The Income-tax Officer, UDHAMPUR V. M/s. Maa Durga Industries, Uttar Pradesh

ITA 337/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85882 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• 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. 337(ASR)/2014 ASSESSMENT YEAR: 2009-10 PAN: AAMFM 3368D INCOME-TAX OFFICER, VS. M/S. MAA DURGA INDUSTR IES, UDHAMPUR. BATTAL BALLIAN, UDHAMPUR. AT PRESENT- SUNDAR MOHALLA CHANDAUSI (U.P.) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. RATINDER KAUR, D.R. RESPONDENT BY : SH. P.N. ARORA, ADVOCATE DATE OF HEARING : 13.01.2015 DATE OF PRONOUNCEMENT : 13.01.2015 ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 20 09-10 AGAINST THE ORDER DATED 06.03.2014 PASSED BY LEARNED CIT(A) , JAMMU. 2. THE LD. COUNSEL FOR THE ASSESSEE HAS FILED AN AP PLICATION FOR ADJOURNMENT, CONTENDING THEREIN THAT HE HAS NOT BEE N ABLE TO COLLECT NECESSARY INFORMATION FROM HIS CLIENT. WE, HOWEVER, FIND THAT ALL NECESSARY INFORMATION REQUIRED IS ON RECORD. THE MA TTER CAN BE PROCEEDED WITH AS SUCH. THEEREFORE, THE APPLICATION FOR ADJOURNMENT IS REJECTED. 2 ITA NO. 337(ASR)/2014 3. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS O F APPEAL : 1. WHETHER THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU WAS RIGHT IN LAW TO ALLOW DEDUCTIO N U/S. 80IB OF THE INCOME TAX ACT, 1961 ON CENTRAL EXCISE DUTY REFUND BY RELYING UPON THE JUDGMENT OF THE HONBLE HIGH COURT OF J&K, IN THE CASE OF M/S. SHREE BALAJI ALLO YS & 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) , JAMMU COMMITTED AN ERROR IN LAW IN NOT FOLLOWING TH E LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CA SE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD., WHEREIN SIMILAR RECEIPTS WERE HELD TO BE REVENUE IN NATURE 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) , JAMMU WAS RIGHT IN NOT APPRECIATING AND APPLYING TH E 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. 4. THE FACTS ARE THAT THE ASSESSEE FIRM, FOR THE YE AR UNDER CONSIDERATION, CLAIMED DEDUCTION OF RS.13,57,481/- U/S. 80IB OF THE INCOME-TAX ACT IN RESPECT OF EXCISE DUTY REFUND. TH E AO, VIDE ORDER DATED 24.11.2011, REJECTED THIS CLAIM AS NOT AN ALL OWABLE DEDUCTION. IT WAS OBSERVED THAT SIMILAR DEDUCTION CLAIMED BY THE ASSESSEE IN THE TWO IMMEDIATELY PRECEDING ASSESSMENT YEARS HAD ALSO BEE N DISALLOWED. IT WAS ALSO OBSERVED THAT IN SHREE BALAJI ALLOYS & OT HERS VS. CIT & ANOTHER, 333 ITR 335 (J&K), RENDERED BY THE HONBL E JURISDICTIONAL 3 ITA NO. 337(ASR)/2014 HIGH COURT, THIS ISSUE HAS BEEN DECIDED AGAINST THE DEPARTMENT, BUT THE DEPARTMENT, HAVING NOT ACCEPTED THE SAID DECISION, HAS FILED SLPS BEFORE THE HONBLE SUPREME COURT. 5. BY VIRTUE OF THE IMPUGNED ORDER, FOLLOWING THE D ECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA), THE LD. CIT(A ) DELETED THE DISALLOWANCE, OBSERVING AS FOLLOWS : 4. DETERMINATION GROUND OF APPEAL NO. 1 TO 5 RELATE TO ADDITION ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION OF EX CISE DUTY REFUND U/S 80IB FOR RS.13,57,481/-. CONCERNING PROFIT AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING, THE EXCISE DUTY REFUND DOES NOT QUALIF Y FOR SUCH PROFIT AND GAINS IN VIEW OF RATIO OF JUDGMENT OF TH E APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 WHICH CLARIFIED THAT IN SUCH RECEIPTS THERE IS NO F IRST DEGREE NEXUS WITH THE MANUFACTURING OF INDUSTRIAL UNDERTAK ING. HOWEVER, THE HONBLE J & K HIGH COURT IN THE CASE O F SHRI BALAJI ALLOYS & OTHERS VS. CIT HAS HELD THAT EXCISE DUTY REFUND AND INTEREST SUBSIDY ARE CAPITAL RECEIPTS. THE APPELLANT HAS PLACED ITS RELIANCE ON THIS