M/s. S.D. Wires & Cables, Jammu V. The Income-tax Officer, Jammu

ITA 342/ASR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51125 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Question of law; Capital receipt
• Section: 234B; 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, HONBLE VICE PRESIDENT AND SH. D.K. SRIVASTAVA, ACCOUNTANT MEMBER I.T.A. NO.342(ASR)/2011 ASSESSMENT YEAR: 2006-07 M/S. S.D. WIRES & CABLES, VS. THE INCOME-TAX OFFIC ER, GANGYAL, JAMMU. WARD 1(3), JAMMU. PAN:AAZFS6120N (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA, ADV RESPONDENT BY:SH. TARSEM LAL, DR DATE OF HEARING :12.12.2011 DATE OF PRONOUNCEMENT: ORDER PER H.L. KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JAMMU, DATED 21.12.2009, RELATING TO THE AS SESSMENT YEAR 2006-07. 2. THE ORIGINAL GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL, READ AS UNDER: 1. THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN RE FUSING DEDUCTION OF RS.19,52,435/- UNDER SECTION 80IB OF INCOME-TAX ACT, ON EXCISE REFUND RECEIVED B THE ASSESSEE. 2. THAT THE LD. CIT(A) WAS ERRED IN LAW INN CONFIRM ING THE INTEREST CHARGED UNDER SECTION 234B OF THE ACT. 2. THE ASSESSEE VIDE ITS LETTER DATED 24.06.2011 HA S ALSO RAISED ADDITIONAL GROUNDS OF APPEAL, WHICH READ AS UNDER: 2 1. THAT THE LD. CIT(A), JAMMU, WAS NOT AT ALL JUST IFIED IN TREATING THE SUM OF RS.19,52,435/- AS REVENUE RECEIPT. THE L D. CIT(A), DID NOT APPRECIATE THAT THIS AMOUNT RECEIVED WAS A CAPITAL RECEIPT WHICH WAS NOT SUBJECT TO TAX. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS A ND IN LAW IN UPHOLDING THE ACTION OF THE AO IN MAKING THE IMPUGN ED ADDITION OF RS.19,52,435/- ON ACCOUNT OF EXCISE DUT Y REFUND BY TREATING THE SAME AS REVENUE RECEIPT. THE LD. CI T(A) DID NOT APPRECIATE THAT THIS WAS A CAPITAL RECEIPT AND THIS WAS NOT LIABLE TO TAX. AS SUCH THE ADDITION OF RS.19,52,435/- MAY BE DELETED. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDI NG THAT THE EXCISE DUTY REFUND OF RS.19,52,435/- RECEIVED BY TH E ASSESSEE WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THIS WAS NOT LIABLE FOR THE CLAIM OF DEDUCTION U/S 80IB OF T HE ACT. THAT THE DEDUCTION AS CLAIMED MAY BE ALLOWED. 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 3 HONBLE SUPREME COURT IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND OF APPEAL. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E RECEIVED A SUM OF RS.19,52,435/- AS EXCISE DUTY REFUND. ON THIS AMOU NT, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX AC T, 1961 (IN SHORT, THE ACT). HOWEVER, THE A.O. REJECTED THE CLAIM OF THE ASSESSEE AND TAXED THE ENTIRE AMOUNT. 5. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE A. O. FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA. THE ASSESSEE (M/S. SHREE BA LAJI ALLOYS) CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT OF J & K. THE ISSUE RAISED BEFORE THE HONBLE J & K H IGH 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? 6. THE HONBLE J & K HIGH COURT VIDE ITS JUDGMENT D ATED 31-1-2011 IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA, REPORT ED IN (2011) 333 ITR 335 (J&K) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH COURT ARE AS UN DER:- 4 . IN THIS VIEW OF THE MATTER, THE INCENTIVES PROV IDED 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 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 5 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 CASE OF M/S.SHREE BALAJI ALLOYS AND OTHERS (SUPRA), WE HOLD THAT THE AMOUNT OF RS.19,52,435/- RECEIVED BY THE ASSSSEE ON ACCOUNT OF EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND NOT LIA BLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 8. SINCE WE HAVE DECIDED THE ADDITIONAL GROUND NO. 1 & 2 OF APPEAL IN FAVOUR OF THE ASSESSEE AND, THEREFORE, WE DO NOT TH INK IT NECESSARY TO DECIDE THE ORIGINAL GROUNDS OF APPEAL, I.E. GROUND NO.1 AN D ADDITIONAL GROUND NO.3 OF THE APPEAL. 6 9. THE ORIGINAL GROUND NO.2 OF THE APPEAL RELATES T O CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. AT THE TIME OF HEARI NG, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND OF APPEAL IS CO NSEQUENTIAL IN NATURE AND WE HOLD ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH DECEMBER, 2011. SD/- SD/- (D.K.SRIVASTAVA) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 12TH DECEMBER, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: M/S. S.D. WIRES & CABLES, GANGYAL, JA MMU. 2. THE ITO WARD 1(3), JAMMU. 3. THE CIT(A), 4. THE CIT, 5. THE SR DR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.