KASHMIR STEEL ROLLING MILSS., JAMMU V. DEPUTY COMMISSIONER OF INCOME TAX .CENTRAL CIRCLE, JAMMU

ITA 544/ASR/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7782 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Capital receipt; Revised return
• Section: 80IB; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 544/(ASR)/2016 AS SESSMENT YEAR: 2006-07 KASHMIR STEEL ROLLING MILLS LANE-II, SIDCO INDUSTRIAL COMPLEX BARI BRAHMANA, JAMMU [PAN: AABFK 4948A] VS. DCIT CENTRAL CIRCLE, JAMMU (APPELLANT) (RESPONDENT) I.T.A. NO. 571/(ASR)/2017 AS SESSMENT YEAR: 2005-06 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, JAMMU VS. KASHMIR STEEL ROLLING MILLS, BARI BRAHMANA, JAMMU FOR THE AY 2005-06 [PAN: AABFK 4948A] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. R. K. GUPTA (C.A.) RESPONDENT BY: SH. BHAWANI SHANKAR (D.R.) DATE OF HEARING: 23.05.2018 DATE OF PRONOUNCEMENT: 12.07.2018 ORDER PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE AND TH E REVENUE FOR TWO CONSECUTIVE YEARS, BEING ASSESSMENT YEARS (AYS.) 20 05-06 AND 2006-07. THE ISSUE ON MERITS OF THE ASSESSEES CLAIM, I.E., THE EXCLUSION OF THE EXCISE DUTY REFUND ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 2 AND INTEREST SUBSIDY IN COMPUTING ITS BUSINESS INCO ME, BEING COMMON, THE APPEALS WERE POSTED FOR HEARING AND, ACCORDINGLY, HEARD TOG ETHER, AND ARE BEING DISPOSED OF PER A COMMON, CONSOLIDATED ORDER. 2. THE PRINCIPAL ISSUE, ON MERITS, ARISING IN THESE APPEALS, IS THE CHARACTER OF EXCISE DUTY REFUND, I.E., CAPITAL ON REVENUE, ARISI NG TO THE ASSESSEE. IN FACT, THE ASSESSEE HAD ITSELF CONSIDERED IT AS A REVENUE RECE IPT FOR THE EARLIER YEARS, CLAIMING DEDUCTION U/S. 80-IB OF THE ACT ON THE PROFITS AND, THUS, THE REFUND AMOUNT CREDITED TO ITS PROFIT AND LOSS ACCOUNT. THE SAME WAS DENIED BY THE REVENUE (FOR AY 2005- 06), AND CONFIRMED BY THE TRIBUNAL FOLLOWING THE DE CISION IN LIBERTY INDIA V. CIT [2009] 317 ITR 218 (SC). THE MATTER TRAVELED TO THE HON'BLE HIGH COURT WHICH, ACCEPTING THE ASSESSEES ALTERNATE PLEA, HELD IT TO BE A CAPITAL RECEIPT, PER ITS DECISION REPORTED AT SHREE BALAJI ALLOYS & ORS. V. CIT [2011] 333 ITR 335 (J&K). THE ASSESSEE, ACCORDINGLY, RAISED AN ADDITIONAL GRO UND TOWARD THE SAME IN ITS APPEAL FOR AY 2006-07 PENDING BEFORE THE LD. CIT(A) . THE SAME STANDS DENIED BY HIM FOLLOWING GOTEZE (INDIA) LTD. V. CIT [2006] 284 ITR 323 (SC). FOR AY 2005- 06, THE SECOND YEAR UNDER APPEAL BEFORE US, THE ASS ESSEE MOVED THE ASSESSING OFFICER (AO) U/S. 154, I.E., IN VIEW OF THE DECISIO N BY THE HON'BLE JURISDICTIONAL HIGH COURT. THE SAME WAS, AGAIN, DENIED ON THE GROU ND THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE EXCISE-DUTY REFUND STANDS C REDITED TO ITS OPERATING STATEMENT