M/s. Keshav Agro Mills, Jammu V. The Income Tax Officer, Jammu

ITA 473/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5715 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• 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.473(ASR)/2010. (ASSESSMENT YEAR: 2005-06) M/S.KESHAV AGRO MILLS, THE INCOME TAX OFFICER, INDUSTRIAL AREA, GANGYAL, WARD 1(2), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: NONE. 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 28-9-2010, RELATING TO THE ASSE SSMENT YEAR 2005-06. 2. GROUND NOS.4 AND 5 OF THE APPEAL READ AS UNDER:- 4. THAT THE LD. CIT(A), JAMMU HAS ERRED IGNORING T HE NOTIFICATION NO.56/2002-CE AND 57/2002-CE DATED 14-11-2002 ISSUE BY THE MINISTRY OF FINANCE & COMPANY AFFAIRS (DEPTT. OF RE VENUE), GOVT. OF INDIA, NEW DELHI FOR J&K STATE EXEMPTING T HAT PORTION OF EXCISE DUTY WHICH IS PAID BY THE MANUFACTURER IN CASH, AND TREATING IT AS CAPITAL RECEIPT, ARBITRARILY, ILLEGA LLY AND WITHOUT ANY JUSTIFICATION. 5. THAT THE LD. CIT(A), JAMMU HAS ERRED IN MIS-INTE RPRETING THE LEGAL AND FACTUAL ASPECTS OF THE HONBLE SUPREME CO URT/HONBLE HIGH COURT AND HONBLE ITAT, AMRITSAR BENCH ARBITRA RILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION BY TREATING THE EXCISE DUTY REFUND AS INCOME NOT HAVING NEXUS WITH THE IND USTRIAL 2 UNDERTAKING OF THE APPELLANT NOT LIABLE FOR DEDUCTI ON UNDER SECTION 80IB OF THE I.T. ACT, 1961. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FIRM IS ENGAGED IN MANUFACTURING OF WASHING SOAP FROM THE NON EDIBLE G RADE OILS, FATTY ACID, ACID OIL, WAX & SOAP STOCK. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED REFUND OF EXCI SE DUTY AMOUNTING TO RS.39,32,290/-. ON THIS AMOUNT, THE ASSESSEE CLAIM ED DEDUCTION UNDER SECTION 80-IB OF THE INCOME TAX ACT, 1961 (IN SHORT , THE ACT). HOWEVER, THE A.O. DENIED THE CLAIM OF THE ASSESSEE AND TREATED T HE IMPUGNED REFUND AS REVENUE RECEIPT AND TAXED THE SAME. 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 HEARD THE LEARNED D.R. AND HAVE ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT M/S.SHREE BAL AJI ALLOYS, KATHUA CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HON BLE JURISDICTIONAL J & K HIGH COURT. THE ISSUE BEFORE THE HONBLE JURISDIC TIONAL 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.39 ,32,390/- RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSI DERATION IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVIS IONS OF THE INCOME TAX ACT, 1961. GROUND NOS.4 AND 5 STAND ALLOWED. 8. GROUND NOS.2 AND 3 READ AS UNDER:- 2. THAT THE LD. CIT(A), JAMMU HAS ERRED IN UPHOLDI NG THE ADDITION MADE BY THE LD. LD. AO, WARD 1(2), JAMMU, AMOUNTING TO RS.619350/- CLAIMED AS DEDUCTION UNDER SECTION 80IB OF THE I.T. ACT, 1961, ARBITRARILY, ILLEGALLY AND WITHOUT ANY JUSTIFICATION. 5 3. THAT THE LD. CIT(A), JAMMU HAS ERRED IN UPHOLDIN G THE DISALLOWANCE AMOUNTING TO RS.619350/- AS PART OF TH E TOTAL EXCISE DUTY REFUND AMOUNTING TO RS.3932390/- AS IT HAS NO NEXUS WITH INDUSTRIAL UNDERTAKING AND INTEREST AMOU NTING TO RS.55731/- AS NON-INDUSTRIAL INCOME ARBITRARILY, IL LEGALLY AND WITHOUT ANY JUSTIFICATION. 8.1 SINCE WE HAVE ALLOWED GROUND NOS.4 AND 5 OF THE APPEAL, WE, THEREFORE, DO NOT THINK IT NECESSARY TO ADJUDICATE THESE TWO GROUNDS OF THE APPEAL. 9. GROUND NO.6 RELATES TO THE CHARGING OF INTEREST UNDER SECTIONS 234A, 234B AND 234C OF THE ACT. THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND WE HOLD ACCORDINGLY. 10. IN THE RESULT, THE APPEAL IS ALLOWED IN THE ABO VE TERMS, AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST JUNE, 20 11. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 21 ST JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.KESHAV AGRO MILLS, 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. 6