M/s. Sidhi Vinayak Alloys Industries, Jammu V. The Income tax Officer, Kathua

ITA 432/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5694 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 234B

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.432(ASR)/2010. (ASSESSMENT YEAR: 2006-07) M/S.SIDHI VINAYAK ALLOYS INDS., THE INCOME TAX OFFI CER, 46B-50, SICOP INDUSTRIAL ESTATE, KATHUA. HATLI MORE, KATHUA, JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSIONS. 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 DATED 14-10-2010, RELATING TO THE ASS ESSMENT YEAR 2006-07. 2. GROUND NOS.3 AND 3.1 OF THE APPEAL READ AS UNDER :- 3. THAT THE LD. CIT(A) ERRED IN NOT ALLOWING DEDUC TION U/S.80IB OF THE ACT ON THE TOTAL AMOUNT OF RS.40,73,095/- RECE IVED BY THE APPELLANT AS EXCISE DUTY REFUND OF THE EXCISE AMOUN T PAID BY IT OTHERWISE ALSO SUCH REFUND OF EXCISE DUTY, IN FACT IS NOT INCOME AT ALL BEING REFUND OF THE SAME AMOUNT WHICH WAS PA ID BY THE APPELLANT EARLIER AND CLAIMED AS DEDUCTION AS EXP ENDITURE. WITHOUT PREJUDICE TO THE ABOVE, 2 3.1 THAT THE REFUND OF EXCISE DUTY BEING PART OF SC HEME OF CENTRAL GOVERNMENT FOR BOOSTING INFRASTRUCTURE OF THE STATE IS NOT ASSESSABLE TO INCOME TAX BEING CAPITAL RECEIPT IN V IEW OF JUDGMENT OF HONOURABLE SUPREME COURT IN VARIOUS CAS ES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP CONCERN ENGAGED IN THE BUSINESS OF MANU FACTURING OF ALLUMINIUM ALLOY INGOTS AND DROSS ETC. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED A SUM OF RS. 40,73,095/- ON ACCOUNT OF EXCISE DUTY REFUND. ON THIS AMOUNT, THE ASSESSEE CL AIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT , THE ACT). THE A.O. DID NOT ALLOW DEDUCTION OF EXCISE DUTY REFUND OF RS.40 ,73,095/- UNDER SECTION 80-IB OF THE ACT ON THE PLEA THAT THE ASSESSEE IS N OT DERIVING INCOME FROM INDUSTRIAL UNDERTAKING. 4. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA DATED 26-11-2009 DISMISSED THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE LEARNED D.R. AND HAVE ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S.SHREE BAL AJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE J & K HIGH COURT. THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS UND ER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTERES T SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSES, IN PURSUANCE OF THE IN CENTIVES ANNOUNCED AND SANCTIONED VIDE GOVERNMENT OF INDIA, MINISTRY O F COMMERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POLICY AND PROMO TION)S OFFICE MEMORANDUM NO.1(13)2000-NER DATED JUNE 4, 2002 AND CENTRAL EXCISE NOTIFICATION NOS.56 AND 57, DATED NOVEMBER 1 4,2002 AND OTHER NOTIFICATIONS ISSUED ON THE SUBJECT, PERTAINI NG TO THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU & KASHMIR, IS A CAPITAL RECEIPT AND, THUS, NOT LIABLE TO TAX UNDER THE PROV ISIONS OF THE ACT, OR REVENUE RECEIPT, AS OPINED BY THE AUTHORITIES UNDER THE ACT? 3 6. THE HONBLE HIGH COURT VIDE JUDGMENT DATED 31-1- 2011 IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA, REPORTED IN (2011) 333 ITR 335 (J&K) DECIDED THE ISSUE, OBSERVING AS UNDER:- 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 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. 4 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. 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 J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE HOLD THAT THE AMOUNT OF EXCISE DUTY REFUND AMOUNTING TO RS.40,73,095/- RECE IVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOM E TAX ACT, 1961. GROUND NOS.1 AND 3.1 STAND ALLOWED. 8. GROUND NO.5 OF THE APPEAL READS AS UNDER:- THAT THE ORDER OF THE CIT(A) IS NOT ALLOWING DEDUC TION U/S.80IB OF THE ACT ON EXCISE DUTY REFUND IS BAD IN LAW AS BIND ING PRECEDENTS OF 5 SUPERIOR COURTS HAVE NOT BEEN PROPERLY APPRECIATED. THE ORDERS OF CIT(A) AND THE LD. A.O. BEING NOT BASED ON CORRECT FACTS OF THE CASE AND BINDING PRECEDENTS ARE LIABLE TO BE SET AIDE. 8.1 SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E VIDE GROUND NOS.3 AND 3.1 OF THE APPEAL, THEREFORE, WE DO NOT THINK I T NECESSARY TO DECIDE GROUND NO.5. 9. GROUND NO.4 OF THE APPEAL RELATES TO CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT IS CONSEQUENTIAL IN NATURE AND WE H OLD ACCORDINGLY. 10. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 22 ND JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.SIDHI VINAYAK ALLOYS INDS., 46B-5 0, SICOP, INDL. ESTATE, HATLI MORE, KATHUA, JAMMU. (2) THE I.T.O., KATHUA. (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. 6