DECIS ION OF SHRI BALAJI ALLOYS AND OTHERS VS. CIT 333 ITR 335, WHERE IT HAS BEEN HELD THAT EXCISE DUTY REFUND AND INTEREST SUBSIDY IN PURSUANCE TO THE INCENTIVE ALLOWANCE BY THE GOVERNM ENT PERTAINING TO INDUSTRIAL POLICY INTRODUCED IN THE S TATE OF J & K ARE CAPITAL RECEIPT. IN THE JUDGMENT THE HON. J & K HIGH COURT HAS OBSER VED IN THE CASE OF SHREE BALAJI ALLOYS VS. CIT THAT THE EX CISE REFUND IS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESEE.TH IS JUDGMENT HOLDING CAPITAL RECEIPT IS BASED ON THE FA CT THAT THE EXCISE REFUND WOULD FACILITATE THE EMPLOYMENT I N THE BACKWARD AREA AND SETTING UP OF NEW INDUSTRY AS WEL L. WITH DUE RESPECT TO THE JUDGMENT OF HONBLE J & K HIGH C OURT, TO MY UNDERSTANDING THIS DECISION IS IN CONTRADICTION TO THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN SAHNEY STEEL 4 ITA NO. 337(ASR)/2014 CASE AND RAJA RAM MAIZE PRODUCT CASE DECIDED BY THE HON. SUPREME COURT. IN MY HUMBLE VIEW FOR THE FOLLOWING REASONS THE REFUND OF EXCISE DOES NOT APPEAR TO BE OF CAPIT AL NATURE. (I) THE EXCISE DUTY IS LEVIABLE ONCE THE INDUSTRY IS ES TABLISHED AND START PRODUCTION AND NOT PRIOR TO ITS SETTING UP. T HUS IT HAS NO ROLE IN ESTABLISHING AN INFRASTRUCTURE. (II) AS AND WHEN MANUFACTURING TAKES PLACE AND IS SOLD I N THE MARKET THE INCIDENCE OF EXCISE DUTY AD SALES TAX AR ISES RESPECTIVELY. THUS IT IS LINKED WITH DAY TO DAY OPE RATION OF THE INDUSTRY. (III) THIS IS NOT A ONE TIME PHENOMENA BUT A RECURRING PHENOMENA WHICH IS LINKED WITH QUANTITY OF GOODS MANUFACTURED AND SOLD. THE INCENTIVE/SUBSIDY IS GIV EN FOR 10 YRS WHICH SUGGEST THAT THIS IS TO ASSIST THE SUSTEN ANCE OF THE INDUSTRY IN COMPETITION RATHER THAN SETTING UP OF T HE INDUSTRY. (IV) THE RECEIPT OF THE EXCISE DUTY REFUND IS ACCOUNTED FOR BY THE APPELLANT AS REVENUE RECEIPT IN ACORDANCE WITH THE ACCOUNTIG STANDARDS. (V) THE FACT THAT EXCISE DUTY IS CLAIMED AS DEDUCTION EXPENDITURE IN PROFIT AND LOSS ACCOUNT AS EXPENDITU RE, ITSELF CLARIFIES OF BEING REVENUE IN NATURE. (VI) IN THE CASE OF LIBERTY INDIA THE HON. SUPREME COURT HAS HELD THAT INCENTIVE AND OTHER ASSISTANCE FROM THE C ENTRAL GVERNMENT IN TERMS OF DEPB AND DUTY DRAW BACK ARE N OT THE PROFITS ARISING OUT OF INDUSTRIAL UNDERTAKING.THERE IS NO FIRST DEGREE NEXUS BETWEEN THE PROFIT AND RUNNING OF THE INDUSTRY. THIS IS AN INCENTIVE UNDER THE GOVERNMENT SCHEME AN D THEREFORE CANNOT CLAIMED AS EXEMPT UNDER SECTION 80 IA. SINCE THE HONBLE H.C. OF J&K HAS REFERRED TO THE C ASES OF M/S. SAHNEY STEEL PRESS WROKS LTD., PONNI SUGARS AN D M/S. MEPCO INDUSTRIES LTD IN THEIR JUDGMENT IN THE CASE OF SHREE BALAJI ALLOYS VS. CIT BEFORE ARRIVING AT THE CONCLU SION THAT EXCISE DUTY REFUND IS CAPITAL IN NATURE AND ALSO SU BSEQUENTLY REJECTED THE MISCELLANEOUS PETITION OF THE DEPARTME NT FOR RECONSIDERTION, THE ISSUE STAND SETTLED TILL A CONT RARY JUDGMENT IS PRONOUNCED BY THE APEX COURT. THE JURISDICTIONAL BENCH OF HONBLE ITAT AMRITSAR IS IN VARIABLY FOLLOWING THE SAID DECISION OF HONBLE HC OF J&K IN FAVOUR OF ASSESSEE DESPITE HAVING CONTRARY VIEW IN THE MAT TER ERLIER 5 ITA NO. 337(ASR)/2014 I.E., BEFORE THE DECISION OF THE HONBLE J&K HIGH C OURT. IN VIEW OF JUDICIAL DISCIPLINE DESPITE HAVING DIFFEREN CES IN MY INTERPRETATION VIS--VIS THAT OF THE HONBLE HC OF J&K ON THE ISSUE, I RESPECTFULLY FOLLOWING THE JUDGMENT OF THE JURISDICTION HC OF J & K ALLOW THIS GROUND OF APPEA L. 6. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US . 7. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S. 80IB OF THE INCOME TAX ACT, 1961 ON CENTRAL EXCISE DUTY REFUND BY RELY ING ON THE JUDGMENT OF THE HONBLE HIGH COURT OF J&K, IN THE C ASE OF M/S. SHREE BALAJI ALLOYS & OTHERS (SUPRA); THAT THE LD. CIT(A ) HAS ERRED IN NOT FOLLOWING THE LAW AS LAID DOWN BY THE HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. PONNI SUGAR, 306 ITR 392(SC) & SA HNEY STEEL AND PRESS WORKS LTD. VS. CIT, 228 ITR 253 (SC), WHEREI N SIMILAR RECEIPTS WERE HELD TO BE REVENUE IN NATURE AS THE SAME HAD B EEN MADE AFTER THE INDUSTRIES HAD BEEN SET UP AND NOT FOR THE PURPOSE OF SETTING UP OF THE INDUSTRIES; AND THAT THE LD. CIT(A) HAS ERRED IN NO T APPRECIATING AND APPLYING THE PURPOSE TEST AS LAID DOWN BY THE JUDGM ENT OF THE HONBLE SUPREME COURT, IN THE CASE OF ASSESSEE, AS THE MONE Y RECEIVED BY THE ASSESSEE ON ACCOUNT OF CENTRAL EXCISE WAS NOT SUPPO SED TO BE SPENT IN A PARTICULAR MANNER, OR FOR THE PURPOSE OF SUBSTANT IAL EXPANSION OF THE INDUSTRY. 8. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED STRONG 6 ITA NO. 337(ASR)/2014 RELIANCE ON THE IMPUGNED ORDER AND HAS BROUGHT TO O UR NOTICE THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N SHREE BALAJI ALLOYS (SUPRA), WHICH DECISION HAS BEEN FOLLOWED B Y THE LD. CIT(A) FOR DELETING THE DISALLOWANCE. 9. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. 10. THE SOLE REASON FOR THE LD. CIT(A) TO DELETE TH E ADDITION MADE BY THE AO WAS THE DECISION IN SHREE BALAJI ALLOYS(SU PRA), WHEREIN IT HAS BEEN HELD THAT THE PURPOSE OF THE INCENTIVE SCHEME FORMULATED BY THE CENTRAL GOVERNMENT FOR JAMMU & KASHMIR IS TO ACCELE RATE THE INDUSTRIAL DEVELOPMENT, GENERATE EMPLOYMENT AND CRE ATE OPPORTUNITIES FOR SELF EMPLOYMENT; THAT THIS PURPOSE IS IN PUBLIC INTEREST; AND THAT THE EXCISE DUTY REFUND AND INTEREST SUBSIDY CONCERNED T HEREWITH IS A CAPITAL RECEIPT. IT REMAINS UNDISPUTED THAT THE DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA), IS A DECISION RENDERED BY TH E HONBLE J&K HIGH COURT, WHICH IS THE JURISDICTIONAL HIGH COURT QUA T HE ASSESEE. NOW, THE MAIN GRIEVANCE RAISED BY THE DEPARTMENT IS THAT WHI LE FOLLOWING 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), A ND SAWHNEY 7 ITA NO. 337(ASR)/2014 STEELS & PRESS WORKS LTD.(SUPRA). HOWEVER, A PERUS AL OF DECISION IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA) SHOWS THAT THIS JUDGMENT HAS BEEN PASSED AFTER DULY TAKING INTO CONSIDERATION BO TH THE ABOVE JUDGMENTS OF THE HONBLE SUPREME COURT, I.E., PONN I SUGARS & CHEMICALS LTD. AND SAWHNEY STEELS & PRESS WORKS L TD. MOREOVER, IN MEPCO INDUSTRIES LTD. VS. CIT, 319 ITR 208 (SC ) ALSO, BOTH THESE DECISIONS OF THE HONBLE SUPREME COURT WERE CONSIDE RED WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS HAS ALSO BEEN TAKEN INTO CONSIDERATION BY US IN ITO, WARD-3, PATHANKOT VS. M/S. T.K. PAPER MILLS, CHACK SAKTA, KATHUA, H.O. PATHANKOT, AN ORDER DATED 05.08.2014, PASSED IN ITA NO. 106(ASR)/2014 FOR ASS ESMENT YEAR 2010- 11 AND IN DY. CIT, JAMMU VS. M/S. NARBADA STEEL LT D., SIDCO INDUSTRIAL COMPLEX, BARI BRAHMANA, JAMMU, AN ORDER DATED 12.01.2015, PASSED IN ITA NO. 280(ASR)/2014 FOR THE ASSESSMENT YEAR 2010-11. 11. FURTHER, THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF SHREE BALAJI ALLOYS(SUPRA) HAS NOT BE EN SHOWN TO HAVE BEEN SET ASIDE OR STAYED BY THE HONBLE SUPREME CO URT AND MERE FILING OF SLP IS OF NO HELP TO THE DEPARTMENT. 12. IN VIEW OF THE ABOVE DISCUSSION, FINDING NO ERR OR THEREIN, THE WELL 8 ITA NO. 337(ASR)/2014 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. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2015. SD/- SD/- (B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 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.