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

ITA 433/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5734 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: 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.433(ASR)/2010. (ASSESSMENT YEAR: 2007-08) M/S.SIDHI VINAYAK ALLOYS INDUSTRIES, THE INCOME TA X OFFICER, 46B-50, SICOP, KATHUA. INDUSTRIAL ESTATE, HATLI MORE, KAHUA, 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 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN AS MANY A S FIVE GROUNDS. HOWEVER, VIDE GROUND NO.3 OF THE APPEAL, THE ASSES SEE HAS SUBMITTED AS UNDER:- 3. THAT THE LD. CIT(A) ERRED IN NOT ALLOWING DEDUC TION U/S.80-IB OF THE ACT ON THE TOTAL AMOUNT OF RS.2,60,44,707/- RECEIVED BY THE APPELLANT AS EXCISE DUTY REFUND OF THE EXCISE A MOUNT PAID BY IT OTHERWISE ALSO SUCH REFUND OF EXCISE DUTY, IN FA CT IS NOT INCOME AT ALL BEING REFUND OF THE SAME AMOUNT WHICH WAS PAID BY THE APPELLANT EARLIER AND CLAIMED AS DEDUCTION A S EXPENDITURE. WITHOUT PREJUDICE TO THE ABOVE, 2 3.1 THAT THE REFUND OF EXCISE DUTY BEING PART OF SCHEME OF CENTRAL GOVERNMENT FOR BOOSTING INFRASTRUCTURE OF T HE STATE IS NOT ASSESSABLE TO INCOME TAX BEING CAPITAL RECEI PT IN VIEW OF JUDGMENT OF HONOURABLE SUPREME COURT IN VARIOUS CASES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FIRM IS RUNNING AN ALUMINIUM ALLOY INGOTS MANUFACTURING UNI T. FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) ON THE A MOUNT OF REFUND OF EXCISE DUTY OF AN AMOUNT OF RS.2,60,44,707/-. THE A.O. TR EATED THE EXCISE DUTY REFUND AS REVENUE RECEIPT. 4. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF M/S.SHREE BALAJI ALLOYS , KAHUA CONFIRMED THE ORDER OF THE A.O. 5. WE HAVE HEARD THE LEARNED D.R. AND HAVE ALSO CON SIDERED THE WRITTEN SUBMISSION SUBMITTED BY THE ASSESSEE. THE PLEA TAKE N BY THE ASSESSEE IS THAT DEDUCTION OF EXCISE DUTY IS PART OF SCHEME OF CENTR AL GOVT. FOR BOOSTING INFRASTRUCTURE IN THE STATE IS NOT ACCESSABLE TO IN COME TAX BEING CAPITAL RECEIPT. IT IS SEEN THAT THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS WAS CHALLENGED BY THE ASSES SEE BEFORE THE HONBLE J & K HIGH COURT IN APPEAL. THE ISSUE BEFORE THE H ONBLE HIGH COURT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND IN TEREST 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 3 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 IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE, WHICH IS REPORTED IN (2011 ) 333 ITR 335 (J&K). THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE AS UNDER:- IN THIS VIEW OF THE MATTER, THE INCENTIVES PROVID ED 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 4 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 HAS BEEN SAID ABOVE, THE FINDING OF TH E 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 AL LOYS (SUPRA), WE ALLOW THE APPEAL OF THE ASSESSEE. 5 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 13 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.SIDHI VINAYAK ALLOYS INDS., 46B- 50, SICOP, INDUSTRIAL ESTATE, HATLI MORE, KAHUA, JAMMU. (2) THE ITO, KAHUA. (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.