BY THE ASSESSEE. THE ASSESSEE BEFORE THE LD. CIT(A) SHOWED THE SAME TO FORM PART OF THE RECORD. FURTHER, THE DECISION BY T HE HONBLE JURISDICTIONAL HIGH COURT WOULD, IRRESPECTIVE OF IT HAVING FILED A SLP BEFORE THE HONBLE SUPREME COURT, PREVAIL. THE AO WAS ACCORDINGLY DIRECTED BY HIM TO ALLOW THE INTEREST SUBSIDY AND EXCISE-DUTY REFUND AS CAPITAL RECEIPTS, TREATING ITS NON-ALLOWANCE IN ASSESSMENT AS A MISTAKE RECTIFIABLE U/S. 154. AGGRI EVED, BOTH THE PARTIES ARE IN APPEAL FOR THE RESPECTIVE YEARS. ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 3 3. IT WAS AT THE OUTSET CLARIFIED BY THE LD. COUNSE L FOR THE ASSESSEE, SHRI R.K. GUPTA, CA, THAT THE ISSUE IN PRINCIPLE STANDS SINCE SETTLED BY THE APEX COURT, PRODUCING A COPY OF ITS DECISION DATED 19/4/2016 ( IN CIVIL APPEAL NO. 10061 OF 2011/COPY ON RECORD AT PB PGS. 23-24) UPHOLDING THE DECISION BY THE HON'BLE JURISDICTIONAL HIGH COURT IN SHREE BALAJI ALLOYS (SUPRA). THE MATTER BEING LEGAL, WITH THE PRIMARY FACTS ON RECORD AND NOT DISPUTED, THE ADDITIONAL GROUND OUGHT TO HAVE BEEN ACCEPTED BY THE LD. CIT(A) IN VIEW OF THE DECISIONS, INTER ALIA , BY THE APEX COURT IN NATIONAL THERMAL POWER CO. LTD. V. CIT [1998] 229 ITR 383 (SC). SIMILARLY, IT IS WELL SETTLED THAT A DECISION BY TH E APEX COURT SETTLES THE LAW, SO THAT ANY DECISION CONTRARY THERETO OR INCONSISTENT THERE WITH WOULD BE, TO THAT EXTENT, A MISTAKE APPARENT FROM RECORD, RECTIFIABLE U/S. 154, EVEN AS CLARIFIED BY THE CBDT ITSELF AS FAR BACK AS IN 1971 VIDE ITS CIRCULAR NO. 68 DATED 17/11/1971 (PB PG. 22). 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), THOUG H RELYING ON THE ORDERS BY THE AUTHORITIES BELOW, WAS HOWEVER UNABLE TO MEET A NY OF THE ARGUMENTS ADVANCED BY THE LD. AR DURING HEARING. SURE, THE ASSESSEE HA D NOT MADE ANY CLAIM AS TO THE EXCISE-DUTY REFUND BEING A CAPITAL RECEIPT PER ITS RETURN OR EVEN THE REVISED RETURN OF INCOME, PRESSING, IN FACT, ITS CLAIM FOR DEDUCT ION U/S. 80IB THEREON FOR THE PRECEDING YEARS, SO THAT THE SAME WAS WITHOUT DOUBT REGARDED BY IT (ASSESSEE) AS A REVENUE RECEIPT. WHY, NEVERTHELESS, WE ARE UNABLE T O UNDERSTAND, COULD IT NOT RAISE THIS ISSUE IN APPEAL; THE MANDATE OF AN APPELLATE A UTHORITY BEING THE CORRECT DETERMINATION OF THE ASSESSEES TAXABLE INCOME, AND THUS TAX LIABILITY (REFER: AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351 (BOM)(FB)). A LEGAL ISSUE COULD BE RAISED FOR THE FIRST TIME BEFORE ANY APPELLATE AUTHORITY WHERE THE RELEVANT FACTS ARE AVAILABLE ON RECORD AND NOT DISP UTED. THE LIMITATION ON THE POWER OF THE ASSESSING AUTHORITY WHERE THE CLAIM IS NOT PRESSED THROUGH HIS RETURN BY AN ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 4 ASSESSEE, IN THIS REGARD IS NOT APPLICABLE TO AN AP