ACIT, Chandigarh V. M/s Shivalik Agro Chemicals, Chandigarh

ITA 417/CHANDI/2012

• Counselvise Citation: 41721514 RSA 2012
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: HARRY REKHY
• Keywords: Capital receipt
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.417/CHD/2012 (ASSESSMENT YEAR : 2008-09) THE A.C.I.T., VS. M/S SHIVALIK AGRO CHEMICALS, CIRCLE 2(1), NEELAM CINEMA COMPLEX, CHANDIGARH. SECTOR 17-E, CHANDIGARH. PAN: AALFS7372Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI HARRY REKHY DATE OF HEARING : 22.08.2012 DATE OF PRONOUNCEMENT : 28.08.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), CHANDIGARH DAT ED 20.01.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL: 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.2,26,43,925/- MADE BY THE A.O. BY HOLDING THAT EXCISE DUTY REFUND WAS CAPITAL RECEIPT AND WAS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. 3. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSM ENT YEAR 2007-08 AND 2 THE CIT (APPEALS) HAD ALLOWED THE CLAIM OF THE ASSE SSEE FOLLOWING THE SAME. 4. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IN THE PRESENT APPEAL IS IN RELATION TO THE T REATMENT OF EXCISE DUTY REFUND OF RS.2,26,43,925/- RECEIVED DURING THE YEAR UNDER CONSIDERATION. THE SAID RECEIPT WAS CLAIMED AS EXEMPT BY THE ASSES SEE BUT THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID EXC ISE DUTY REFUND HAD NO DIRECT NEXUS WITH THE MANUFACTURING PROCESS AND THE SAME WAS TO BE ADDED AS INCOME OF THE ASSESSEE WITH NO BENEFIT OF DEDUCTION UNDER SECTION 80IC OF THE ACT. SIMILAR ISSUE OF TREATMEN T OF EXCISE DUTY REFUND IN THE HANDS OF THE ASSESSEE AROSE BEFORE THE TRIBU NAL IN ITA NO.968/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE. THE TRIBUNAL VIDE ORDER DATED 20.12.2011 IN TURN FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 AND OTHERS (DATE OF DECISION 31.1.2011) HELD THE SAID EXCISE D UTY REFUND TO BE CAPITAL RECEIPT AND NOT INCLUDIBLE IN THE HANDS OF THE ASSESSEE AS INCOME IN THE YEAR IN WHICH THE SAME WAS RECEIVED. THE TR IBUNAL VIDE PARAS 15 TO 17 OBSERVED AS UNDER: 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE RAISED VIDE GROUND NO.3 BY T HE ASSESSEE WAS IN CONNECTION WITH THE ADDITION MADE B Y THE AUTHORITIES BELOW ON ACCOUNT OF EXCISE DUTY REF UND BY HOLDING THAT IT HAD NO NEXUS WITH THE MANUFACTUR ING ACTIVITIES CARRIED ON BY THE ASSESSEE AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T. THE ASSESSEE HAS RAISED AN ALTERNATE PLEA BY WAY OF 3 ADDITIONAL GROUND OF APPEAL NO.1 WHEREIN IN VIEW OF THE RATIO LAID DOWN BY JAMMU & KASHMIR HIGH COURT IN M/ S SHREE BALAJI ALLOYS & OTHERS (SUPRA) IT IS CLAIMED THAT THE SAID EXCISE DUTY REFUND IS A CAPITAL RECEIPT AN D HENCE NOT INCLUDIBLE AS INCOME OF THE ASSESSEE. TH E ADDITIONAL GROUND OF APPEAL NO.1 BEING PURELY LEGAL IS ADMITTED FOR ADJUDICATION. 16. FIRST WE TAKE UP ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE. THE ASSESSEE HAD SET UP MANUFACTURING UNIT AND STARTED COMMERCIAL PRODUCTIO N AT SAMBA, WHICH IS BACKWARD AREA OF STATE OF JAMMU & KASHMIR. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE PROFITS EARNED FROM THE SAMBA MANUFACTURING UNIT AND AS THE ASSESSEE WAS FOUND TO HAVE FULFILLED ALL CONDITIONS LAID DOWN UN DER SECTION 80IB OF THE ACT, THE SAID DEDUCTION WAS ALL OWED BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER HELD THAT A SUM OF RS.139.80 LACS BEING EXC ISE DUTY REFUND RECEIVED BY THE ASSESSEE WAS NOT ELIGIB LE FOR THE SAID DEDUCTION UNDER SECTION 80IB OF THE AC T, AS THE SAME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. SIMILAR ISSUE OF RECEIPT OF EXCISE DU TY REFUND AROSE BEFORE THE HON'BLE JAMMU & KASHMIR HIG H COURT IN BUNCH OF APPEALS WITH LEAD ORDER IN M/S SH REE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 & OTHERS. THE HON'BLE COURT VIDE ORDER DATED 31.1.20 11 AFTER CONSIDERING THE SCHEME FORMULATED BY THE STAT E GOVERNMENT HAD ALSO REFERRED TO THE RATIOS LAID DOW N BY THE HON'BLE SUPREME COURT IN SAWHNEY STEEL & PRE SS WORKS LTD. & OTHERS VS. CIT [228 ITR 253(SC)] AND CIT VS. PONNI SUGARS & CHEMICALS LTD. [306 ITR 392 (SC)] AND HELD THAT IN CONTEXT OF THE RESPECTIVE INCENTIVE SCHEMES IN THE TWO CASES, THE SUBSIDY IN SAWHNEY STEEL & PRESS WORKS LTD. & OTHERS (SUPRA) WAS HELD TO BE REVENUE RECEIPT WHEREAS THE SUBSIDY IN PONNI SUGARS & CHEMICALS LTD.(SUPRA) WAS HELD TO BE CAPITAL RECEIPT. FURTHER SUPPORT WAS TAKEN FROM TH E LATER DECISION OF THE HON'BLE SUPREME COURT IN M/S 4 MEPCO INDUSTRIES LTD., MADURAI VS. CIT & ANOTHER, 2009 (97) SUPREME 564, WHEREIN SIMILAR PRINCIPLE HA D BEEN HELD AND IT HAS ALSO BEEN LAID DOWN THAT THE NATURE OF THE SUBSIDY IN EACH OF THE CASES WAS SEPA RATE AND DISTINGUISHED. IT WAS FURTHER HELD THAT THERE IS NO STRAIGHT JACKET PRINCIPLE OF DISTINGUISHING A CAPIT AL RECEIPT FROM A REVENUE RECEIPT. THE HON'BLE JAMMU & KASHMIR HIGH COURT FURTHER OBSERVED THAT TO DETERMINE THE NATURE AND INTENT OF THE INCENTIVES A S TO WHETHER THOSE WERE REVENUE RECEIPTS, THE PURPOSE UNDERLYING THE INCENTIVES WAS THE DETERMINATIVE TES T. ON CONSIDERING THE NEW INDUSTRIAL POLICY FORMULATED IN THE STATE OF JAMMU & KASHMIR AND THE OBJECT BEHIND THE FORMULATION OF SUCH POLICY BY THE CENTRAL GOVERNMENT, THE COURT HELD THAT THE FINDING OF THE TRIBUNAL THAT EXCISE DUTY REFUND, INTEREST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES, HENCE REVENUE RECEIPTS CANNOT BE SUSTAINED, BEING AGAINST THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN SAWHNEY STEEL & PRESS WORKS LTD. & OTHERS (SUPRA) AND PONNI SUGARS & CHEMICALS LTD. (SUPRA). THE COU RT THUS HELD THAT THE SAID INCENTIVES WERE CAPITAL REC EIPTS IN THE HANDS OF THE ASSESSEE. 17. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE EXCISE DUTY REFUND RECEIVED BY THE ASSESSEE WAS IN LIEU OF THE INCENTIVE SCHEME PROMULGATED IN THE STATE OF JAMMU & KASHMIR WHICH WAS CONSIDERED AT LENGTH BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTHERS (SUPRA). FOLLOWING THE ABOV E SAID RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT, WE HOLD THAT THE EXCISE DUTY REFUND OF RS.139.80 LACS WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND WAS NOT TO BE INCLUDED AS INCOME OF TH E ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN V IEW THEREOF, WE ALLOW ADDITIONAL GROUND OF APPEAL NO.1. RAISED BY THE ASSESSEE. 5 6. THE FACTS OF THE PRESENT APPEAL BEFORE US ARE ID ENTICAL TO THE FACTS IN THE APPEAL RELATING TO ASSESSMENT YEAR 2007-08 A ND FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL VIDE ORDER DATED 20.12.20 11 IN ASSESSMENT YEAR 2007-08, WE HOLD THAT THE EXCISE DUTY REFUND R ECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS CAP ITAL RECEIPT IN ITS HANDS AND IS NOT INCLUDIBLE IN THE INCOME OF THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION. IN VIEW THEREOF, WE DISMISS G ROUND OF APPEAL RAISED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF AUGUST, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH AUGUST, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6