Asst. Commissioner of Income Tax, Circle-2(1), Panaji V. M/s Shaiv Distilleries Pvt. Ltd., Goa

ITA 179/PAN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1320 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHINMAY S KAMAT; Y AM J KAMAT
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 17 9/PNJ/201 4 (ASST. YEAR : 200 9 - 1 0 ) ACIT, CIRCLE - 2(1), PANAJI GOA. VS. M/S. SHAIV DISTILLERIES (P) LTD., PLOT NO. 101 - 104, BICHOLIM INDUSTRIAL ESTATE, BICHOLIM GOA. PAN NO. AAHCS 7846 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SH Y AM J. KAMAT C A & SHRI CHINMAY S. KAMAT - CA DEPARTMENT BY : SHRI PRASHANT GADEKAR - D R DATE OF HEARING : 18 / 1 1 /2015 . DATE OF PRONOUNCEMENT : 1 8 / 1 1 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI , DATED 14 /0 2 /201 4 . 2. THIS APPEAL OF THE REVENUE WAS DISPOSED OFF BY THE TRIBUNAL VIDE ORDER DATED 14/08/2014 PASSED IN ITA NO. 179/PNJ/2014 . THE ASSESSEE FILED APPEAL AGAINST THE SAID ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT OF BOMBAY AT GOA PANAJI . THE HONBLE HIGH COURT VIDE ITS ORDER DATED 07/07/2015 PASSED IN TAX APPEAL NO. 29/2015 RESTORED THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE TO THE TRIBUNAL FOR DECIDING AFRESH AFTER HEARING BOTH THE PARTIES IN ACCORDANCE WITH LAW. HENCE, WE AR E PROCEEDING TO DECIDE GROUND NO.2 OF THE APPEAL OF THE REVENUE. 2 ITA NO. 179 /PNJ/201 4 3 . GROUND NO.2 OF THE APPEAL OF THE REVENUE READS AS UNDER: - 2) THE LD CIT(A) HAS ERRED IN NOT CONSIDERING THAT SALES TAX INCENTIVE IS IN THE NATURE OF DUTY DRAWBACK AND THE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT SQUARELY APPLIES TO THE FACTS OF THE ASSESSEES CASE AS SALES TAX INCENTIVE IS INCENTIVE PROFIT AND THE SAME IS NOT ELIGIBLE FOR 80IB BENEFIT. 4 . WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD RECEIVED SALES TAX INCENTIVE OF 4,58,64,698/ - FROM THE COMMERCIAL TAX DEPARTMENT AS V ATD - NPV - CPS2005 APPEARING IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD OTHER INCOME . THE ASSESSEE CLAIMED 80IB BENEFIT ON THE ABOVE INCOME TREATING IT AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING . ACCORDING TO THE ASSESSING OFFICER, THE SALES TAX INCENTIVE IS IN THE NATURE OF DUTY DRAWBACK AND THE SUPREME COURTS DECISION IN THE CASE OF LIBERTY INDIA VS. CIT (317 ITR 218) WHEREIN IT WAS HELD THAT THE DUTY DRAWBACK RECEIPTS AND DEPB BENEFITS DO NOT FORM PART OF THE NET PROFITS OF THE ELIGIBLE INDUST RIAL UNDERTAKING FOR THE PURPOSE OF DEDUCTION UNDER SEC. 80I/80IA/80IB OF THE INCOME TAX ACT, 1961 SQUARELY APPLIES TO THE FACTS OF THE ASSESSEES CASE. HE, THEREFORE, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB ON THE SALES TAX INCENTIVE RECEIVED BY IT AND ACCORDINGLY DISALLOWED THE SAME . 5. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: - 9. I HAVE GONE THROUGH THE LETTER OF THE A.O. REQUESTING FOR ENHANCEMENT AND THE SUBMISSION OF THE APPELLANT. IN THIS CASE, THE ASSESSEE IS COLLECTING 100% OF THE SALES TAX FROM ITS CUSTOMERS AND PAYING 25% TO THE GOVT. OF GOA, WHILE RETAINING THE BALANCE AMOUNT FOR ITSELF. THE INCIDENCE OF COLLECTION OF SALES TAX IS INTRICATELY CONNECTED TO EVERY SALE MADE BY THE APPELLANT AND THEREFORE IS PART OF ASSESSEES SALES TURNOVER AND THE SAME CANNOT BE SEPARATE D. THE AMOUNT PAID TO THE GOVT. OF GOA IS AN 3 ITA NO. 179 /PNJ/201 4 EXPENSE TO THE ASSESSEE. SINCE SALES TAX RECOVERED IS PART OF SALES TURNOVER, IT IS THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THEREFORE, IN MY OPINION, ENHANCEMENT APPLICATION FILED BY THE A.O. CANN OT BE SUSTAINED. 6 . BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. SHRI MAHALASA POWER RENTALS PASSED IN I.T.A.NO. 54/PNJ/2013 IN THE ASSESSMENT YEAR 2009 - 10 ORDER DATED 04/08/2015 . 7 . WE FIND THAT THE TRIBUNAL IN THE CASE OF M/S. SHRI MAHALASA POWER RENTALS (SUPRA) HELD AS UNDER: - 8 . WE FIND THAT THIS VERY BENCH OF THE TRIBUNAL IN THE CASE OF M/S.CORAL CLINICAL SYSTEMS (SUPRA) HELD AS UNDER: - 9 . BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED INCENTIVE OF RS. 18,98,162/ - UNDER GOA VAT DEFERMENT CUM NET COMPULSORY PAYMENT SCHEME 2005. THE ASSESSEE CLAIMED 80IB BENEFIT ON THE ABOVE INCOME TREATING THEM AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF STERLING FOODS VS. CIT REPORTED IN 237 ITR 579, PANDIAN CHEMICALS LTD. VS. CIT REPORTED IN 262 ITR 278 AND LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 HELD THAT TAX INCENTIVE IS INCENTIVE PROFIT AND THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. 10 . ON APPEAL, LD. CIT(A) FOLLOWING THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. MEGHA LAYA STEELS LTD. REPORTED IN (2011) 221 TAXMANN 79, WHO AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA), HELD THAT EXCISE DUTY REFUND IS INEXTRICABLY LINKED WITH MANUFACTURING ACTIVITY AND HENCE IS ELIGIBLE FOR DEDUCTION U/S. 80IB, ALLOWED THE CLAIM OF DEDUCTION U/S. 80IB TO THE ASSESSEE ON GOA VAT INCENTIVE. 11 . BEING AGGRIEVED BY THIS ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4 ITA NO. 179 /PNJ/201 4 12 . DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE A R SUPPORTED THE ORDER OF THE LD. CIT(A). 13 . WE FIND THAT ON A SIMILAR ISSUE, THE BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DIAMOND TOOL INDUSTRIES VS. JCIT IN I.T.A.NO. 136/MUM/2009 VIDE ORDER DATED 14/12/2011, HELD AS UNDER: - '6. WE HAVE CONSIDE RED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) AFTER CONSID ERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HAS HELD THAT CENTRAL EXCISE DUTY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY THE REFUND OF THE CENTRAL EXCISE DUTY ALSO HAD A DIRECT NEXUS WITH THE MANUF ACTURING ACTIVITY. THE ISSUE OF PAYMENT OF CENTRAL EXCISE DUTY WOULD NOT ARISE IN THE ABSENCE OF ANY INDUSTRIAL ACTIVITY. IT WAS, ACCORDINGLY, HELD THAT THE REFUND OF EXCISE DUTY HAS TO BE TAKEN INTO ACCOUNT FOR PURPOSES OF SECTION 80 - IB. FOLLOWING THE RAT IO OF THE SAID DECISION, WE ARE OF THE CONSIDERED OPINION THAT THERE IS AN INEXTRICABLE LINK BETWEEN THE MANUFACTURING ACTIVITY, THE PAYMENT OF SALES TAX AND THE SALES TAX INCENTIVE. THEREFORE, IN OUR OPINION, SUCH SALES TAX INCENTIVE WHICH HAS BEEN RETAIN ED BY THE ASSESSEE FROM THE SALES TAX COLLECTED HAS TO BE HELD AS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND CONSEQUENTLY IS ELIGIBLE FOR DEDUCTION U/S 80 - IB OF THE ACT. IN THIS VIEW OF THE MATTER, THE ORDER OF THE LD.CIT(A) IS SET ASIDE AND THE A.O. IS DIRECTED NOT TO EXCLUDE THE SALES TAX INCENTIVE OF 12,94,1097 - AND RS.84,687/ - FROM THE PROFIT OF UNIT - 1 AND UNIT - II RESPECTIVELY WHILE CALCULATING DEDUCTION U/S 80 - IB OF THE ACT. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 14 . FURTHER, ON A SIMILAR ISSUE, HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. COROMANDEL INTERNATIONAL LTD. IN I.T.A.NO. 1147 & 1157/HYD/2014 & C.O.NOS. 52 & 53/HYD/2014 VIDE ORDER DATED 21/11/2014, HELD AS UNDER: - 8. HAVING CONSIDERED RIVAL S UBMISSIONS AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD AND AFTER HAVING APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN ALLOWING BENEFIT U/S 80I B TO ASSESSEE ON EXCISE DUTY REFUND FOR THE FOLLOWING REASONS. 5 ITA NO. 179 /PNJ/201 4 9. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT AO HAS DENIED 80IB DEDUCTION ON EXCISE DUTY REFUND FOR THE SOLE REASON THAT IT CANNOT BE TREATED AS INCOME DERIVED FROM ELIGIBLE BUSINESS OF THE U NDERTAKING. HOWEVER, AS CAN BE SEEN FROM THE FACTS BROUGHT ON RECORD, THERE IS NO DISPUTE THAT ASSESSEE HAS PAID THE EXCISE DUTY ON THE GOODS MANUFACTURED AND SOLD AND AS SUCH IT FORMS PART OF THE SALE PRICE OF ASSESSEE. THEREFORE, PAYMENT OF CENTRAL EXCIS E DUTY IS INTEGRALLY CONNECTED WITH THE MANUFACTURING AND SALE OF GOODS PRODUCED BY ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT AS PER THE INDUSTRIAL POLICY RESOLUTION DECLARED FOR THE STATE OF J&K AND CONSEQUENT TO CENTRAL EXCISE DEPARTMENT NOTIFICATION, ASS ESSEE BECAME ELIGIBLE FOR REFUND OF EXCISE DUTY PAID AFTER SET OFF OF CENVAT CREDIT. THEREFORE, IN SUM AND SUBSTANCE, IT IS ONLY A REFUND OF AN AMOUNT ALREADY PAID BY ASSESSEE AND REDUCED FROM THE SALE PRICE WHILE COMPUTING THE PROFIT. THEREFORE, WHEN ASSE SSEE GETS REFUND OF AN EXPENDITURE ALREADY INCURRED THE SAME HAS TO BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION CARRIED ON BY ASSESSEE IN TERMS OF SECTION 41(1)(A) OF THE ACT. IN THAT VIEW OF THE AFTER, EXCISE DUTY REFUND RECEIVED BY AS SESSEE HAS TO BE TREATED AS PART OF THE BUSINESS PROFIT, HENCE, ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. OTHERWISE ALSO, AS PAYMENT OF EXCISE DUTY IS DIRECTLY LINKED WITH THE MANUFACTURING OF GOODS, REFUND OF EXCISE DUTY HAS TO BE TREATED AS INCOME DERI VED FROM ELIGIBLE BUSINESS AS PROVIDED U/S 80IB. IN THE AFORESAID VIEW OF THE MATTER, ASSESSEE WILL BE ELIGIBLE TO CLAIM DEDUCTION U/S 80IB ON THE INCOME ACCRUING FROM REFUND OF EXCISE DUTY. SO FAR AS THE RATIO IN CASE OF LIBERTY INDIA VS. CIT (SUPRA), THE FACTS ARE CLEARLY DISTINGUISHABLE AND DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN CASE OF LIBERTY INDIA, THE H ONBLE SUPREME COURT WAS CONSIDERING THE PROFITS DERIVED FROM SALE/TRANSFER OF DEPB/DUTY DRAW BACK BENEFITS. DEPB/DUTY DRAW BACK BENEFITS, IS GIVEN UNDER A SCHEME FRAMED UNDER THE CUSTOMS ACT AND IT IS TRANSFERABLE, IN OTHER WORDS, IT IS A MARKETABLE COMMO DITY. EXCISE DUTY REFUND BY ASSESSEE IN THE PRESENT CASE IS NEITHER A MARKETABLE COMMODITY NOR TRANSFERABLE. IT IS ONLY A REFUND OF EXPENDITURE ALREADY INCURRED BY ASSESSEE, HENCE THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) W ILL NOT APPLY. IN THE AFORESAID 6 ITA NO. 179 /PNJ/201 4 VIEW OF THE MATTER, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING GROUNDS RAISED. 15 . THUS, ON PERUSAL OF THE ABOVE QUOTED ORDERS OF THE TRIBUNAL, WE FIND THAT THE GOA VAT INCENTIVE RECEIVED BY THE ASSESSEE IS DIRECTLY L INKED WITH THE MANUFACTURING AND SALE OF GOODS AND THEREFORE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND CONSEQUENTLY IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIONS OF THE TRIBUNAL, WE C ONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 9. FACTS BEING IDENTICAL RESPECTFULLY FOLLOWING THE PRECEDENT, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THIS PART OF THE GROUND OF APPE AL OF THE REVENUE. THEREFORE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 8 . IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 1 8 TH DAY OF NOVEMBER , 201 5 AT GOA . SD/ - SD/ - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 8 TH N O V E M B E R , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER 7 ITA NO. 179 /PNJ/201 4 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 8 . 1 1 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 19 . 1 1 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 19 / 1 1 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 19 / 1 1 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 9 / 1 1 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 18 / 1 1 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 19 / 1 1 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER