M/s. Star Plastics, Jammu V. The Income Tax Officer, Jammu

ITA 454/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5826 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Additional evidence; 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.454(ASR)/2010. (ASSESSMENT YEAR: 2005-06) M/S.STAR PLASTICS, THE INCOME TAX OFFICER, JAMMU. WARD 1(3), JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI P.N. ARORA, ADV. 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 27-9-2010, RELATING TO THE ASSE SSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS: 1. THAT ON THE FACTS AND IN LAW, THE ORDERS PASSED BY THE ASSESSING OFFICER, AS WELL AS BY THE LD. CIT(A) ARE BOTH ILLE GAL, INVALID AND VOID AB-INITIO AN BAD IN LAW AND ARE LIABLE TO BE CANCELLED. 2. THE APPELLANT DENIES HIS LIABILITY TO TAX AS DET ERMINED AND COMPUTED AND THE MANNER IN WHICH IT HAS BEEN SO DET ERMINED OR COMPUTED. 3. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHO LDING THE ACTION OF LEARNED OFFICER IN MAKING THE IMPUGNED A DDITION OF RS.92,583/- BY DISALLOWING CLAIM OF DEDUCTION U/S.8 0IB OF THE INCOME TAX ACT ON EXCISE DUTY FUND (RS.4,77,943/-). 2 4. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLD ING THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW REFU ND OF EXCISE DUTY AMOUNTING TO RS.4,77,943/- IS NOT A CAPITAL RE CEIPT AND THUS LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TA X ACT, 1961 (THE ACT) 5. THAT ON THE FACTS AND IN LAW THE LD. CIT(A) ERRE D IN UPHOLDING THAT THE EXCISE DUTY AMOUNTING TO RS.4,77,943/- REC EIVED BY THE ASSESSEE WAS NOT DERIVED FROM THE INDUSTRIAL UNDERT AKING AND THUS WAS NOT ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961. 6. THAT THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER AMEND AND/OR VARY THE GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING OF THE APPEAL. 7. THAT THE APPELLANT CRAVES LEAVE AND SANCTION TO FILE ADDITIONAL EVIDENCE, IF SO REQUIRED FOR PROPER PRESENTATION OF THE CASE, BASED ON FACTS AND CIRCUMSTANCES, WHICH HAS NOT BEE N OR COULD NOT BE EDUCED OR FILED BEFORE THE LOWER AUTHORITIES EITHER BECAUSE PROPER AND SUFFICIENT OPPORTUNITY/TIME WAS NOT PROVIDED OR BECAUSE IT WAS NOT SOLICITED OR ITS NEE D WAS NOT PROVIDED OR BECAUSE ITS NEED WAS APPRECIATED. 3. AT THE TIME OF HEARING, SHRI P.N. ARORA, ADVOCAT E, THE LEARNED COUNSEL FOR THE ASSESSEE, DID NOT PRESS GROUND NOS.1 TO 3 A ND 5 TO 7, AND, THEREFORE, WE DISMISS THE SAME AS NOT PRESSED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED EXCISE DUT Y REFUND OF RS.4,77,943/- AND HAS CLAIMED DEDUCTION UNDER SECTI ON 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) ON THE INCOME C ORRESPONDING TO THE RECEIPT OF THE SAID REFUND. THE A.O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DEDUCTION UNDER SECTION 80-IB OF THE ACT CLAIMED ON EXCISE DUTY REFUND 3 MAY NOT BE WITHDRAWN AS THE SAME IS NOT DERIVED FRO M MANUFACTURING ACTIVITY. AFTER RECEIVING THE REPLY FROM THE ASSESS EE, THE A.O. REJECTED THE CLAIM OF THE ASSESSEE HOLDING THAT THE EXCISE DUTY REFUND HAS NO DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING AS THE DIRECT SOURCE IS THE INDUSTRIAL POLICY OF THE GOVT. AND NOT THE INDUSTRIAL UNDERTAK ING. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80-IB OF THE ACT ON PROFIT ATTRIBUTABLE TO CENTRAL EXCISE DUTY REFUND. 5. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL, AMRITSAR BENCH IN THE CASES OF M/S. SHREE BALAJI ALLOYS, KAT HUA AND OTHERS IN I.T.A. NOS.255(ASR)/2009 AND 305(ASR)/2009 DATED 26-11-20 09, RELATING TO THE ASSESSMENT YEAR 2005-06. IN THE ORDER PASSED BY TH E TRIBUNAL DATED 26-11-12009, IT HAS BEEN HELD THAT THE REFUND OF EX CISE DUTY IS NOT A CAPITAL RECEIPT BUT A REVENUE RECEIPT AND HELD NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT THE ORDER OF THE TRIBUNAL PASSED IN THE CASES OF M/S. SHREE BALAJI A LLOYS, KATHUA AND OTHERS IN I.T.A. NOS.255(ASR)/2009 AND 305(ASR)/2009 DATE D 26-11-2009 WERE SUBJECT-MATTER OF ASSESSEES APPEAL BEFORE THE HON BLE JURISDICTIONAL HIGH COURT, I.E. IN THE JAMMU & KASHMIR HIGH COURT. THE ISSUE BEFORE 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 4 ACT, OR REVENUE RECEIPT, AS OPINED BY THE AUTHORITI ES UNDER THE ACT? 6.1 THE HONBLE HIGH COURT DECIDED THE ISSUE 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 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. 5 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. 6.2 THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF M/S.SHREE BALAJI ALLOYS VS. C.I.T. AND OTHERS (SUPR A) DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE EXCISE DUTY REFUND RECEIVED BY THE ASSESSEE IS A CA PITAL RECEIPT AND HENCE NOT TAXABLE. 6 7. IN THE RESULT, THE APPEAL IS ALLOWED AS INDICATE D ABOVE. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 7 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.STAR PLASTICS, JAMMU. (2) THE ITO, WARD 1(3), 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.