M/s. Celestial Polymers, Jammu V. The Income Tax Officer, Jammu

ITA 455/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5779 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2011
• 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: 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.455(ASR)/2010. (ASSESSMENT YEAR: 2005-06) M/S.CELESTIAL POLYMERS, THE INCOME TAX OFFICER, PHASE-I, SIDCO INDL. COMPLEX, WARD 1(1), JAMMU. BARI BRAHMANA, 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 28-9-2010, RELATING TO THE ASSE SSMENT YEAR 2005-06. 2. GROUND NOS.1, 2, 6 AND 7 OF THE APPEAL ARE GENER AL IN NATURE AND HENCE NO COMMENTS ARE REQUIRED. 3. GROUND NOS.3 AND 4 READ AS UNDER:- 3. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPH OLDING THE ACTION OF LEARNED OFFICER IN MAKING THE IMPUGNED AD DITION OF RS.7,27,710/- ON ACCOUNT OF EXCISE DUTY REFUND (RS. 6,86,084/-) AND INTEREST SUBSIDY (RS.41,625/-) BY TREATING IT I S A REVENUE RECEIPT & INCOME OF THE APPELLANT AND NOT ALLOWING THE CLAIM OF DEDUCTION U/S.80IB OF THE INCOME TAX ACT ON THIS. 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 2 DUTY AMOUNTING TO RS.6,86,084/- AND INTEREST SUBSID Y AMOUNTING TO RS.41,625/- IS NOT A CAPITAL RECEIPT A ND THUS LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 (THE ACT). 4. FIRSTLY, WE WILL DECIDE GROUND NOS. 3 AND 4 OF T HE APPEAL. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING HDPE/P.P. WOVEN FABRICS SACKS FILED R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 2-11-2005 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT), 100% ON THE GROSS TOTAL INCOME OF RS.23,15,569/- BEING A N INDUSTRIAL UNDERTAKING SITUATED IN AN INDUSTRIALLY BACKWARD STATE AS SPECI FIED IN THE EIGHTH SCHEDULE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS RECEIVED EXCISE DUTY REFUND OF RS.6,86,084/- AND ALSO AN AMOUNT OF RS.41 ,625/- AS INTEREST SUBSIDY FROM THE DIC, JAMMU. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE ACT AND A.O. DISALLOWED THE SA ME. 5. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE A. O. FOLLOWING THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA. THE ASSESSEE (M/S. SHREE BA LAJI ALLOYS) CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT OF J & K. THE ISSUES RAISED BEFORE THE HONBLE J & K HIGH COURT WAS AS UNDER:- WHETHER THE AMOUNT OF EXCISE REFUND AND INTEREST 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 3 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? 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 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 4 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 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 REFUND OF EXCISE DUTY AMOUNTING TO RS.6,86,084/ - AND INTEREST SUBSIDY AMOUNTING TO RS.41,625/- IS A CAPITAL RECEIPT, HENC E NOT EXIGIBLE TO TAX. GROUND NOS. 3 AND 4 STAND ALLOWED. 8. GROUND NO.5 OF THE APPEAL READS AS UNDER:- 5 THAT ON THE FACTS AND IN LAW THE LD. CIT(A) ERRED IN UPHOLDING THAT HE REFUND OF EXCISE DUTY AMOUNTING TO RS.6,86,084/- AN D INTEREST SUBSIDY AMOUNTING TO RS.41,625/- RECEIVED BY THE ASSESSEE W AS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THUS WAS NOT EX IGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961. 8.1 IT IS OBSERVED THAT WHILE FRAMING THE ASSESSMEN T, THE A.O. DID NOT ALLOW DEDUCTION UNDER SECTION 80IB OF THE ACT ON TH E AMOUNT OF REFUND OF EXCISE DUTY AMOUNTING TO RS.6,86,084/- AND INTEREST SUBSIDY AMOUNTING TO RS.41,625/- RECEIVED BY THE ASSESSEE HOLDING THAT T HE SAME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THUS WAS NOT EX IGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. 9. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE A.O. ON THIS ISSUE. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES. SINCE WE HAVE HELD THAT THE ABOVE AMOUNTS IS A CAPITAL RE CEIPT AND NOT EXIGIBLE TO TAX AND, THEREFORE, WE DO NOT THINK IT NECESSARY TO GIVE ANY FINDING ON THIS ISSUE THAT THE REFUND OF EXCISE DUTY AND INTEREST S UBSIDY RECEIVED BY THE ASSESSEE IS DERIVED FROM THE INDUSTRIAL UNDERTAKING OR NOT, AND DEDUCTION U/S.80IB IS ALLOWABLE OR NOT. 11. IN THE ABOVE TERMS, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 16 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.CELESTIAL POLYMERS, PHASE-I, SIDC O INDS. COMPLEX, BARI BRAHMANA, JAMMU(2)THE ITO, WARD 1(1), JAMMU.(3) THE CIT, JAMMU.(4) THE CIT(A), JAMMU. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER 6