M/s. Resp.Faucet Inds, Jammu V. The Income Tax Officer, Jammu

ITA 56/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5703 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIRENDER K MAINI
• Keywords: Capital receipt

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.56(ASR)/2011. (ASSESSMENT YEAR: 2007-08) M/S.RESP FAUCET INDS. , THE ASSESSING OFFICER, BARI BRAHMANA, WARD I(2), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: S/SHRI R.K. GUPTA, C.A. & VIRENDER K. MAINI, C.A. 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 15-01-2011, RELATING TO THE ASS ESSMENT YEAR 2007-08. 2. GROUND NOS.1 AND 2 OF THE APPEAL READ AS UNDER:- 1. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING T HE ACTION OF THE LD. A.O. IN TREATING THE REFUND OF RS.9,44,928/- F ROM EXCISE DEPARTMENT AS REVENUE RECEIPT. THE REFUND RECEIVED FROM EXCISE DEPARTMENT IS A CAPITAL RECEIPT ARISING OUT OF THE INCENTIVE SCHEME OF THE GOVT. OF INDIA FOR PROMOTIO N OF INDUSTRY AND GENERATING EMPLOYMENT IN THE INDUSTRIA LLY BACKWARD AREA LIKE THE STATE OF J&K. 2. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING TH E ACTION OF THE LD. AO IN DISALLOWING THE DEDUCTION IN RESPECT OF INTEREST SUBSIDY AMOUNTING TO RS.1,48,478/- ON THE ALLEGED G ROUND THAT 2 IT DOES NOT CONSTITUTE PROFIT AND GAINS DERIVED FRO M THE BUSINESS OF THE APPELLANT. THE INTEREST SUBSIDY RECEIVED IS A CAPITAL RECEIPT ARISING OUT OF THE INCENTIVE SCHEME OF THE GOVT. OF INDIA FOR PROMOTION OF INDUSTRY AND GENERATING EMPL OYMENT IN THE INDUSTRIALLY BACKWARD ARE LIKE THE STATE OF J&K . HENCE IT IS INFRUCTOUS TO SEE WHETHER IT IS DERIVED FROM INDUST RIAL ACTIVITY OR NOT WHEN IT IS NOT A REVENUE RECEIPT AT ALL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT BOTH TH ESE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE JUDGMENT DATED 31-1-2011 OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATHUA, REPORTED IN (2011) 333 ITR 3 35 (J&K). WHILE DECIDING THE ISSUE, THE HONBLE HIGH COURT HAS HELD 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, 3 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 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. 4. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI ALLOYS (SUPRA), WE HOLD THAT THE AMOUNTS OF 4 EXCISE DUTY REFUND AND INTEREST SUBSIDY RECEIVED B Y THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS A CAPITAL R ECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. WE ALLOW BOTH THE GROUNDS OF APPEAL. 5. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 23 RD JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.RESP FAUCET INDS, 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.