The Dy.Commissioner of Income-tax, Jammu V. M/s. Narbada Steel Limited, Jammu

ITA 280/ASR/2014

• Counselvise Citation: 28020914 RSA 2014
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDER KUMAR SINGH
• Assessee Lawyers: P N ARORA
• Keywords: Capital receipt
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 280(ASR)/2014 ASSESSMENT YEAR: 2010-11 PAN: AAACN 5769 L DY. C.I.T., CIRCLE 1, VS. M/S. NARBADA STEEL LT D., JAMMU. SIDCO INDUSTRIAL COMPLEX, BARI BRAHMANA, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VIRENDER KUMAR SINGH, D.R. RESPONDENT BY : SH. P.N. ARORA, ADVOCATE DATE OF HEARING : 12.01.2015 DATE OF PRONOUNCEMENT : 12.01.2015 ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 20 10-11 AGAINST THE ORDER DATED 09.12.2013 PASSED BY LEARNED CIT(A) -I, LUDHIANA. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS OF APPEA L : 1. WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA WAS RIGHT IN LAW TO ALLOW DED UCTION U/S. 80IB OF THE INCOME TAX ACT, 1961 ON CENTRAL EX CISE DUTY REFUND BY RELYING UPON THE JUDGMENT OF THE HON BLE HIGH COURT OF J&K IN THE CASE OF M/S. SHREE BALAJI ALLOYS & OTHERS & IGNORING THE RATIO OF THE LAW ON THE ISSUE AS LAID DOWN IN THE CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD. 2. WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS) - I, LUDHIANA COMMITTED AN ERROR IN LAW IN NOT FOLLOW ING THE LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN TH E CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD. , WHEREIN SIMILAR RECEIPTS WERE HELD TO BE REVENUE IN NATURE 2 ITA NO. 280(ASR)/2014 AS THE SAME HAD BEEN MADE AFTER THE INDUSTRIES HAD BEEN SET UP AND NOT FOR THE PURPOSE OF SETTING UP OF THE IND USTRIES. 3. WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS) - I, LUDHIANA WAS RIGHT IN NOT APPRECIATING AND APPLY ING THE PURPOSE TEST AS LAID DOWN BY THE JUDGMENT OF THE HO NBLE SUPREME COURT, IN THE CASE OF ASSESSEE, AS THE MONE Y RECEIVED BY THE ASSESSEE ON ACCOUNT OF CENTRAL EXCI SE WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER OR FOR THE PURPOSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. 2. THE FACTS AS PER THE RECORD ARE THAT THE AO OBSE RED THAT THE ASSESSEE HAD RECEIVED EXCISE DUTY REFUND AND INTERE T SUBSIDY AND THE SAME HAD BEEN TREATED AS REVENUE RECEIPTS IN THE AS SESEES BOOKS OF ACCOUNT. HOWEVER, ON 28.03.2012, THE ASSESSEE REVIS ED ITS RETURN OF INCOME TREATING THE SAID RECEIPTS AS CAPITAL RECEIP TS. ON QUERY BY THE AO, THE ASSESSEE SUBMITTED THAT IT HAD CAPITALIZED AN AMOUNT OF RS.2,45,23,504/- ON ACCOUNT OF EXCISE DUTY REFUND A ND HAD ALSO TREATED AN AMOUNT OF RS.3,30,793/- AS CAPITAL RECEIPT ON AC COUNT OF INTEREST SUBSIDY EARLIER CREDITED TO THE PROFIT & LOSS ACCOU NT. IT WAS SUBMITTED THAT THE RETURN FOR THE ASSESSMENT YEAR UNDER CONSI DERATION HAD BEEN REVISED IN ACCORDANCE WITH THE JUDGMENT OF THE HON BLE J&K HIGH COURT IN THE CASE OF BALAJI ALLOYS KATHUA, 333 IT R 335 (J&K), WHEREIN THE J&K HIGH COURT HELD THAT EXCISE DUTY AN D INTERET SUBSIDY ARE CAPITAL RECEIPTS AND NOT REVENUE RECEIPTS. IT W AS FURTHER SUBMITTED THAT AS THE AMOUNT WAS BEING PAID/REFUNDED FOR THE PURPOSE OF DEVELOPMENT OF INDUSTRY IN BACKWARD AREAS, THE ASSE SSEE HAD TREATED IT 3 ITA NO. 280(ASR)/2014 AS CAPITAL RECEIPT. 3. THE AO, HOWEVER, DID NOT AGREE WITH THE AFORESAI D STAND TAKEN BY THE ASSESSEE. REFERRING TO THE DECISION IN CIT VS. STERLING FOODS, 237 ITR 579 (SC), AND OBSERVING THAT THE DECISION OF TH E HONBLE J&K HIGH COURT IN THE CASE OF SHREE BALAJI ALLOYS(SUP RA), HAD NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN SLP HAD BEEN FILE D IN THE HONBLE SUPREME COURT, THE AO TREATED THE RECEIPTS ON ACCOU NT OF EXCISE DUTY REFUND AS WELL AS INTEREST SUBSIDY AS REVENUE RECEI PTS ON THE BASIS OF THE DECISION OF THE SUPREME COURT IN THE CASE OF L IBERTY INDIA VS. CIT, 2009-TIOL-100-IT-SC . IT WAS AS SUCH THAT THE AO MADE ADDITION OF RS.22,45,23,504/- RERPRESENTING EXCISE DUTY REFU ND AND OF RS.3,30,793/-, REPRESENTING INTEREST SUBSIDY, TREAT ING BOTH THESE RECEIPTS AS REVENUE RECEIPTS. 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED BOTH THE ADDITIONS MADE BY THE AO. IN DOING SO, THE LD. CIT( A) FOLLOWED THE DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA ). AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. 5. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED BEFORE US THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCT ION U/S.80IB OF THE 4 ITA NO. 280(ASR)/2014 INCOME-TAX ACT BY WRONGLY DELETING THE ADDITIONS RI GHTLY MADE BY THE AO; THAT WHILE DOING SO, THE LD.CIT(A) HAS ERRONEOU SLY RELIED UPON THE DECISION IN SHREE BALAJI ALLOYS(SUPRA); THAT IN D OING SO, THE LD. CIT(A) HAS ERRED IN IGNORING THE DECISIONS OF HONB LE SUPREME COURT IN THE CASES OF PONNI SUGARS & CHEMICALS LTD., 30 6 ITR 392(SC) AND SAWHNEY STEELS & PRESS WORKS LTD., 228 ITR 253(SC ), WHEREIN, RECEIPTS SIMILAR TO THE ONES IN QUESTION IN THE PRE SENT CASE WERE HELD TO BE REVENUE RECEIPTS, SINCE THE SAME HAD BEEN MADE A FTER THE INDUSTRIES HAD BEEN SET UP AND NOT FOR THE PURPOSE OF SETTING UP OF THE INDUSTRIES; AND THAT THE LD.CIT(A) FAILED TO APPRECIATE AND APP LY THE PURPOSE TEST AS LAID DOWN BY HONBLE SUPREME COURT, DESPITE THE FACT THAT THE MONEY RECEIVED BY THE ASSESEE ON ACCOUT OF CENTRAL EXCISE REFUND WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER, OR FOR THE PURPOSE OF SUBSTANTIAL EXPANSION OF THE INDUSTRY. IT HAS ALSO BEEN CONTENDED THAT THE LD.CIT(A) HAS FAILED TO TAKE INTO ACCOUNT THE S PECIFIC OBSERVATION OF THE AO THAT THE DECISION OF THE HONBLE J&K HIGH CO URT IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE DEPARTMENT IS IN APPEAL THERE-AGAINST BEFOR E THE HONBLE SUPREME COURT. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS PLACED RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTEND ED THAT THE LD. 5 ITA NO. 280(ASR)/2014 CIT(A) CANNOT AT ALL BE FAULTED FOR HAVING FOLLOWED THE DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA), SINCE THE SAI D DECISION HAS BEEN RENDERED BY THE JURISDICTIONAL HIGH COURT SO FAR AS REGARDS THE ASSESEE AND THAT IT IS WELL SETTLED THAT ALL AUTHORITIES SU BORDINATE TO A PARTICULAR HIGH COURT ARE GOVERNED BY THE DECISIONS RENDERED B Y SUCH JURISDICTIONAL HIGH COURT. 7. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE L IGHT OF THE MATERIAL PLACED BEFORE US, WE FIND THAT THE LD. CIT (A), WHILE DELETING THE ADDITIONS MADE BY THE AO, HAS OBSERVED AS FOLLO WS : 5. I HAVE CONSIDERED THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON TH E ISSUE. IT IS CLEAR THAT THE DECISION OF HONBLE JURISDICIT IONAL HIGH COURT IS DIRECTLY ON THE ISSUE AND IN VIEW OF THE S AME, THE SAID EXCISE DUTY REFUND AND INTEREST REFUND ARE TO BE TREATED AS CAPITAL IN NATURE UNTIL AND UNLESS THE SAID DECI SION OF THE HONBLE COURT IS REVERSED BY THE APEX COURT IN THE SLP FILED BY THE DEPARTMENT.THE DECISION OF THE HONBLE JURISDICIONAL HIGH COURT IS BINDING ON ALL THE AUTH ORITIES BELOW AND THE ACT OF FILING AN SLP DOES NOT MEAN TH AT THERE WOULD BE STAY AGAINST THE ORDER OF THE JURISDICTION AL HIGH COURT ON THE ISSUE. IN VIEW OF THE ABOVE, THE ADDIT ION MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. 8. FROM THE ABOVE, IT IS EVIDENT THAT THE SOLE REAS ON FOR THE LD. CIT(A) TO DELETE THE ADDITIONS MADE BY THE AO WAS T HE DECISION IN SHREE BALAJI ALLOYS(SUPRA), WHEREIN IT HAS BEEN H ELD THAT THE PURPOSE OF THE INCENTIVE SCHEME FORMULATED BY THE CENTRAL G OVERNMENT FOR JAMMU & KASHMIR IS TO ACCELERATE THE INDUSTRIAL DEV ELOPMENT, GENERATE 6 ITA NO. 280(ASR)/2014 EMPLOYMENT AND CREAT OPPORTUNITIES FOR SELF EMPLOYM ENT; THAT THIS PURPOSE IS IN PUBLIC INTEREST; AND THAT THE EXCISE DUTY REFUND AND INTEREST SUBSIDY CONCERNED THEREWITH IS A CAPITAL R ECEIPT. IT REMAINS UNDISPUTED THAT THE DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA), IS A DECISION RENDERED BY THE HONB LE J&K HIGH COURT, WHICH IS THE JURISDICTIONAL HIGH COURT QUA THE ASSE SEE. NOW, THE MAIN GRIEVANCE RAISED BY THE DEPARTMENT IS THAT WHILE FO LLOWING THE DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA), THE LD . CIT(A) HAS FAILED TO TAKE INTO CONSIDERATION THE SUPREME COURT DECISIONS IN THE CASES OF PONNI SUGARS & CHEMICALS LTD.(SUPRA), AND SAWHNE Y STEELS & PRESS WORKS LTD.(SUPRA). HOWEVER, A PERUSAL OF DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA) SHOWS THAT THIS JUDGME NT HAS BEEN PASSED AFTER DULY TAKING INTO CONSIDERATION BOTH THE ABOVE JUDGMENTS OF THE HONBLE SUPREME COURT, I.E., PONNI SUGARS & CHEMIC ALS LTD. AND SAWHNEY STEELS & PRESS WORKS LTD. MOREOVER, IN M EPCO INDUSTRIES LTD. VS. CIT, 319 ITR 208 (SC) ALSO, BOTH THESE DE CISIONS OF THE HONBLE SUPREME COURT WERE CONSIDERED WHILE DECIDIN G THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS HAS ALSO BEEN TAKEN IN TO CONSIDERATION BY US IN ITO, WARD-3, PATHANKOT VS. M/S. T.K. PAPER M ILLS, CHACK SAKTA, KATHUA, H.O. PATHANKOT, AN ORDER DATED 05.08.2014, PASSED IN ITA NO. 106(ASR)/2014 FOR ASSESMENT YEAR 2010-11. 7 ITA NO. 280(ASR)/2014 9. FURTHER, AS RIGHTLY CONSIDERED BY THE LD. CIT(A) , THE DECISION OF THE HONBLE J&K HIGH COURT IN THE CASE OF SHREE BA LAJI ALLOYS(SUPRA) HAS NOT BEEN SHOWN TO HAVE BEEN SET ASIDE OR STAYED BY THE HONBLE SUPREME COURT AND MERE FILING OF SLP IS OF NO HELP TO THE DEPARTMENT. 10. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ERR OR THEREIN, THE WELL REASONED ORDER OF THE LD. CIT(A) IS HEREBY CONFIRME D, REJECTING THE GROUNDS TAKEN BY THE DEPARTMENT, WHICH ARE FOUND TO BE SHORN OF MERIT. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2015. SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH JANUARY, 2015 *AKS/- COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE 2. ASSESSING OFFICER 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T.,AMRITSAR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.