EXCISE DUTY REFUND BY RELYING UPON ORDERS O F HONBLE HIGH COURT OF J&K, JAMMU WHICH HAS BEEN DELIVERED N OT ON MERITS OF THE ISSUE BUT HOLDING THE RECEIPT TO BE A CAPITAL RECEIPT ONLY BECAUSE THE POLICY UNDER WHICH THE SAME WAS PA ID ENVISAGED TACKLING THE UNEMPLOYMENT IN THE STATE WH ICH CANNOT BE SAID TO BE A GOOD TEST FOR DECIDING WHETHER A RE CEIPT IS A TRADING RECEIPT OR A CAPITAL RECEIPT. 2 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 HONBLE SUPREME COURT OF INDIA IN THE CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD., W HEREIN THE HONBLE SUPREME COURT HAD HELD SUCH RECEIPTS TO BE THE REVENUE RECEIPTS IN AS MUCH AS IN THAT CASE PAYMENT S WERE MADE ONLY AFTER THE INDUSTRIES HAD BEEN SET UP AND PAYME NTS WERE NOT MADE FOR PURPOSE 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 COM PANY WHICH LAYS DOWN TWO IMPORTANT TESTS FOR DETERMINING WHETHER RECEIPTS 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 JU DGMENTS OF THE HONBLE SUPREME COURT. IN THE CASE OF ASSESSE E THE MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF REFUND OF CE NTRAL EXCISE WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER FOR PURPOSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE DURING THE PERIOD, RELEVANT TO THE ASSESSMENT YEAR 2006-07, THE ASSES SEE RECEIVED REFUND OF EXCISE DUTY AMOUNTING TO RS.2,71,75,015/-. SIMILAR LY, FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE RECEIVED REFUND OF EXCIS E DUTY AMOUNTING TO RS.1,64,81,670/-. ON THE ABOVE AMOUNTS, THE ASSESS EE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). HOWEVER, THE A.O. DID NOT ACCEPT THE CLAIM OF THE A SSESSEE AND TAXED THE ENTIRE AMOUNTS IN BOTH THE YEARS. 4. ON APPEAL, THE CIT(A) FOLLOWING THE JUDGMENT DAT ED 31-1-2011 OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S.SHREE BALAJI ALLOYS, 3 REPORTED IN (2011) 333 ITR 335 (J&K) ALLOWED THE A PPEALS OF THE ASSESSEE AND HENCE THE REVENUE IS IN APPEALS BEFORE THE TRIB UNAL. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA). IN THE CASE OF M/S.SHREE B ALAJI ALLOYS (SUPRA), THE ISSUE BEFORE THE HONBLE 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, BE CONSTRUED AS PRODUCTION OR OPERATIONAL INCENTIVE S FOR THE BENEFIT OF ASSESSEES ALONE. 4 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. 5 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 J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) AND ACCORDINGLY, WE UPHOLD THE SAME, 8. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 24 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: SHRI RAJINDER KUMAR., JAMMU. (2) THE DCIT, CIRCLE 2, 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.