M/s. Sukhjeet Starch & Chemicals Ltd., Phagwara V. ACIT, Phagwara

ITA 340/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5811 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 30-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Question of law; 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. NO.340(ASR)/2010. (ASSESSMENT YEAR: 2007-08 ) M/S.SUKHJIT STARCH & CHEMICALS LTD. THE ADDL. C.I. T., SARAI ROAD, PHAGWARA. PHAGWARA RANGE, PHAGWARA. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI Y.K. SUD, C.A. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JALANDHAR, RELATING TO THE ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE RAISED THE ADDITION AL GROUND OF APPEAL, WHICH READS AS UNDER- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE INTEREST SUBSIDY AMOUNTING TO RS.4305125/- IS A CAP ITAL RECEIPT, NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE ACT. 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:- 2 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 A ND PROCEED TO DECIDE THE SAME IN SUCCEEDING PARAGRAPHS. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURE OF MAIZE STARCH AND DERI VATE LIKE DECTRIN, LIQUID GLUCOSE, DEXTROSE MONOHYDRATE, SORBITOL ETC. WHICH THE COMPANY USES AS ITS BASIC RAW MATERIAL. DURING THE ASSESSMENT YEAR, TH E ASSESSEE HAD RECEIVED THE INTEREST SUBSIDY/INCENTIVE AMOUNTING TO RS.43,0 5,125/- AND CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT , 1961 (IN SHORT, THE ACT). HOWEVER, THE A.O. DID NOT ALLOW THE CLAIM O F THE ASSESSEE AND TAXED THE SAME. 5. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KA THUA UPHELD THE ORDER OF THE A.O. AND DISMISSED THE APPEAL OF THE ASSESSEE A ND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A). 6. 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 3 DECISION OF THE HONBLE J & K HIGH COURT IN THE CASE OF M/S. SHREE BALAJI ALLOYS, KATHUA WHICH IS REPORTED IN (2011) 333 ITR 335 (J&K). THERE IS NO OTHER DECISION OF THE JURISDICTIONAL HIGH COURT AVA ILABLE ON THIS ISSUE AND, THEREFORE, WE WILL FOLLOW THE JUDGMENT OF THE HONB LE J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA). TH E 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? 7. THE HONBLE HIGH COURT DECIDED THE ISSUE, OBSERV ING AS UNDER:- . IN THIS VIEW OF THE MATTER, THE INCENTIVES PRO VIDED 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 4 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 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. 5 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. 8. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE HOLD THAT INTEREST SUBSIDY/INCENTIVE AMOUNTING TO RS.43,05,12 5/- RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT NO LIABLE TO TAX UNDE R THE PROVISIONS OF THE ACT. 8.1 IN VIEW OF THE ABOVE, WE ALLOW THE ABOVE GROUND OF APPEAL. 9. SINCE WE HAVE DECIDED THE ADDITIONAL GROUND IN F AVOUR OF THE ASSESSEE, THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE T HE GROUNDS OF APPEAL, RAISED ON MERITS. 10. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH JUNE, 2 011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 15 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE : M/S.SUKHJIT STARCH & CHEMICALS LTD., SARAI ROAD, PHAGWARA. (2) THE ADDL. CIT, PHAGWARA RANGE, PHAGWARA. (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.