M/s Tripti Menthol Ind, Jammu V. The Income Tax Officer, Jammu

ITA 58/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5666 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Question of law; 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.58(ASR)/2011. (ASSESSMENT YEAR: 2007-08) M/S.TRIPTI MANTHOL INDS., 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 MEHAR SINGH, ACCOUNTANT MEMBER. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), JAMMU DATED 15-12-2010, RELATING TO THE ASS ESSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN REFUSI NG DEDUCTION OF RS.76,06,332/- UNDER SECTION 80IB OF INCOME TAX ACT ON EXCISE REFUND RECEIVED BY THE ASSESSEE. 2. THAT EXCISE DUTY HAS GOT DIRECT NEXUS WITH BUSIN ESS OF ASSESSEE AND IS AN INCOME DERIVED FROM THE BUSINESS OF THE A SSESSEE. 3. EVEN OTHERWISE EXCISE DUTY REFUND IS CAPITAL IN THE HANDS OF THE ASSESSEE AND NOT REVENUE RECEIPT. 4. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN REFUSIN G DEDUCTION UNDER SECTION 80IB ON AN AMOUNT OF RS.59,580/- EXPE NSES 2 ADDED BACK IN ACCORDANCE WITH PROVISION OF SECTION 40(A)AI) OF INCOME TAX ACT. 3. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A), JAMMU, WAS NOT AT ALL JUST IFIED IN TREATING THE SUM OF RS.76,06,332/- AS REVENUE RECEIPT. THE LD. CIT(A), DID NOT APPRECIATE THAT THIS AMOUNT RECEIVED WAS A CAPITAL RECEIPT WHICH WAS NOT SUBJECT TO TAX. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS A ND IN LAW IN UPHOLDING THE ACTION OF THE A.O. IN MAKING THE IMPU GNED ADDITION OF RS.76,06,332/- ON ACCOUNT OF EXCISE DUT Y REFUND BY TREATING THE SAME AS REVENUE RECEIPT. THE LD. CI T(A) DID NOT APPRECIATE THAT THIS WAS A CAPITAL RECEIPT AND THIS WAS NOT LIABLE TO TAX. AS SUCH THE ADDITION OF RS.76,06,332/- MAY BE DELETED. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDI NG THAT THE EXCISE DUTY REFUND OF RS.76,06,332/- RECEIVED BY TH E ASSESSEE WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THIS WAS NOT LIABLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961. THAT THE DEDUCTION AS CLAIME D MAY BE ALLOWED. 4. AS REGARDS THE ADMISSION OF ADDITIONAL GROUND, W E FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. (1998) 229 ITR 383 (SC), WHEREIN THE HONBLE SUPREM E COURT HELD (HEAD NOTE) AS UNDER:- UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO AL LOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHI CH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECES SARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 3 4.1 IN OUR VIEW, THE ADDITIONAL GROUND RAISED BY TH E ASSESSEE IS A QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND OF APPEAL A ND PROCEED TO DECIDE THE SAME IN THE SUCCEEDING PARAGRAPHS.. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN MANUFACTURING OF MENTHOL CRYSTALS & ALLIED PRODUCTS . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED A SU M OF RS.76,06,332/- ON ACCOUNT OF EXCISE DUTY REFUND. ON THE AFORESAID AM OUNT, THE ASSESSEE ALSO CLAIMED DEDUCTION U/S.80IB OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). THE A.O. DENIED THE CLAIM OF THE ASSESSEE AN D TREATED THE ABOVE AMOUNT AS REVENUE RECEIPT. 6. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THI S BENCH OF THE TRIBUNAL PASSED IN THE CASE OF M/S.SHREE BALAJI ALL OYS, KATHUA DATED 26-11-2009 DISMISSED THE APPEAL OF THE ASSESSEE. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND HAVE ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE FI ND THAT THE ORDER OF THE TRIBUNAL DATED 26-11-2009 PASSED IN THE CASE OF M/S .SHREE BALAJI ALLOYS, KATHUA WAS CHALLENGED IN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE ISSUE BEFORE THE HONBLE JURISDICTIO NAL 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 4 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? 8. 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 5 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. 9. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL I.E. J & K HIGH COURT IN THE CASE OF M/S.SHREE BALAJI AL LOYS (SUPRA), WE HOLD THAT THE AMOUNT OF RS.76,06,332/- RECEIVED BY THE A SSESSEE ON ACCOUNT OF EXCISE DUTY REFUND IS A CAPITAL RECEIPT AND NOT LIA BLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. 6 10. SINCE WE HAVE ALLOWED ADDITIONAL GROUND NOS.1 O F 3 OF THE APPEAL AND, THEREFORE, WE DO NOT THINK IT NECESSARY TO DEC IDE GROUND NOS.1 AND 2 OF THE APPEAL. 11. GROUND NO.3 RELATES TO THE ADDITIONAL GROUND AN D WE HOLD THAT THE EXCISE DUTY REFUND IS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 12. GROUND NO.4 OF THE APPEAL WAS NOT PRESSED BEFOR E US AND ACCORDINGLY WE DISMISS THE SAME AS NOT PRESSED. 13. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT. ACCOUNTANT MEMBER. DATED: 24 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.TRIPTI MENTHOL INDS., 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.