PELLATE AUTHORITY, AS EXPLAINED IN GOTEZE (INDIA) LTD . (SUPRA) ITSELF. SIMILARLY, FOR AY 2005-06, ONCE T HERE IS A BINDING DECISION BY THE APEX COURT, ANY ORDER BY AN Y COURT SUBORDINATE TO IT INCONSISTENT THEREWITH WOULD CONSTITUTE A MISTAKE R ECTIFIABLE U/S. 154. THIS IS AS A MISTAKE U/S. 154 INCLUDES A MISTAKE OF LAW, AND A D ECISION BY THE APEX COURT DECLARES THE LAW UNDER ART. 141 OF THE CONSTITUTION OF INDIA. THE FACT OF EXCISE- DUTY REFUND FORMING PART OF THE ASSESSEES OPERATIN G STATEMENT (P&L ACCOUNT), AS IN THE PAST, IS APPARENT FROM THE SAID STATEMENT FI LED ALONG WITH THE RETURN OF INCOME. TWO, THE DECISION BY THE APEX COURT IN SHREE BALAJI ALLOYS (SUPRA), IN UNAMBIGUOUS TERMS, UPHOLDS THE DECISION BY THE HON' BLE JURISDICTIONAL HIGH COURT HOLDING EXCISE-DUTY REFUND IN PURSUANCE TO A SCHEME BY THE GOVERNMENT OF INDIA FOR THE STATE OF J&K TO BE A CAPITAL RECEIPT IN-AS- MUCH AS IT IS FOR THE OVERALL DEVELOPMENT OF THE INDUSTRY IN AND ECONOMY OF THE S TATE. 4.2 WE MAY AT THIS STAGE ALSO CONSIDER SOME ASPECTS OF THE MATTER. THE APEX COURT HAS IN CIT V . SHREE BALAJI ALLOYS (SUPRA) BASED ITS DECISION ON ITS EARLIER DECISIONS IN CIT V . PONNI SUGARS & CHEMICALS LTD. [2008] 306 ITR 392 (SC) AND CIT V. MEGHALAYA STEELS LTD . [2016] 3 SCALE 192, STATING IT TO BE SQUARELY COVERING THE ISSUE ARISING OUT OF THE DECISION BY T HE HON'BLE HIGH COURT IN SHREE BALAJI ALLOYS (SUPRA). THE DECISION IN PONNI SUGARS & CHEMICALS LTD. (SUPRA), AS ITS READING SHOWS, IN LINE WITH SEVERAL OTHERS BY T HE APEX COURT, LAYS DOWN THE PRINCIPLES ON WHICH AN INCENTIVE OR SUBSIDY IS TO B E REGARDED AS EITHER REVENUE OR CAPITAL. THE SECOND ASPECT DEEMED RELEVANT IS THAT THE DECISION IN ITS APPLICATION RESULTS IN A DOUBLE BENEFIT TO THE ASSESSEES ROUTIN G THE EXCISE-DUTY REFUND THROUGH THE OPERATING STATEMENT (PROFIT AND LOSS ACCOUNT), I.E., AS AGAINST THOSE THAT, REGARDING THE EXCISE-DUTY PAID AS A RECEIVABLE, DO NOT DO SO, TAKING IT DIRECTLY TO THE BALANCE-SHEET, AN ACCOUNTING TREATMENT IN AGREEMENT WITH THE APPLICABLE ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 5 ACCOUNTING STANDARD (AS). IN EITHER CASE, THE EXCISE-DUTY REFUND IS NOT SUBJE CT TO TAX . HOWEVER, WHERE ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT, THE PROFIT OF THE UNIT WOULD GET DEPRESSED BY THE AMOUNT OF EXCISE-DU TY ON THE INPUTS CONSUMED IN THE OUTPUT SOLD, SO THAT IT GETS TAX DEDUCTION ON T HIS DUTY. THE PERTINENT QUESTION TO THEREFORE ASK IS: THE WHOLE PURPORT OF THE EXCISE-D UTY REFUND SCHEME BEING NOT TO LEVY AND, THUS, BURDEN THE TARGET MANUFACTURING UNI TS WITH EXCISE-DUTY, SHOULD NOT THE SAME RESULT IN PROFIT AND, RESULTANTLY, TAX NEU TRALITY ACROSS DIFFERENT UNITS, I.E., IRRESPECTIVE OF THE ACCOUNTING TREATMENT ADOPTED? T HIS IS AS ACCOUNTING ONLY SEEKS TO PRESENT A TRUE AND FAIR VIEW OF THE OPERATING RE SULTS FOR THE ACCOUNTING PERIOD, AS WELL AS THE FINANCIAL POSITION AT ITS END. THE ANSW ER COULD ONLY BE AN EMPHATIC YES. OR, ALTERNATIVELY, COULD THE EXCISE-DUTY, IN VIEW O F IT BEING REFUNDABLE, HAVE ANY INCOME IMPLICATION; ITS RECEIPT BACK ON REFUND BEIN G A RECEIPT ON CAPITAL ACCOUNT, I.E., BY DEFINITION. THE ANSWER TO WHICH AGAIN COUL D ONLY BE IN THE NEGATIVE. THE LD. COUNSEL, SHRI GUPTA, UPON THIS BEING OBSERVED BY TH E BENCH DURING HEARING, WOULD EXPLAIN THAT THOUGH THE SCHEME ENVISAGES A REFUND O F EXCISE-DUTY, THE SAME (REFUND) STANDS REGARDED AS ARISING BY VIRTUE OF TH E SCHEME. THAT IS, THE REFUND IS DELINKED FROM THE PAYMENT OF EXCISE-DUTY, AS IT ARI SES DUE TO A SCHEME FOR THE CONCERNED, EXCISE-EXEMPT UNITS. IN FACT, IT HAS BEE N SO REGARDED BY THE REVENUE AND EVEN BY THE TRIBUNAL, WHICH ENDORSED THE DENIAL OF THE BENEFIT U/S. 80-IB THEREON. THE HON'BLE HIGH COURT THEREFORE PROCEEDED ON THAT FOOTING. IN FACT, HE WOULD EXPLAIN FURTHER, SOME ASSESSEES HAD, FOLLOWIN G THE RELEVANT AS, NOT INCLUDED THE EXCISE-DUTY IN THE OPERATING STATEMENT, WHOSE P ROFIT AND LOSS ACCOUNT WAS, HOWEVER, RECAST BY THE REVENUE BY INCLUDING THE EXC ISE-DUTY THEREIN, PRESUMABLY IN COMPLIANCE WITH S. 145A OF THE ACT. FURTHER, HE ADDED, THE ASSESSEE, IN SHREE BALAJI ALLOYS (SUPRA), HAD ITSELF RAISED A PLEA BEFORE THE HON'B LE HIGH COURT WITH ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 6 REFERENCE TO THE ACCOUNTING TREATMENT, WHICH WAS DE CLINED TO BE ENTERTAINED BY IT AS IT HAD DECIDED THE PRINCIPAL QUESTION IN FAVOUR OF THE ASSESSEE. THE MOOT QUESTION HOWEVER IS IF A TAX, DUTY, CESS, ETC. COULD BE CALLED AN IMPOSITION PROPER WHERE ITS DEPOSIT IS SUBJECT TO I T BEING REFUNDED, IN FULL, AND FROM THE SAME ENTITY THE CENTRAL GOVERNMENT, TO WHOM I T STANDS PAID EARLIER. COULD IT, IN ANY CASE, BE CALLED AN EXPENDITURE, IMPLYING AN AMOUNT LOST IRRETRIEVABLY. THE SCHEME ONLY PROVIDES THE LEGAL BASIS FOR THE REFUND . THESE, AND OTHER ANCILLARY QUESTIONS, REMAIN UNADDRESSED IN THE DECISIONS CITE D. THE QUESTIONS WERE HOWEVER NOT RAISED AND THE MATTER PROCEEDED WITH ON THE BAS IS OF THE EXCISE-DUTY REFUND BEING A SEPARATE SOURCE OF INCOME, AND WHICH WAS, O N EXAMINATION, HELD TO BE IN THE NATURE OF A CAPITAL RECEIPT IN VIEW OF THE LARG ER OBJECTIVES FOR WHICH THE REFUND STANDS GRANTED. IMPLICIT THEREIN IS THE TREATMENT O F THE REFUND AS A SEPARATE AND INDEPENDENT SOURCE OF RECEIPT, AN ISSUE WHICH IS LA RGELY FACTUAL. EVEN THOUGH THE APEX COURT IN CIT V. WALCHAND AND CO. (P.) LTD. [1967] 65 ITR 381 (SC) EXPLAINED THAT THE TRIBUNAL IS TO DEAL WITH AND DET ERMINE ALL THE QUESTIONS WHICH ARISE OUT OF THE SUBJECT MATTER OF APPEAL, IN LIGHT OF THE EVIDENCE AND CONSISTENTLY WITH THE JUSTICE OF THE CASE, WE DO NOT, FOR THAT R EASON, CONSIDER IT PROPER TO RAISE THIS ASPECT OF THE MATTER. WE, ACCORDINGLY, HAVE NO HESITATION IN ACCEPTING THE ASSESSEES PLEAS FOR BOTH THE YEARS. 