M/s. J.K. Oil Industries, Jammu V. The Income Tax Officer, Jammu

ITA 450/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5813 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: RATTAN LAL GUPTA
• Keywords: Capital receipt
• Section: 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.450(ASR)/2010. (ASSESSMENT YEAR: 2004-05) M/S.J.K. OIL IND., THE INCOME TAX OFFICER, I-A, GANGYAL, WARD 1(2), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI RATTAN LAL GUPTA, ADV. RESPONDENT BY: SHRI AMRIK CHAND, 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 31-8-2010, RELATING TO THE ASSE SSMENT YEAR 2004-05. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT THE LD. CIT(A), JAMMU HAS ERRED IN LAW AN D FACTS. IN ANY CASE HE HAS NOT APPLIED HIS MIND TO THE ACTUA L FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LD. CIT(A), JAMMU HAS ERRED IN UPHOLDIN G THE DISALLOWANCE AMOUNTING TO RS.12,73,288/- BEING REFU ND OF EXCISE DUTY FROM THE TOTAL DEDUCTION UNDER SECTION 80IB OF THE I. T. ACT, 1961 AMOUNTING TO RS.36,27,988/- ARBITRA RILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION. 3. THAT THE LD. CIT(A), JAMMU HAS ERRED IN IGNORING THE NOTIFICATIONS NO.56/2002-CE AND 57/2002-CE DATED 2 14-11-2002 ISSUED BY THE MINISTRY OF FINANCE & COMP ANY AFFAIRS (DEPTT. OF REVENUE), GOVT. OF INDIA, NEW DE LHI FOR J&K STATE EXEMPTING THAT PORTION OF EXCISE DUTY WHI CH IS PAID BY THE MANUFACTURER IN CASH, ARBITRARILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION. 4. THAT THE LD. CIT(A), HAS ERRED IN MISINTERPRETIN G THE LEGAL AND FACTUAL ASPECTS OF THE HONBLE SUPREME COURT/HONBL E HIGH COURT AND HONBLE ITAT, AMRITSAR BENCH ARBITRARILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION BY TREATING THE EXCIS E DUTY REFUND AS CAPITAL RECEIPT NOT LIABLE FOR DEDUCTION UNDER S ECTION 80IB OF I.T. ACT, 1961. 5. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE F INDING OF LEARNED INCOME TAX OFFICER, WARD 1(1) CHARGING INTE REST UNDER SECTION 234(B) AMOUNTING TO RS.1,83,459/-, ARBITRA RILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION. 3. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE A ND HENCE NO COMMENTS ARE CALLED FOR. 4. VIDE GROUND NOS.2 TO 4 OF THE APPEAL, THE ASSESS EE HAS CLAIMED THE AMOUNT OF RS.12,73,288/- BEING EXCISE DUTY REFUND R ECEIVED FROM THE CENTRAL EXCISE DEPARTMENT, JAMMU ON ACCOUNT OF REFUND OF EXCISE TO BE RECEIVABLE IN THE J & K STATE INDUSTRIAL POLICY (20 02-2015) IS A CAPITAL RECEIPT IN VIEW OF THE JUDGMENT OF THE JURISDICTION AL HIGH COURT PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS VS. CIT (2011) 333 ITR 335 (J&K). IN THIS CASE, THE ASSESSEE CLAIMED DEDUCTION OF RS.12,73,28 8/- BEING REFUND OF EXCISE DUTY. THE A.O. REJECTED THE CLAIM OF THE ASS ESSEE. 5. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KA THUA CONFIRMED THE ORDER OF THE A.O. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ORDE R OF THE TRIBUNAL PASSED IN 3 THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA WAS CHA LLENGED BY THE ASSESSEE I.E. M/S.SHREE BALAJI ALLOYS, KATHUA BEFORE THE HON BLE JURISDICTIONAL HIGH COURT. IN OUR VIEW, THE ISSUE RAISED IN THIS APPEA L IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF THE HONBLE J & K HIGH COURT IN THE CASE OF M/S. SHR EE BALAJI ALLOYS, KATHUA, WHICH IS REPORTED IN (2011) 333 ITR 335 (J&K) AND, THEREFORE, WE WILL FOLLOW THE JUDGMENT OF THE HONBLE J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA). THE ISSUE BEFO RE 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? 7. 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, 4 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 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 5 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. 8. 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 RS.12,73,288/- BEING REFUND OF EXCIS E DUTY IS A CAPITAL RECEIPT NOT LIABLE TO TAX UNDER THE PROVISIONS OF I NCOME TAX ACT, 1961. 9. GROUND NO.5 OF THE APPEAL IS STATED TO BE CONSEQ UENTIAL IN NATURE AND WE HOLD ACCORDINGLY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 15 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.J.K. OIL IND., INDS. AREA, GANGYA L, JAMMU. (2) THE ITO, WARD 1(2), 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. T 6