The ACIT, Jammu V. M/s. Kashmir Tubes, Jammu

ITA 336/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5793 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Capital receipt

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. NOS.335 & 336(ASR)/2010. (ASSESSMENT YEARS: 2006-07 & 2007-08) THE ASSTT. C.I.T., M/S.KASHMIR TUBES, C.C., JAMMU. BARI BRAHMNA, JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI TARSEM LAL, D.R. RESPONDENT BY: SHRI P.N. ARORA, ADV. ORDER PER H.L. KARWA, VICE PRESIDENT. THESE APPEALS FILED BY THE REVENUE INVOLVING COMMO N ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS OR DER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUND OF APPEALS READS AS UNDER:- THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN ALLOWING DEDUCTION U/S.80IB TO THE ASSESSEE ON THE EXCISE DUTY REFUND WITHOUT APPRECIATING THAT THE RETURN ON ACCOUNT OF EXEMPTION FROM EXCISE DUTY IS AN INCENTIVE AND NOT INCOME FROM ELI GIBLE BUSINESS ENTITLED FOR DEDUCTION U/S,.80IB. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT F OR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTI ON 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) AMOUNTING TO RS. 57,45,072/- . THE AFORESAID DEDUCTION UNDER SECTION 80-IB INCLUDES AM OUNT OF RS.24,06,848/- ON THE REFUND OF EXCISE DUTY AMOUNTING TO RS.96,27 ,393/-. THE A.O. TOOK 2 THE VIEW THAT REFUND OF EXCISE DUTY CANNOT BE SAID TO BE PROFIT OF INDUSTRIAL UNDERTAKING. THEREFORE, DEDUCTION U/S.80-IB WAS RE DUCED ON REFUND OF EXCISE DUTY. ON APPEAL, THE CIT(A) ALLOWED THE CLA IM OF THE ASSESSEE. 3.1 FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE C LAIMED 25% DEDUCTION UNDER SECTION 80-IB OF THE ACT AMOUNTING TO RS.57,9 9,403/- WHEREAS RETURN OF EXCISE DUTY IS RS.1,65,76,439/-. THE A.O. HELD THAT DEDUCTION UNDER SECTION 80-IB OF THE ACT IS NOT ALLOWABLE ON REFUND OF EXCISE DUTY CANNOT BE PROFIT OF INDUSTRIAL UNDERTAKING. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 4. 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 CASE OF M/S. SHREE BALAJI ALLOYS, KATHUA (2011) 333 ITR 335 (J&K ). THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS UNDER:- 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? 5. 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 3 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 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 4 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. 6. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL J & K HIGH COURT IN THE CASES OF M/S.SHREE BALAJI ALLOY S AND OTHERS (SUPRA), WE DISMISS BOTH THE APPEAL BEING DEVOID OF ANY MERIT. 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. 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.KASHMIR TUBES, BARI BRAHMNA, JAMM U. (2) THE ACIT, CENTRAL CIRCLE, JAMMU.(3) THE CIT, JAMMU. (3) THE CIT(A), JAMMU. THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR. 5