5. WE, ACCORDINGLY, ADMIT THE ADDITIONAL GROUND FOR AY 2006-07, AS WELL AS OF IT BEING A MISTAKE APPARENT FROM RECORD FOR AY 2005 -06; AND ANSWER THE QUESTION ON MERITS IN FAVOUR OF THE ASSESSEE. THAT IS, THAT THE EXCISE-DUTY REFUND AND INTEREST SUBSIDY ARE CAPITAL RECEIPTS AND, THEREFORE, ARE TO BE EXCLUDED IN THE COMPUTATION OF THE ASSESSEES BUSINESS INCOME U/S. 28 FOR THESE YE ARS. WE DECIDE ACCORDINGLY. ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 7 6. IN THE RESULT, THE ASSESSEES APPEAL FOR AY 2006 -07 IS ALLOWED, WHILE THAT OF THE REVENUE FOR AY 2005-06, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 12, 2018 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER 7. I HAVE GONE THROUGH THE ORDER PASSED BY THE HON BLE ACCOUNTANT MEMBER, WHEREBY THE APPEAL OF THE ASSESSEE IS ALLOWED AND T HAT OF THE REVENUE IS DISMISSED. THE ISSUE INVOLVED IN THE APPEALS UNDER CONSIDERATI ON RELATES TO THE EXCISE DUTY REFUND AND INTEREST SUBSIDY AS CAPITAL RECEIPT OR REVENUE RECEIPT, HAS ALREADY BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SH. BALAJI ALLOYS & ORS. VS. CIT (2011) 333 ITR 335 (J&K) BY HOLDING THE EXCISE DUTY REFUND AND INTEREST SUBSIDY AS ' CAPITAL RECEIPT' . THE AFORESAID HIGH COURT JUDGMENT WAS FURTHER CHALLENGED IN THE APEX COURT AND THE APEX C OURT VIDE ITS JUDGMENT DATED 19.04.2016 PASSED IN CIVIL APPEAL NO.10061 OF 2011 AFFIRMED THE VIEW OF THE HIGH COURT, HENCE, IN VIEW OF THE JUDGMENTS OF APEX COUR T AND JURISDICTIONAL HIGH COURT, I DO NOT HAVE ANY OPTION EXCEPT TO RESPECTFULLY FOL LOW THE RATIO LAID DOWN BY SUPERIOR COURTS, IN ITS TRUE SPIRIT, THEREFORE, I F EEL IT APPROPRIATE NOT TO TRAVEL TO OTHER ASPECTS BUT TO FOLLOW THE PROPOSITION SETTLED BY THE APEX COURT AND HON'BLE HIGH COURT. HENCE, I AM INCLINED TO ALLOW THE APPEAL OF THE ASSESSEE AND TO DISMISS THE APPEAL OF THE REVENUE IN VIEW OF THE OBSERVATIO N MADE ABOVE. 8. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y.200 6-07 IS ALLOWED AND OF THE REVENUE FOR A.Y. 2005-06 STANDS DISMISSED. SD/- N. K. CHOUDHRY (JUDICIAL MEMBER) DATE: 12.07.2018 ITA NOS. 544 & 571/ASR/2016&2017 KASHMIR STEEL R OLLING MILLS V. DY. CIT (AYS. 2006-07 & 2005-06) 8 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: KASHMIR STEEL ROLLING MILLS LANE-II, SIDCO INDUSTRIAL COMPLEX BARI BRAHMANA, JAMMU (2) THE RESPONDENT: DCIT CENTRAL CIRCLE, JAMMU (3) THE CIT(APPEALS)-5, LUDHIANA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER