Asst. Commissioner of Income Tax, Circle-2 (1), Panaji V. M/s Esteem Industries (P) Ltd., Goa

ITA 213/PAN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1391 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 26-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR SUNDARESAN S
• Assessee Lawyers: MAHENDRA B SANGHVI
• Section: 80IB; 10; 2; 11

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 S . 2 1 1 TO 213 /PNJ/201 4 (ASST. YEAR S : 200 9 - 1 0 TO 2011 - 12 ) ACIT, CIRCLE - 2(1), PANAJI - GOA VS. M/S. ESTEEM INDUSTRIES (P) LTD. , PLOT NO. 76 - 77 , PISSURLEM INDUSTRIAL ESTATE, PISSURLEM, SATTARI - GOA. PAN NO. AA A C E 9474 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHENDRA B. SANGHVI C A DEPARTMENT BY : SHRI DR. SUNDARESAN S. - D R DATE OF HEARING : 2 4 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 2 4 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER TH E S E ARE THE APPEAL S FILED BY THE REVENUE AGAINST THE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI , DATED 18/03/2014 & 19 /0 3 /201 4 . A SSESSMENT Y EAR 2009 - 10 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SEC. 80IB TO THE ASSESSEE ON INTEREST INCOME FROM BANK, SALES TAX INCENTIVES, EXCISE REFUND AND REFUND OF ENTRY TAX . 2 ITA NO. 211 - 213/PNJ/2014 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HELD THAT DEDUCTION UNDER SEC. 80IB IS ALLOWABLE TO THE A SSESSEE ON PROFITS AND GAINS DERIVED FROM ELIGIBLE BUSINESS. ACCORDING TO THE ASSESSING OFFICER, SALES TAX INCENTIVES, EXCISE DUTY REFUND INCENTIVES , ENTRY TAX REFUND INCENTIVES AND INTEREST INCOME FROM BANK ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS OF THE UNDERTAKING UNDER SEC. 80IB. ACCORDING TO THE ASSESSING OFFICER, THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 HAS HELD THAT THE IMMEDIATE SOURCE OF INCOME FOR THE DUTY DRAWBACK IS THE GOVE RNMENT POLICY AND NOT THE INDUSTRIAL UNDERTAKING AND, THEREFORE, PROFITS ARE NOT PROFITS DERIVED FROM THE BUSINESS UNDERTAKING UNDER SEC. 80IB, HENCE , NOT ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB. CONSEQUENTLY , THE ASSESSING OFFICER REDUCED THE GROSS TOTAL INCOME FOR COMPUTING THE DEDUCTION UNDER SEC. 80IB BY SALES TAX INCENTIVES 2 7 , 54 , 214 / - , BANK INTEREST 11,02,117/ - , EXCISE REFUND 1,47,99,719/ - AND ENTRY TAX REFUND 11,08,224/ - . 4 . BEING AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHO HELD THAT IN THE INSTANT CASE, REFUND OF EXCISE DUTY AND ENTRY TAX IS ARITHMETICALLY EQUAL TO THE EXCISE DUTY AND ENTRY TAX ACTUALLY PAID AND THEREFORE, THE SAME CANNOT BE COMPARED TO THE DEPB INCENTIVES, WHICH WAS SUBJECT MATTER OF DECISION IN THE CASE OF LIBERTY INDIA (SUPRA) . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS) , TWO ITEMS OF REFUND ARE EQUAL TO THE AMOUNT PAID BY THE ASSESSEE AND NULLIF IES THE PAYMENT S AND RECEIPT S AND DO NOT CONTAIN ANY ELEMENT OF PROFITS. SINCE THE ASSESSEE HAD NOT SHOWN ANY PROFITS ON ACCOUNT OF THESE RECEIPTS OF REFUNDS, QUESTION OF CONSIDERING THE SAME FOR WORKING OUT THE ELIGIBLE PROFITS, DO NOT ARISE. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO NOT TO REDUCE THESE AMOUNTS OF REFUNDS FROM THE PROFITS DECLARED BY THE ASSESSEE COMPANY FOR CALCULATING THE AMOUNT OF DEDUCTION ALLOWABLE UNDER SEC. 80IB. 3 ITA NO. 211 - 213/PNJ/2014 5. REGARDING THE INTEREST EARNED ON FIXED DEPOSITS WITH BANK, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE PAID INTEREST OF 2,58,98,521/ - AND EARNED INTEREST THEREON OF 11,02,117/ - RESULTING IN A NET INTEREST PAYMENT OF 2,47,96,404/ - . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), AS THE ASSESSEE HAS NOT EARNED ANY INTEREST INCOME, NO QUESTION OF THE SAME BEING INCLUDED OR EXCLUDED FROM THE CALCULATION OF DEDUCTION UNDER SEC. 80IB ARISES AND FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES LTD. VS. CIT REPORTED IN 18 TAXMAN.COM 137 , DIRECTED THE ASSESSING OFFICER TO TAKE INTO CONSIDERATION ONLY THE NET INTEREST WHICH IS NEGATIVE IN THE INSTANT CASE FOR REDUCING THE CLAIM OF DEDUCTION U NDER SEC. 80IB AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 6 . REGARDING THE SALES TAX INCENTIVES, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN THE INSTANT CASE, SALES TAX IS RECOVERED FROM THE BUYERS AS PART OF SALE PROCEEDS, HENCE, SALES TAX RETAINED BY THE ASSESSEE IS PART OF HIS SALE PROCEEDS AND NEEDS TO BE INCLUDED IN THE CALCULATION FOR CLAIM OF DEDUCTION UNDER SEC. 80IB. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION UND ER SEC. 80IB ON THE AMOUNT OF SALES TAX RETAINED BY THE ASSESSEE. 7 . BEING AGGRIEVED BY THE ABOVE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 8 . BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON SALES TAX INCENTIVES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. CORAL CLINICAL SYSTEMS IN I.T.A.NOS. 322 TO 324/PNJ/2014 PASSED IN ASSESSMENT YEAR S 2009 - 10 TO 2011 - 12 ORDER DATED 09/07/2015 , WHEREIN THE TRIBUNAL HELD AS UNDER: - 4 ITA NO. 211 - 213/PNJ/2014 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 CONSIDERED 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'B LE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) AFTER CONSIDERING 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 SIMILAR LY THE REFUND OF THE CENTRAL EXCISE DUTY ALSO HAD A DIRECT NEXUS WITH THE MANUFACTURING 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 DUT Y HAS TO BE TAKEN INTO ACCOUNT FOR PURPOSES OF SECTION 80 - IB. FOLLOWING THE RATIO 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 INCEN TIVE. THEREFORE, IN OUR OPINION, SUCH SALES TAX INCENTIVE WHICH HAS BEEN RETAINED 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 THI S 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 D ATED 21/11/2014, HELD AS UNDER: - 8. HAVING CONSIDERED RIVAL SUBMISSIONS 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 IN FIRMITY IN THE ORDER OF LD. CIT(A) IN ALLOWING BENEFIT U/S 80IB TO ASSESSEE ON EXCISE DUTY REFUND FOR THE FOLLOWING REASONS. 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 UNDERTAKING. HOWEVER, AS CAN BE SEEN FROM THE FACTS BROUGHT ON RE CORD, THERE IS NO DISPUTE THAT 5 ITA NO. 211 - 213/PNJ/2014 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 EXCISE DUTY IS INTEGRALLY CONNECTED WITH THE MANUFACTURING AND SALE O F 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, ASSESSEE BECAME ELIGIBLE FOR REFUND OF EXCISE DUTY PAID AFTER SET O FF 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 ASSESSEE 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 ASSESSEE 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 DERIVED FROM ELIGIBLE BUSINESS AS PROVIDED U/S 80IB. IN THE AFORESAI D 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 HONBLE 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 T RANSFERABLE, IN OTHER WORDS, IT IS A MARKETABLE COMMODITY. 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 HON BLE SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) WILL NOT APPLY. IN THE AFORESAID 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 LINKED 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 FOLLOW ING THE ABOVE QUOTED DECISIONS OF THE TRIBUNAL, WE CONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 6 ITA NO. 211 - 213/PNJ/2014 9. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL, WE DISMISS THIS PART OF GROUND OF APPEA L OF THE REVENUE. 10 . REGARDING ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON INTEREST ON FIXED DEPOSITS, EXCISE DUTY REFUND AND ENTRY TAX REFUND, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF GAUHATI HIGH COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. REPORTED IN 332 ITR 91 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD UNDER: - 17. INSOFAR AS THE SECOND QUESTION IS CONCERNED, THE CENTRAL EXCISE DUTY REFUND CLAIMED BY THE ASSESSEE IS ON THE BASIS OF EXEMPTION NOTIFICATIONS ISSUED BY THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION NO. 32 OF 1999 AND NOTIFICATION NO. 33 OF 1999, BOTH DT. 8TH JULY, 1999. IN TERMS OF THESE NOTIFICATIONS, A MANUFACTURER IS REQUIRED TO FIRST PAY THE CENTRAL EXCISE DUTY AND THEREAFTER CLAIM A REFUND ON FULFILMENT OF CERTAIN CONDITIONS. IN THE NEXT MONTH, AFTER VERIFICATION OF THE CLAIM, TH E CENTRAL EXCISE DUTY SO DEPOSITED IS REFUNDED TO THE ASSESSEE IF THE CONDITIONS LAID DOWN IN THE NOTIFICATIONS ARE FULFILLED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE WAS ENTITLED TO THE CENTRAL EXCISE DUTY REFUND. 18. THE CENTRAL BOARD OF EXCISE AND CUSTOMS IN ITS CIRCULAR DT. 19TH DEC., 2002 CLARIFIED THAT THE REFUND IS NOT ON ACCOUNT OF EXCESS PAYMENT OF EXCISE DUTY BUT IS BASICALLY DESIGNED TO GIVE EFFECT TO THE EXEMPTION AND TO OPERATIONALISE THE EXEMPTION GIVEN BY THE NOTIFICATIONS. IN THAT SENSE, THE CENTRAL EXCISE DUTY REFUND DOES NOT APPEAR TO BEAR THE CHARACTER OF INCOME SINCE WHAT IS REFUNDED TO THE ASSESSEE IS THE AMOUNT PAID UNDER THE MODALITIES PROVIDED BY THE DEPARTMENT OF REVENUE FOR GIVING EFFECT TO THE EXEMPTION NOTIFICAT IONS. THERE IS ALSO NOTHING TO SUGGEST THAT THE ASSESSEE HAS RECOVERED OR PASSED ON THE EXCISE DUTY ELEMENT TO ITS CUSTOMERS. 19. EVEN ASSUMING THE REFUND DOES AMOUNT TO INCOME IN THE HANDS OF THE ASSESSEE, IT IS A PROFIT OR GAIN DIRECTLY DERIVED BY THE AS SESSEE FROM ITS INDUSTRIAL ACTIVITY. THE PAYMENT OF CENTRAL EXCISE DUTY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY, THE REFUND OF THE CENTRAL EXCISE DUTY ALSO HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY. THE ISSUE OF PAYMENT OF 7 ITA NO. 211 - 213/PNJ/2014 CENTRAL EXCISE DUTY WOULD NOT ARISE IN THE ABSENCE OF ANY INDUSTRIAL ACTIVITY. THERE IS, THEREFORE, AN INEXTRICABLE LINK BETWEEN THE MANUFACTURING ACTIVITY, THE PAYMENT OF CENTRAL EXCISE DUTY AND ITS REFUND. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THA T QUESTION NO. 2 MUST BE ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 11 . WHEN QUESTION ED BY THE BENCH THAT IN THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) , THE FINDING OF THE HONBLE HIGH COURT IS THAT THE ASSESSEE ON THE BASIS OF EXEMPTION NOTIFICATION ISSUED BY THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION N O S . 32/1999 & 33/1999 , BOTH DATED 08/07/1999 WAS ENTITLED TO DEDUCTION UNDER SEC . 80IB ON EXCISE DUTY REFUND, WHICH IS THE NOTIFICATION ISSUED BY THE GOVERNMENT UNDER WHICH THE ASSESSEE WAS ENTITLED TO REFUND OF EXCISE DUTY AND ENTRY TAX REFUND. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT AT PRESENT IT IS NOT AVAILABLE WITH HIM AND SUBMITTED THAT THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE SAME AND ADJUDICATING THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE DECISION OF TH E HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA). 12 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORE THE MA TTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE ISSUE AFRESH AFTER VERIFICATION OF NOTIFICATION OF THE GOVERNMENT ISSUED ON REFUND OF EXCISE DUTY AND REFUND OF ENTRY TAX AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS PART OF THE GR O UND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 13 . REGARDING ALLOWABILITY OF DEDUCTION ON INTEREST EARNED ON FIXED DEPOSITS WITH BANK, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE FIXED DEPOSITS WERE KEPT WITH THE BANK BY THE ASSESSEE TO AVAIL CASH CREDIT FACILITY FROM THE BANK. ON BEING 8 ITA NO. 211 - 213/PNJ/2014 QUESTIONED BY THE BENCH WHERE IS THE BANK SANCTION LETTER OF LOAN, HE EXPRESSED HIS INABILITY TO SUBMIT THE SAME BEFORE THE BENCH AND SUBMIT TED THAT THIS ISSUE MAY ALSO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF SANCTION LETTER FROM THE BANK AND THEREAFTER RE - ADJUDICATE THE ISSUE AFRESH AS PER LAW . 14 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THIS PART OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - EXAMINE THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE SANCTION LETTER OF LOAN FROM THE BANK REQUIRING THE ASSESSEE TO MAINTAIN FIXED DEPOSIT S FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE. HE SHALL ALSO EXAMINE WHETHER THE FIXED DEPOSIT REC E IPTS ISSUED BY THE BANK TO THE ASSESSEE WAS HELD BY THE BANK UNDER LIEN FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE . H E SHALL RE - ADJUDICATE THE ISSUE AFRESH A S P E R L A W AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATIS TI CAL PURPOSE. 15. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ASSESSMENT YEAR 20 1 0 - 11 1 6 . THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SEC. 80IB TO THE ASSESSEE ON INTEREST INCOME FROM BANK, SALES TAX INCENTIVES, EXCISE REFUND AND REFUND OF ENTRY TAX. 1 7 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HELD THAT DEDUCTION UNDER SEC. 80IB IS ALLOWABLE TO THE ASSESSEE ON PROFITS AND GAINS DERIVED FROM ELIGIBLE BUSINESS. ACCORDING TO THE ASSESSING OFFICER, 9 ITA NO. 211 - 213/PNJ/2014 SALES TAX INCENTIVES, EXCISE DUTY REFUND INCENTIVES, ENTRY TAX REFUND INC ENTIVES AND INTEREST INCOME FROM BANK ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS OF THE UNDERTAKING UNDER SEC. 80IB. ACCORDING TO THE ASSESSING OFFICER, THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 HAS HELD THAT THE IMMEDIATE SOURCE OF INCOME FOR THE DUTY DRAWBACK IS THE GOVERNMENT POLICY AND NOT THE INDUSTRIAL UNDERTAKING AND, THEREFORE, PROFITS ARE NOT PROFITS DERIVED FROM THE BUSINESS UNDERTAKING UNDER SEC. 80IB, HENCE, NOT ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB. CONSEQUENTLY, THE ASSESSING OFFICER REDUCED THE GROSS TOTAL INCOME FOR COMPUTING THE DEDUCTION UNDER SEC. 80IB BY SALES TAX INCENTIVES 11,83,747/ - , BANK INTEREST 18,45,563/ - , EXCISE REFUND 2,09,84,978/ - AND ENTRY TAX REFUND 1 3 , 35 , 6 12 / - . 18 . BEING AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHO HELD THAT IN THE INSTANT CASE, REFUND OF EXCISE DUTY AND ENTRY TAX IS ARITHMETICALLY EQUAL TO THE EXCISE DUTY AND ENTRY TAX ACTUALLY PAID AND THEREFOR E, THE SAME CANNOT BE COMPARED TO THE DEPB INCENTIVES, WHICH WAS SUBJECT MATTER OF DECISION IN THE CASE OF LIBERTY INDIA (SUPRA) . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), TWO ITEMS OF REFUND ARE EQUAL TO THE AMOUNT PAID BY THE ASSESSEE AND NULLIFIES THE PAYMENTS AND RECEIPTS AND DO NOT CONTAIN ANY ELEMENT OF PROFITS. SINCE THE ASSESSEE HAD NOT SHOWN ANY PROFITS ON ACCOUNT OF THESE RECEIPTS OF REFUNDS, QUESTION OF CONSIDERING THE SAME FOR WORKING OUT THE ELIGIBLE PROFITS, DO NOT ARISE. ACCO RDINGLY, HE DIRECTED THE ASSESSING OFFICER TO NOT TO REDUCE THESE AMOUNTS OF REFUNDS FROM THE PROFITS DECLARED BY THE ASSESSEE COMPANY FOR CALCULATING THE AMOUNT OF DEDUCTION ALLOWABLE UNDER SEC. 80IB. 19 . REGARDING THE INTEREST EARNED ON FIXED DEPOSITS W ITH BANK, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE PAID 10 ITA NO. 211 - 213/PNJ/2014 INTEREST OF 2,58,98,521/ - AND EARNED INTEREST THEREON OF 11,02,117/ - RESULTING IN A NET INTEREST PAYMENT OF 2,47,96,404/ - . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), AS THE ASSESSEE HAS NOT EARNED ANY INTEREST INCOME, NO QUESTION OF THE SAME BEING INCLUDED OR EXCLUDED FROM THE CALCULATION OF DEDUCTION UNDER SEC. 80IB ARISES AND FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATE D CAPSULES LTD. VS. CIT REPORTED IN 18 TAXMAN.COM 137, DIRECTED THE ASSESSING OFFICER TO TAKE INTO CONSIDERATION ONLY THE NET INTEREST WHICH IS NEGATIVE IN THE INSTANT CASE FOR REDUCING THE CLAIM OF DEDUCTION UNDER SEC. 80IB AND ALLOWED THE GROUND OF APPEA L OF THE ASSESSEE. 20 . REGARDING THE SALES TAX INCENTIVES, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN THE INSTANT CASE, SALES TAX IS RECOVERED FROM THE BUYERS AS PART OF SALE PROCEEDS, HENCE, SALES TAX RETAINED BY THE ASSESSEE IS PART OF HIS SALE PROCEEDS AND NEED S TO BE INCLUDED IN THE CALCULATION FOR CLAIM OF DEDUCTION UNDER SEC. 80IB. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SEC. 80IB ON THE AMOUNT OF SALES TAX RETAINED BY THE ASSESSEE. 21 . BEING AGGRIEVED BY THE ABOVE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 22 . AT THE TIME OF HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT ALLOWED DEDUCTION UNDER SEC. 80IB TO THE ASSESSEE ON REFUND OF ENTRY TAX AS THIS WAS NOT THE GROUND OF APPEAL RAISED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE DEPARTMENTAL REPRESENTATIVE AGREED TO THE SAME. THEREFORE, WE DISMISS THIS PART OF GROUND OF APPEAL OF THE RE VENUE AS NOT ARISING OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 11 ITA NO. 211 - 213/PNJ/2014 23 . BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON SALES TAX INCENTIVES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. CORAL CLINICAL SYSTEMS IN I.T.A.NOS. 322 TO 324/PNJ/2014 PASSED IN ASSESSMENT YEARS 2009 - 10 TO 2011 - 12 ORDER DATED 09/07/2015, WHEREIN THE TRIBUNAL HELD AS UNDER: - 13. WE FIND THAT ON A SIMILAR I SSUE, 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 CONSIDERED 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 CONSIDERING 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 N EXUS WITH THE MANUFACTURING 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 RATIO 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 WH ICH HAS BEEN RETAINED 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 ASID E 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: - 12 ITA NO. 211 - 213/PNJ/2014 8. HAVING CONSIDERED RIVAL SUBMISSIONS 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 8 0IB TO ASSESSEE ON EXCISE DUTY REFUND FOR THE FOLLOWING REASONS. 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 UNDERTAKING. 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 EXCI SE 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, AS SESSEE 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 ASS ESSEE 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 A SSESSEE 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 DER IVED 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), TH E FACTS ARE CLEARLY DISTINGUISHABLE AND DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN CASE OF LIBERTY INDIA, THE HONBLE 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 COMMODITY. EXCISE DUTY REFUND BY ASSESSEE IN THE PRESENT CASE IS NEITHER A MARKETABLE COMMODITY NOR TRANSFERABLE. IT IS ONLY A REFUND OF EXPEND ITURE ALREADY INCURRED BY ASSESSEE, HENCE THE DECISION OF THE HONBLE 13 ITA NO. 211 - 213/PNJ/2014 SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) WILL NOT APPLY. IN THE AFORESAID 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 LINKED WITH THE MANUFACTURING AND SALE OF GOODS AND THEREFORE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING AND CONSEQUENTLY IS ELIGIBLE FO R DEDUCTION U/S. 80IB OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIONS OF THE TRIBUNAL, WE CONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 24 . THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL, WE DISMISS THIS PART OF THE GROUND OF APPEAL OF THE REVENUE. 25 . REGARDING ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON INTEREST ON FIXED DEPOSITS, EXCISE DUTY REFUND AND ENTRY TAX REFUND, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF GAUHATI HIGH COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. REPORTED IN 332 ITR 91 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD UNDER: - 17. INSOFAR AS THE SECOND QUESTION IS CONCERNED, THE CENTRAL EXCISE DUTY REFUND CLAIMED BY THE ASSESSEE IS ON THE BASIS OF EXEMPTION NOTIFICATIONS ISSUED BY THE MINISTR Y OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION NO. 32 OF 1999 AND NOTIFICATION NO. 33 OF 1999, BOTH DT. 8TH JULY, 1999. IN TERMS OF THESE NOTIFICATIONS, A MANUFACTURER IS REQUIRED TO FIRST PAY THE CENTRAL EXCISE DUTY AND THEREAFTER CLAIM A REFUND ON FULFILMENT OF CERTAIN CONDITIONS. IN THE NEXT MONTH, AFTER VERIFICATION OF THE CLAIM, THE CENTRAL EXCISE DUTY SO DEPOSITED IS REFUNDED TO THE ASSESSEE IF THE CONDITIONS LAID DOWN IN THE NOTIFICATIONS ARE FULFILLED. IN THE PRESENT CASE, THERE IS NO DISPU TE THAT THE ASSESSEE WAS ENTITLED TO THE CENTRAL EXCISE DUTY REFUND. 18. THE CENTRAL BOARD OF EXCISE AND CUSTOMS IN ITS CIRCULAR DT. 19TH DEC., 2002 CLARIFIED THAT THE REFUND IS NOT ON ACCOUNT OF EXCESS PAYMENT OF EXCISE DUTY BUT IS BASICALLY DESIGNED TO G IVE EFFECT TO THE EXEMPTION AND TO OPERATIONALISE THE EXEMPTION GIVEN BY THE NOTIFICATIONS. IN THAT SENSE, THE CENTRAL EXCISE DUTY REFUND DOES NOT APPEAR TO BEAR THE CHARACTER OF INCOME SINCE WHAT IS 14 ITA NO. 211 - 213/PNJ/2014 REFUNDED TO THE ASSESSEE IS THE AMOUNT PAID UNDER THE MO DALITIES PROVIDED BY THE DEPARTMENT OF REVENUE FOR GIVING EFFECT TO THE EXEMPTION NOTIFICATIONS. THERE IS ALSO NOTHING TO SUGGEST THAT THE ASSESSEE HAS RECOVERED OR PASSED ON THE EXCISE DUTY ELEMENT TO ITS CUSTOMERS. 19. EVEN ASSUMING THE REFUND DOES AMOUN T TO INCOME IN THE HANDS OF THE ASSESSEE, IT IS A PROFIT OR GAIN DIRECTLY DERIVED BY THE ASSESSEE FROM ITS INDUSTRIAL ACTIVITY. THE PAYMENT OF CENTRAL EXCISE DUTY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY, THE REFUND OF THE CENTRAL E XCISE DUTY ALSO HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY. THE ISSUE OF PAYMENT OF CENTRAL EXCISE DUTY WOULD NOT ARISE IN THE ABSENCE OF ANY INDUSTRIAL ACTIVITY. THERE IS, THEREFORE, AN INEXTRICABLE LINK BETWEEN THE MANUFACTURING ACTIVITY, THE PAY MENT OF CENTRAL EXCISE DUTY AND ITS REFUND. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT QUESTION NO. 2 MUST BE ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 26 . WHEN QUESTIONED BY THE BENCH THAT IN THE DECISION OF TH E HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA), THE FINDING OF THE HONBLE HIGH COURT IS THAT THE ASSESSEE ON THE BASIS OF EXEMPTION NOTIFICATION ISSUED BY THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION NOS. 3 2/1999 & 33/1999, BOTH DATED 08/07/1999 WAS ENTITLED TO DEDUCTION UNDER SEC. 80IB ON EXCISE DUTY REFUND, WHICH IS THE NOTIFICATION ISSUED BY THE GOVERNMENT UNDER WHICH THE ASSESSEE WAS ENTITLED TO REFUND OF EXCISE DUTY AND ENTRY TAX REFUND. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT AT PRESENT IT IS NOT AVAILABLE WITH HIM AND SUBMITTED THAT THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE SAME AND ADJUDICATING THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA). 2 7 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE ISSUE AFRESH AFTER 15 ITA NO. 211 - 213/PNJ/2014 VERIFICATION OF NOTIFICATION OF THE GOVERNMENT ISSUED ON REFUND OF EXCISE DUTY AND REFUND OF ENTRY TAX AS PER LAW AFTER ALLOWING REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 28 . REGARDING ALLOWABILITY OF DEDUCTION ON INTEREST EARNED ON FIXED DEPOSITS WITH BANK, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE FIXED DEPOSITS WERE KEPT WITH THE BANK BY THE ASSESSEE TO AVAIL CASH CREDIT FACILITY FROM THE BANK. ON BEING QUESTIONED BY THE BENCH WHERE IS THE BANK SANCTION LETTER OF LOAN, HE EXPRESSED HIS INABILITY TO SUBMIT THE SAME BEFORE THE BENCH AND SUBMITTED THAT THIS ISSUE MAY ALSO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF SANCTION LETTER FROM THE BANK AND THEREAFTER RE - ADJUDICATE THE ISSUE AFRESH AS PER LAW. 29 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THIS PART OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - EXAMINE THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE SANCTION LETTER OF LOAN FROM THE BANK REQUIRING THE ASSESSEE TO MAINTAIN FIXED DEPOSIT S FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE. HE SHALL ALSO EXAMINE WHETHER THE FIXED DEPOSIT REC E IPTS ISSUED BY THE BANK TO THE ASSESSEE WAS HELD BY THE BANK UNDER LIEN FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE . H E SHALL RE - ADJUDICATE THE ISSUE AFRESH A S P E R L A W AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATIS TI CAL PURPOSE. 30 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16 ITA NO. 211 - 213/PNJ/2014 ASSESSMENT YEAR 2011 - 12 3 1 . THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SEC. 80IB ON INTEREST INCOME FROM THE BANK, INTEREST ON ADVANCES , INTEREST ON ELECTRICITY DEPOSIT, SALES TAX INCENTIVES, EXCISE REFUND AND REFUND OF ENTRY TAX. 3 2 . BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER HELD THAT DEDUCTION UNDER SEC. 80IB IS ALLOWABLE TO THE ASSESSEE ON PROFITS AND GAINS DERIVED FROM ELIGIBLE BUSINESS. ACCORDING TO THE ASSESSING OFFICER, SALES TAX INCENTIVES, EXCISE DUTY REFUND INCENTIVES, ENTRY TAX REFUND INCENTIVES AND INTEREST INCOME FROM BANK ARE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS OF THE UNDERTAKING UNDER SEC. 80IB. ACCORDING TO THE ASSESSING OFFICER, THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT REPORTED IN 317 ITR 218 HAS HELD THAT THE IMMEDIATE SOURCE OF INCOME FOR THE DUTY DRAWBACK IS THE GOVERNMENT POLICY AND NOT THE INDUSTRIAL UNDERTAKING AND, THEREFORE, PROFITS ARE NOT PROFITS DERIVED FROM THE BUSINESS UNDERTAKING UNDER SEC. 80IB, HENCE, NOT ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB. CONSEQUENTLY, THE ASSESSING OFFICER REDUCED THE GROSS TOTAL INCOME FOR COMPUTING THE DEDUCTION UNDER SEC. 80IB BY SALES TAX INCENTIVES 27,54,214/ - , BANK INTEREST 11,02,117/ - , EXCISE REFUND 1,47,99,719/ - AND ENTRY TAX REFUND 11,08,2 24/ - . 3 3 . BEING AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHO HELD THAT IN THE INSTANT CASE, REFUND OF EXCISE DUTY AND ENTRY TAX IS ARITHMETICALLY EQUAL TO THE EXCISE DUTY AND ENTRY TAX ACTUALLY PAID AND THEREFOR E, THE SAME CANNOT BE COMPARED TO THE DEPB INCENTIVES, WHICH WAS SUBJECT MATTER OF DECISION IN THE CASE OF LIBERTY INDIA (SUPRA) . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), TWO ITEMS OF REFUND ARE EQUAL 17 ITA NO. 211 - 213/PNJ/2014 TO THE AMOUNT PAID BY THE ASSESSEE AND N ULLIFIES THE PAYMENTS AND RECEIPTS AND DO NOT CONTAIN ANY ELEMENT OF PROFITS. SINCE THE ASSESSEE HAD NOT SHOWN ANY PROFITS ON ACCOUNT OF THESE RECEIPTS OF REFUNDS, QUESTION OF CONSIDERING THE SAME FOR WORKING OUT THE ELIGIBLE PROFITS, DO NOT ARISE. ACCOR DINGLY, HE DIRECTED THE ASSESSING OFFICER TO NOT TO REDUCE THESE AMOUNTS OF REFUNDS FROM THE PROFITS DECLARED BY THE ASSESSEE COMPANY FOR CALCULATING THE AMOUNT OF DEDUCTION ALLOWABLE UNDER SEC. 80IB. 3 4 . REGARDING THE INTEREST EARNED ON FIXED DEPOSITS WI TH BANK, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE PAID INTEREST OF 2,58,98,521/ - AND EARNED INTEREST THEREON OF 11,02,117/ - RESULTING IN A NET INTEREST PAYMENT OF 2,47,96,404/ - . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEALS), AS THE ASSESSEE HAS NOT EARNED ANY INTEREST INCOME, NO QUESTION OF THE SAME BEING INCLUDED OR EXCLUDED FROM THE CALCULATION OF DEDUCTION UNDER SEC. 80IB ARISES AND FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES LTD. VS. CIT REPORTED IN 18 TAXMAN.COM 137, DIRECTED THE ASSESSING OFFICER TO TAKE INTO CONSIDERATION ONLY THE NET INTEREST WHICH IS NEGATIVE IN THE INSTANT CASE FOR REDUCING THE CLAIM OF DEDUCTION UNDER SEC. 80IB AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 3 5 . REGARDING THE SALES TAX INCENTIVES, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT IN THE INSTANT CASE, SALES TAX IS RECOVERED FROM THE BUYERS AS PART OF SALE PROCEEDS, HENCE, SALES TAX RETAINED BY THE ASSESSEE IS PART OF HIS SALE PROCEEDS AND NEE DS TO BE INCLUDED IN THE CALCULATION FOR CLAIM OF DEDUCTION UNDER SEC. 80IB. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SEC. 80IB ON THE AMOUNT OF SALES TAX RETAINED BY THE ASSESSEE. 3 6 . BEING AGGRIEVED BY THE ABOVE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 18 ITA NO. 211 - 213/PNJ/2014 3 7 . AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE HAD NO OBJECTION IF DEDUCTION UNDER SEC. 80IB WAS NOT ALLOWED TO THE ASSESSEE ON INTEREST ON ELECTRICITY DEPOSIT. 3 8 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO NOT TO CONSIDER THE INTEREST EARNED ON ELECTRICITY DEPOSIT AS PROFIT OF THE ELIGIBLE BUSINESS OF THE ASSESSEE FOR COMPUTING ALLOWABILITY UNDER SEC. 80IB. 3 9 . WITH REGARD TO INTEREST RECEIVED ON ADVANCES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE SAME WAS EARNED ON ADVANCES GIVEN TO THE SUPPLIERS OF RAW MATERIALS AS THEY DELAYED IN GIVING SUPPLIES TO THE ASSESSEE. 40 . ON A QUERY BY THE BENCH THAT WHAT IS THE EVIDENCE TO SHOW THAT THE ADVANCES WERE GIVEN BY THE ASSESSEE TO THE PARTIES FOR SUPPLYING RAW MATERIALS TO THE ASSESSEE, HE EXPRESSED HIS INABILITY TO SUBMIT THE EVIDENCE AND REQUESTED THE BENCH THAT MATTER MAY BE RESTORED B ACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND THAT THE ASSESSEE WILL BE IN A POSITION TO PRODUCE NECESSARY EVIDENCE BEFORE THE ASSESSING OFFICER. 4 1 . IN VIEW OF THE ABOVE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE RES TORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - ADJUDICATE THE ISSUE AFRESH AFTER VERIFICATION OF NECESSARY EVIDENCE TO BE SUBMITTED BY THE ASSESSEE AFTER ALLOWING HIM REASONABLE OPPORTUNITY OF HEARING. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 4 2. BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON SALES TAX INCENTIVES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CA SE OF 19 ITA NO. 211 - 213/PNJ/2014 ACIT VS. M/S. CORAL CLINICAL SYSTEMS IN I.T.A.NOS. 322 TO 324/PNJ/2014 PASSED IN ASSESSMENT YEARS 2009 - 10 TO 2011 - 12 ORDER DATED 09/07/2015, WHEREIN THE TRIBUNAL HELD AS UNDER: - 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 CONSIDERED 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 CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HAS HELD THAT CENTRAL EXCISE DU TY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY THE REFUND OF THE CENTRAL EXCISE DUTY ALSO HAD A DIRECT NEXUS WITH THE MANUFACTURING 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 RATIO OF THE SAID DECISION, WE ARE OF THE CONSIDERED OPINION THAT THERE IS AN INEXTRICABLE LINK BETWEEN THE MANUFAC TURING ACTIVITY, THE PAYMENT OF SALES TAX AND THE SALES TAX INCENTIVE. THEREFORE, IN OUR OPINION, SUCH SALES TAX INCENTIVE WHICH HAS BEEN RETAINED BY THE ASSESSEE FROM THE SALES TAX COLLECTED HAS TO BE HELD AS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND CO NSEQUENTLY 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.N O. 1147 & 1157/HYD/2014 & C.O.NOS. 52 & 53/HYD/2014 VIDE ORDER DATED 21/11/2014, HELD AS UNDER: - 8. HAVING CONSIDERED RIVAL SUBMISSIONS 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 80IB TO ASSESSEE ON EXCISE DUTY REFUND FOR THE FOLLOWING REASONS. 9. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT AO HAS DENIED 80IB DEDUCTION ON EXCISE DUTY REFUND FOR THE SOLE REASON 20 ITA NO. 211 - 213/PNJ/2014 THAT IT CANNOT BE TREATED AS INCOME DERIVED FROM ELIGIBLE BUSINESS OF THE UNDERTAKING. HOWEVER, AS CAN BE SEEN FROM THE FACTS BROUGHT ON RE CORD, 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 EXCISE DUTY IS INTEGRALLY CONNECTED WITH THE MANUFACTURING AND SALE O F 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, ASSESSEE BECAME ELIGIBLE FOR REFUND OF EXCISE DUTY PAID AFTER SET O FF 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 ASSESSEE 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 ASSESSEE 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 DERIVED FROM ELIGIBLE BUSINESS AS PROVIDED U/S 80IB. IN THE AFORESAI D 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 HONBLE 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 T RANSFERABLE, IN OTHER WORDS, IT IS A MARKETABLE COMMODITY. 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 HON BLE SUPREME COURT IN CASE OF LIBERTY INDIA (SUPRA) WILL NOT APPLY. IN THE AFORESAID 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 LINKED 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 FOLLOW ING THE ABOVE QUOTED DECISIONS OF THE 21 ITA NO. 211 - 213/PNJ/2014 TRIBUNAL, WE CONFIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 4 3 . THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISION OF THE TRIBUNAL, WE DISMISS THIS PART OF GROUND OF APPEAL OF THE REVENUE. 4 4 . REGARDING ALLOWABILITY OF DEDUCTION UNDER SEC. 80IB ON INTEREST ON FIXED DEPOSITS, EXCISE DUTY REFUND AND ENTRY TAX REFUND, T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF GAUHATI HIGH COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. REPORTED IN 332 ITR 91 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD UNDER: - 17. INSOFAR AS THE SECOND QUESTION IS CONCERNED, THE CENTRAL EXCISE DUTY REFUND CLAIMED BY THE ASSESSEE IS ON THE BASIS OF EXEMPTION NOTIFICATIONS ISSUED BY THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION NO. 32 OF 1999 AND NOTIFICATION NO. 33 OF 1999, BOTH DT. 8TH JULY, 199 9. IN TERMS OF THESE NOTIFICATIONS, A MANUFACTURER IS REQUIRED TO FIRST PAY THE CENTRAL EXCISE DUTY AND THEREAFTER CLAIM A REFUND ON FULFILMENT OF CERTAIN CONDITIONS. IN THE NEXT MONTH, AFTER VERIFICATION OF THE CLAIM, THE CENTRAL EXCISE DUTY SO DEPOSITED IS REFUNDED TO THE ASSESSEE IF THE CONDITIONS LAID DOWN IN THE NOTIFICATIONS ARE FULFILLED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE WAS ENTITLED TO THE CENTRAL EXCISE DUTY REFUND. 18. THE CENTRAL BOARD OF EXCISE AND CUSTOMS IN ITS CIRCULAR DT. 19TH DEC., 2002 CLARIFIED THAT THE REFUND IS NOT ON ACCOUNT OF EXCESS PAYMENT OF EXCISE DUTY BUT IS BASICALLY DESIGNED TO GIVE EFFECT TO THE EXEMPTION AND TO OPERATIONALISE THE EXEMPTION GIVEN BY THE NOTIFICATIONS. IN THAT SENSE, THE CENTRAL EXCISE DUTY REFUND DOES NOT APPEAR TO BEAR THE CHARACTER OF INCOME SINCE WHAT IS REFUNDED TO THE ASSESSEE IS THE AMOUNT PAID UNDER THE MODALITIES PROVIDED BY THE DEPARTMENT OF REVENUE FOR GIVING EFFECT TO THE EXEMPTION NOTIFICATIONS. THERE IS ALSO NOTHING TO SUGGEST THAT THE ASSESSEE HAS RECOVERED OR PASSED ON THE EXCISE DUTY ELEMENT TO ITS CUSTOMERS. 19. EVEN ASSUMING THE REFUND DOES AMOUNT TO INCOME IN THE HANDS OF THE ASSESSEE, IT IS A PROFIT OR GAIN DIRECTL Y DERIVED BY THE ASSESSEE FROM ITS INDUSTRIAL ACTIVITY. THE PAYMENT OF CENTRAL EXCISE DUTY HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND SIMILARLY, THE REFUND OF THE CENTRAL EXCISE DUTY ALSO HAS A DIRECT 22 ITA NO. 211 - 213/PNJ/2014 NEXUS WITH THE MANUFACTURING ACTIVITY. THE ISSUE OF PAYMENT OF CENTRAL EXCISE DUTY WOULD NOT ARISE IN THE ABSENCE OF ANY INDUSTRIAL ACTIVITY. THERE IS, THEREFORE, AN INEXTRICABLE LINK BETWEEN THE MANUFACTURING ACTIVITY, THE PAYMENT OF CENTRAL EXCISE DUTY AND ITS REFUND. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT QUESTION NO. 2 MUST BE ANSWERED IN THE AFFIRMATIVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 4 5 . WHEN QUESTIONED BY THE BENCH THAT IN THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA), THE FINDING OF THE HONBLE HIGH COURT IS THAT THE ASSESSEE ON THE BASIS OF EXEMPTION NOTIFICATION ISSUED BY THE MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) BEING NOTIFICATION NOS. 32/1999 & 33/1999, BOTH DATED 08/07/1999 WAS ENTITLED TO DEDUCTION UNDER SEC. 80IB ON EXCISE DUTY REFUND, WHICH IS THE NOTIFICATION ISSUED BY THE GOVERNMENT UNDER WHICH THE ASSESSEE WAS ENTITLED TO REFUND OF EXCISE DUTY AND ENTRY TAX REFUND. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT AT PRESENT IT IS NO T AVAILABLE WITH HIM AND SUBMITTED THAT THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE SAME AND ADJUDICATING THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE DECISION OF THE HONBLE GAUHATI HIGH COURT IN TH E CASE OF MEGHALAYA STEELS LTD. (SUPRA). 4 6 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSES SING OFFICER FOR ADJUDICATION OF THE ISSUE AFRESH AFTER VERIFICATION OF NOTIFICATION OF THE GOVERNMENT ISSUED ON REFUND OF EXCISE DUTY AND REFUND OF ENTRY TAX AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 4 7 . REGARDING ALLOWABILITY OF DEDUCTION ON INTEREST EARNED ON FIXED DEPOSITS WITH BANK, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE FIXED DEPOSITS WERE KEPT WITH THE BANK BY THE 23 ITA NO. 211 - 213/PNJ/2014 ASSESSEE TO AVAIL CASH CREDIT FACILITY FROM THE BANK. ON BEI NG QUESTIONED BY THE BENCH WHERE IS THE BANK SANCTION LETTER OF LOAN, HE EXPRESSED HIS INABILITY TO SUBMIT THE SAME BEFORE THE BENCH AND SUBMITTED THAT THIS ISSUE MAY ALSO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF SANCTION LETTER FROM THE BANK AND THEREAFTER RE - ADJUDICATE THE ISSUE AFRESH AS PER LAW. 4 8 . IN VIEW OF THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THIS PART OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - EXAMINE THE ISSUE AFRESH AFTER TAKING INTO CONSIDERATION THE SANCTION LETTER OF LOAN FROM THE BANK REQUIRING THE ASSESSEE TO MAINTAIN FIXED DEPOSIT S FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE. HE SHALL ALSO EXAMINE WHETHER THE FIXED DEPOSIT REC E IPTS ISSUED BY THE BANK TO THE ASSESSEE WAS HELD BY THE BANK UNDER LIEN FOR ALLOWING CASH CREDIT FACILITY TO THE ASSESSEE . H E SHALL RE - ADJUDICATE THE ISSUE AFRESH A S P E R L A W AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATIS TI CAL PURPOSE. 4 9 . IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 5 0 . IN THE RESULT, ALL THE APPEAL S OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 2 4 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 4 TH AUGUST , 201 5 . 24 ITA NO. 211 - 213/PNJ/2014 VR/ - COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. T HE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER 25 ITA NO. 211 - 213/PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED WITH I.T.A.NO. 210/PNJ/2014 1. DRAFT DICTATED ON 2 5 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 2 5 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 5 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 2 5 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 5 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 24 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 2 5 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER