M/s. Ess Vee Udyog, Jalandhar V. Additional Commissioner of Income Tax, Jalandhar

ITA 308/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5790 (ITAT-AMRITSAR)
• Duration Of Justice: 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J S BHASIN
• Keywords: Application of stay; Question of law; Capital receipt
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. S.A. NO.06(ASR)/2011. (ARISING OUT OF I.T.A. NO.472(ASR)/2010) (ASSESSMENT YEAR: 2007-08) AND I.T.A. NO.472(ASR)/2010. (ASSESSMENT YEAR: 2007-08) AND I.T.A. NO.308(ASR)/2011. (ASSESSMENT YEAR: 2008-09) M/S.ESS VEE UDYOG, THE ADDL. C.I.T., C-88, INDUSTRIAL ESTATE, RANGE II, JALANDHAR. JALANDHAR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI J.S. BHASIN, ADV. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THESE TWO APPEALS INVOLVING COMMON ISSUE ALONGWITH STAY APPLICATION WERE HEARD TOGETHER AND ARE BEING DISPO SED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN I.T.A. NO.472(ASR)/2010, THE ASSESSEE HAS RAI SED THE ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- 2 THAT THE EXCISE REFUND/INCENTIVES RECEIVED BY ASSE SSEE, IN RESPECT OF ITS INDUSTRIAL UNIT SET UP AT KATHUA (J&K), BEING I N THE NATURE OF A CAPITAL RECEIPT, WAS NOT LIABLE TO TAX. 3. AS REGARDS THE ADMISSION OF ADDITIONAL GROUND, W E FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. (1998) 229 ITR 383 (SC), WHEREIN THE HONBLE SUPREM E 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. 3.1 IN OUR VIEW, THE ADDITIONAL GROUND RAISED BY THE AS SESSEE IS A QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND OF APPEAL. 4. IN I.T.A. NO.308(ASR)/2011, THE ASSESSEE HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A), BEING IN THE HIERARCHY OF APPELLATE AUTHORITIES, WAS NOT JUSTIFIED, UNLIKE THE AO, A RE VENUE AUTHORITY AS ALSO AN AGGRIEVED PARTY, TO DIFFER FRO M THE VIEW TAKEN BY THE HONBLE J & K HIGH COURT, ON THE ISSUE IN DISPUTE, UNDER THE MISCONCEPTION THAT IT WAS NOT A JURISDICT IONAL HIGH COURT DECISION RENDERED IN THE CASE OF SHREE BALAJI ALLOYS (2011) 521 DTR (J&K) 271. 3 2. WHILE HOLDING SO, THE LD. CIT(A) LOST SIGHT OF T HE FACT THAT IT WAS THE SAME VERY DECISION OF THE ITAT BENCH, AMRITSAR, IN THE CASE OF SHREE BALAJI ALLOYS, WHICH HAD BEEN FOLLOWE D BY THE AO THIS YEAR, AS ALSO BY HIM IN EARLIER YEAR, TO DI SALLOW ASSESSEES CLAIM ON THE TAXABILITY OF SUBSIDY GIVEN AS EXCISE DUTY REFUND. AS SUCH, REVERSAL OF THE SAID DECISIO N OF ITAT, EVEN BY HONBLE J&K HIGH COURT, HAD BINDING EFFECT. 3. THAT WITHOUT PREJUDICE TO ABOVE, EVEN OTHERWISE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS TO HOLD THAT THE RECE IPT OF EXCISE DUTY REFUND WAS REVENUE IN NATURE AND HENCE LIABLE TO TAX. 4. THAT THE LD. CIT(A) ALSO ERRED IN SUSTAINING THE AOS ACTION THAT THE EXCISE DUTY REFUND WAS NOT ELIGIBLE TO DEDUCTIO N U/S,.80IB. 5. THAT THE ORDER UNDER APPEAL, IS WHOLLY AGAINST L AW AND FACTS OF THE CASE. 4.1 WHILE FRAMING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08, THE A.O. DISALLOWED EXCISE DUTY REFUND AND INTEREST HOL DING THAT THE SAME ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF TH E INCOME TAX ACT, 1961 (IN SHORT, THE ACT). ON APPEAL, THE CIT(A), JALANDHA R CONFIRMED THE DISALLOWANCE. 4.2 FOR THE ASSESSMENT YEAR 2008-09 ALSO, THE A.O. DISALLOWED THE EXCISE DUTY REFUND INCENTIVE UNDER SECTION 80IB OF THE AC T, WHICH WAS CONFIRMED BY THE CIT(A), JALANDHAR, VIDE HIS ORDER DATED 29-4 -2011. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR VIEW, THE ISS UE RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE HONBLE JURISDICTIONAL J & K HIGH COURT IN THE CASES OF M/S. SHREE BALAJI ALLOYS, KATHUA (2011) 333 ITR 335 (J&K ). THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS UNDER:- 4 WHETHER THE AMOUNT OF EXCISE REFUND AND INTEREST SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSES, IN PURSUANCE O F THE INCENTIVES ANNOUNCED AND SANCTIONED VIDE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY (DEPARTMENT OF IN DUSTRIAL POLICY AND PROMOTION)S OFFICE MEMORANDUM NO.1(13)2 000- NER DATED JUNE 4, 2002 AND CENTRAL EXCISE NOTIFICAT ION NOS.56 AND 57, DATED NOVEMBER 14,2002 AND OTHER NOT IFICATIONS ISSUED ON THE SUBJECT, PERTAINING TO THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU & KASHMIR, IS A CA PITAL RECEIPT AND, THUS, NOT LIABLE TO TAX UNDER THE PROV ISIONS OF THE ACT, OR REVENUE RECEIPT, AS OPINED BY THE AUTHORITI ES UNDER THE ACT? 6. THE HONBLE HIGH COURT DECIDED THE ISSUE, OBSERV ING AS UNDER:- IN THIS VIEW OF THE MATTER, THE INCENTIVES PROVID ED 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 BEHALF, TO THE APPELLANTS-ASSESSEES, CANNOT BE CONS TRUE AS MERE 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 5 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. 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 JURISDICTIONAL J & K HIGH COURT IN THE CASSE OF M/S.SHREE BALAJI ALLOY S AND OTHERS (SUPRA), WE ALLOW BOTH THE APPEALS. 6 8. THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE TRE ATED AS DISMISSED. 9. S.A. NO.06(ASR)/2011 (ARISING OUT OF ITA NO.472(ASR )/2010):- SINCE WE HAVE DISPOSED OF THE APPEAL OF THE ASSESS EE AND, THEREFORE, THERE IS NO QUESTION OF GRANTING STAY TO THE ASSESS EE, AS PRAYED FOR, AND HENCE THE SAME HAS BECOME INFRUCTUOUS. ACCORDINGLY, THE STAY PETITION STANDS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN THE ABOVE TERMS AND THE STAY APPLICATION FILED BY THE ASSESSE E STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2011 SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 10 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.ESS VEE UDYOG, C-88, INDL. ESTATE , JAL. (2) THE ADDL. CIT, RANGE II, JAL. (3) THE CIT, JAL. (4) THE CIT(A), JAL. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.