Sh. Ajay Gupta, Jammu V. The Income tax Officer, Jammu

ITA 437/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5725 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 234B; 80IB

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.437(ASR)/2010. (ASSESSMENT YEAR: 2007-08) SHRI AJAY GUPTA PROP. THE INCOME TAX OFFICER, M/S.PRINT PACK, WARD 1(1), 38-C, INDUSTRIAL COMPLEX, JAMMU. BARI BRAHMNA, 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 28-9-2010, RELATING TO THE ASSE SSMENT YEAR 2007-08. 2. GROUND NOS.3 AND 4 READ AS UNDER:- 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE THE LEARNED CIT(A), JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE BY NOT FOLLOWING THE JUDGMENT OF HONBL E HIGH COURT IN THE CASE OF CIT DELHI VS. DHARAMACHAND PRE MCHAND LTD. ITA NO.1441/2006 DATED 27-11-2008 ON THE SIMIL AR ISSUE OF EXCISE REFUND AFFIRMED BY HONBLE SUPREME COURT OF INDIA BY REJECTING THE REVENUE APPEAL VIDE SPECIAL LEAVE TO APPEAL (CIVIL NO(S).24055/2009 REPORTED IN 2010-TOIL-18-SC -IT. 4. CENTRAL EXCISE DUTY IS A CAPITAL RECEIPT NOT LIA BLE TO TAX. THIS VIEW HAS BEEN HELD BY THE HONBLE SUPREME COURT OF INDIA IN 2 THE CASE OF CIT VS. PONNI SUGAR LTD. 2306 ITR 392 S AWHNEY STEEL AND PRESS WORKS 228 ITR 253. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CORRUGATED BOXES. D URING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD RECEIVED EXCISE D UTY REFUND OF RS.43,00,721/- AND ON THIS AMOUNT, THE ASSESSEE CL AIMED DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT), WHICH WAS DENIED BY THE AO. THE A.O. TAXED THE ENTIRE AMOUNT UNDER THE P ROVISIONS OF THE ACT. 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, KAHUA DATED 26-11-2009 DISMISSED THE APPEAL OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF TH E ASSESSEE AND HAVE ALSO HEARD SHRI TARSEM LAL, THE LEARNED D.R. WE FIND THAT THE ORDER OF THE TRIBUNAL DATED 26-11-2009 PASSED IN THE CASE OF M/S .SHREE BALAJI ALLOYS, KATHUA, WAS CHALLENGED IN APPEAL BEFORE THE HONBL E JURISDICTIONAL HIGH COURT AND THE ISSUE BEFORE THE HONBLE JURISDICTIO NAL HIGH COURT WAS AS UNDER:- 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. THE OTHER FACTORS, WHICH HAD WEIGHED WITH THE TRIBU NAL IN DETERMINING THE INCENTIVES AS PRODUCTION INCENTI VES MAY NOT 4 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 JURISDICTIONAL 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.43 ,00,721/- RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSI DERATION IS A CAPITAL RECEIPT AND NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. GROUND NOS. 3 AND 4 STAND ALLOWED. 8. GROUND NO.2 READS AS UNDER:- THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN TREATING THE EXCISE REFUND OF RS.43,00,721/- AS INC OME NOT HAVING DIRECT NEXUS WITH INDUSTRIAL UNDERTAKING AND DENIED THE LEGITIMATE 5 BENEFIT OF SECTION 80IB OF THE INCOME TAX ACT, 1961 FOR WHICH THE ASSESSEE IS RIGHTFULLY ELIGIBLE ON SUCH INCOME. 8.1 SINCE WE HAVE HELD THAT THE EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND, THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE T HIS GROUND OF APPEAL. 9. GROUND NO.6 OF THE APPEAL RELATES TO THE CHARGIN G OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. IN OUR VIEW, T HIS GROUND OF APPEAL IOS CONSEQUENTIAL IN NATURE AND WE HOLD ACCORDINGLY.. 10. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 11. IN THE ABOVE TERMS, THE APPEAL IS ALLOWED AS IN DICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 20 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: SHRI AJAY GUPTA, PROP. M/S.PRINT PACK ,BIRPUR INDUSTRIAL COMPLEX, BARI BRAHMANA, JAMMU. (2) THE ITO, WARD I(1), 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.