Jammu Casting Pvt. Ltd., Jammu V. ACIT, Jammu

ITA 379/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5787 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 06-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Capital receipt
• Section: 143(3); 80IB; 148

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.379(ASR)/2010. (ASSESSMENT YEAR: 2001-02) JAMMU CASTING PVT. LTD., THE ASSTT. C.I.T., JAMMU. CIRCLE I, JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI R.K.. GUPTA, 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), JAMMU, RELATING TO THE ASSESSMENT YEAR 2001 -02. 2. IN THIS APPEAL, THE ASSESSEE RAISED THE ADDITION AL GROUND OF APPEAL, WHICH READS AS UNDER- THE WORTHY CIT(A) IS NOT JUSTIFIED IN DISALLOWING THE DEDUCTION UNDER SECTION 80IB(4) ON THE AMOUNT OF INTEREST SUB SIDY. THE INTEREST SUBSIDY RECEIVED IS IN PURSUANCE OF INCENTIVE ANNOU NCED AND SANCTIONED BY THE GOVERNMENT OF INDIA PERTAINING TO INDUSTRIAL POLICY FOR THE STATE OF JAMMU & KASHMIR. HENCE, IT IS CAPI TAL RECEIPT. ACCORDINGLY VIEWING IT FOR DEDUCTION UNDER SECTION 80IB(4) OF THE INCOME TAX ACT HAS NO RELEVANCE. 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. 2 (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. THE ASESSEE IS DOING THE BUSINESS OF MANUFACTURI NG OF INGOTS REGISTERED WITH THE DISTRICT INDUSTRIES CENTRE, JAM MU AS A SMALL SCALE INDUSTRY. THE ASSESSEE FILED THE RETURN OF INCOME ON 29-10-2001 DECLARING AN INCOME OF RS.3,19,230/- AFTER CLAIMING DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). SUB SEQUENTLY, THE CASE WAS REOPENED AND NOTICE UNDER SECTION 148 OF THE ACT ON 29-3-2008 WAS ISSUED ON THE REASONS THAT THE INTEREST SUBSIDY RECEIVED B Y THE ASSESSEE-COMPANY HAS BEEN ALLOWED DEDUCTION UNDER SECTION 80IB OF TH E ACT WRONGLY. THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SEC TION 147/148 OF THE ACT WAS PASSED ON 26-9-2008 DENYING THE DEDUCTION UNDER SECTION 80IB IN RESPECT OF INTEREST SUBSIDY AMOUNTING TO RS.4,42,69 0/-. 5. ON APPEAL, THE CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE CIT(A). 3 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 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? 6. 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. 7. 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 ALLOW THE APPEAL. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH JUNE, 2 011. 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.JAMMU CASTING PVT. LTD., VILLAGE THANGER, BYE PASS, JAMMU. (2) THE ACIT, CIRCLE I, JAMMU. (3) THE CIT, JAMMU. (4) THE CIT(A), JAMMU (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.