M/s. Vaishno Devi Metals P.Ltd., Jammu V. Income Tax Officer, Jammu

ITA 20/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5682 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Capital receipt
• Section: 234B

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.20 & 21(ASR)/2011. (ASSESSMENT YEARS: 2006-07 & 2007-08) M/S.SHREE VAISHNO DEVI METALS THE INCOME TAX OFFIC ER, P. LTD., SIDCO, INDUSTRIAL COMPLEX, WARD 1(3), BARI BRAHMANA, JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSIONS. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS PASSED BY THE CIT(A), JAMMU BOTH DA TED 21-10-2010, RELATING TO THE ASSESSMENT YEARS 2006-07 AND 2007-0 8. SINCE THE COMMON FACTS AND THE ISSUES ARE INVOLVED IN BOTH THE APPEA LS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY A CONSOLIDATE D ORDER FOR THE SAKE OF CONVENIENCE. 2. I.T.A. NO.20(ASR)/2011(ASSESSMENT YEAR 2006-07): - THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL:- 1. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW I N DISALLOWING DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 OF RS.1,10,16,671/-. 2. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN HOLDING THAT REFUND OF EXCISE DUTY AMOUNTING TO RS.1,10,16,671/- IS NOT 2 INCLUDIBLE IN THE PROFITS COMPUTED FOR PURPOSE OF D EDUCTION U/S.80-IB OF THE INCOME TAX ACT, 1961. 3. THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE IN COME TAX ACT, 1961 BY THE LD. ITO ASSESSING THE TOTAL INCOME FOR ASSESSMENT YEAR 2006-07 AT RS.1,10,16,671/- AND RAISING THE DE MAND OF RS.49,32,000/- IS BAD IN LAW AND NEEDS TO BE QUASHE D. 4. THE LD. A.O. HAS ERRED IN CHARGING INTEREST OF R S.6,10,276/- U/S.234B OF THE INCOME TAX ACT, 1961. 3. I.T.A. NO.21(ASR)/2011(ASSESSMENT YEAR 2007-08): - THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL:- 1. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW I N DISALLOWING DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 OF RS.4,85,47,772/-. 2. THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN HOLDING THAT REFUND OF EXCISE DUTY AMOUNTING TO RS.4,85,47,772/- IS NOT INCLUDIBLE IN THE PROFITS COMPUTED FOR PURPO SE OF DEDUCTION U/S.80-IB OF THE INCOME TAX ACT, 1961. 3. THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE IN COME TAX ACT, 1961 BY THE LD. ITO ASSESSING THE TOTAL INCOME FOR ASSESSMENT YEAR 2007-08 AT RS.4,85,47,772/- AND RAISING THE DE MAND OF RS.1,58,56,956/- IS BAD IN LAW AND NEEDS TO BE QUAS HED. 4. THE LD. A.O. HAS ERRED IN CHARGING INTEREST OF R S.40,13,247/- U/S.234B OF THE INCOME TAX ACT, 1961. 4 IN I.T.A. NO.20(ASR)/2010 FOR THE ASSESSMENT YEA R 2006-07, THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL G ROUNDS OF APPEAL:- 1. THAT EXCISE REFUND AMOUNTING TO RS.1,10,16,.671 /- RECEIVED IN PURSUANCE OF THE INCENTIVES ANNOUNCED AND SANCTIONE D VIDE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUS TRYS OFFICE MEMORANDUM DTD. 14 TH JUNE, 2002 AND CENTRAL EXCISE NOTIFICATION NOS.56 AND 57 DTD. 14 TH NOV., 2002 AND OTHER 3 NOTIFICATIONS ISSUED ON THE SUBJECT, PERTAINING TO THE INDUSTRY POLICY FOR THE STATE OF JAMMU & KASHMIR, IS CAPITAL RECEIPT. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY OF THE GROUNDS OF APPEAL IS FINALLY HEARD OR DISPOSED OFF. 5. IN I.T.A. NO.21(ASR)/2010 FOR THE ASSESSMENT YE AR 2007-08, THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL G ROUNDS OF APPEAL:- 1. THAT EXCISE REFUND AMOUNTING TO RS.4,85,47,772/ - RECEIVED IN PURSUANCE OF THE INCENTIVES ANNOUNCED AND SANCTIONE D VIDE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUS TRYS OFFICE MEMORANDUM DTD. 14 TH JUNE, 2002 AND CENTRAL EXCISE NOTIFICATION NOS.56 AND 57 DTD. 14 TH NOV., 2002 AND OTHER NOTIFICATIONS ISSUED ON THE SUBJECT, PERTAINING TO THE INDUSTRY POLICY FOR THE STATE OF JAMMU & KASHMIR, IS CAPITAL RECEIPT. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY OF THE GROUNDS OF APPEAL IS FINALLY HEARD OR DISPOSED OFF. 6. AS REGARDS THE ADMISSION OF ADDITIONAL GROUNDS I N BOTH THE APPEALS ARE CONCERNED, WE FIND THAT THE ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. (1998) 2 29 ITR 383 (SC), WHEREIN THE HONBLE SUPREME COURT HELD (HEAD NOTE) AS UNDER:- UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO AL LOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHI CH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECES SARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 6.1 IN OUR VIEW, THE ADDITIONAL GROUNDS RAISED BY T HE ASSESSEE ARE A QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE O N RECORD IN THE ASSESSMENT PROCEEDINGS, AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE 4 HONBLE SUPREME COURT IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUNDS OF APPEALS AND PROCEED TO DECIDE THESE APPEALS IN THE SUCCEEDING PARAGRAPHS. 7. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF COPPER INGOTS. THE ASSESSEE R ECEIVED REFUND OF EXCISE DUTY AMOUNTING TO RS.1,10,16,671/- FOR THE ASSESSME NT YEAR 2006-07 AND RS.4,85,47,772/- FOR THE ASSESSMENT YEAR 2007-08 RE SPECTIVELY. ON THESE AMOUNTS, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTI ON 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). HOWEVER, THE A.O. HELD THAT THE EXCISE DUTY REFUND IS A TAXABLE RECEIPT, WHICH IS NOT LIAB LE FOR DEDUCTION U/S.80IB OF THE ACT. 8. 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, KATHUA DATED 26-11-2009 DISMISSED BOTH THE APPEALS OF THE ASSESS EE. 9. WE HAVE HEARD THE LEARNED D.R. AND HAVE ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S.SHREE BAL AJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE J & K HIGH COURT. THE ISSUE BEFORE THE HONBLE JURISDICTIONAL HIGH CO URT 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? 5 10. THE HONBLE JURISDICTIONAL HIGH COURT VIDE JUDG MENT DATED 31-1-2011 IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA, REP ORTED 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. 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 6 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. 11. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE 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.1,10,16,671/- FO R THE ASSESSMENT YEAR 2006-07 AND RS.4,85,47,772/- FOR THE ASSESSMENT YEA R 2007-08 RESPECTIVELY RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR S UNDER CONSIDERATION IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 12. AS REGARDS THE CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT ON THE AMOUNT OF EXCISE DUTY REFUND, WE DO NOT THINK I T NECESSARY TO DECIDE THE SAME, PARTICULARLY WHEN WE HAVE ALLOWED BOTH THE AP PEALS OF THE ASSESSEE. 7 13. COMMON GROUND NO.4 IN BOTH THE APPEALS RELATE T O THE CHARGING OF INTEREST OF RS.6,10,276/- FOR THE ASSESSMENT YEAR 2 006-07 AND RS.40,13,247/- FOR THE ASSESSMENT YEAR 2007-08, RESPECTIVELY, UNDE R SECTION 234B OF THE ACT. WE FIND THAT THIS COMMON GROUND IS CONSEQUENTI AL IN NATURE AND WE HOLD ACCORDINGLY. 14. IN THE RESULT, BOTH THE APPEAL ARE ALLOWED IN THE TERMS, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 22 ND JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.SHREE VAISHNO DEVI METALS PVT. LT D. SIDCO, INDUSTRIAL COMPLEX, BARI BRAHMANA, JAMMU (2) THE ITO, WARD 1(3), 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.