Sh. Amit Gupta Prop. Viraj Industries, Jammu V. The Income Tax Officer, Jammu

ITA 78/ASR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5675 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 17 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: 08-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• 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.78(ASR)/2011. (ASSESSMENT YEAR: 2007-08) SHRI AMIT GUPTA PROP. THE INCOME TAX OFFICER, M/S.VIRAJ INDS., WARD 1(1), JAMMU. JAMMU. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: WRITTEN SUBMISSIONS. 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 26-12-2010, RELATING TO THE ASS ESSMENT YEAR 2007-09. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS OF APPEAL:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE THE LD. CIT(A), JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER THAT EXCISE REFUND OF RS.9,63,80,558/- AS INCOME NOT HAV ING DIRECT NEXUS WITH INDUSTRIAL UNDERTAKING AND DENIED THE LE GITIMATE BENEFIT OF SECTION 80IB OF THE INCOME TAX ACT, 196 1 FOR WHICH THE ASSESSEE IS RIGHTFULLY ELIGIBLE ON SUCH INCOME. 2. CENTRAL EXCISE DUTY IS A CAPITAL RECEIPT NOT LIA BLE TO TAX. THIS VIEW HAS BEEN HELD BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. PONNI SUGAR LTD. 306 ITR 392 SA WHNEY STEEL AND PRESS WORKS 228 ITR 253 & BY HONBLE JURI SDICTIONAL 2 HIGH COURT OF JAMMU & KASHMIR IN ITA NO.6/2010 HELD THE EXCISE DUTY REFUND AS CAPITAL RECEIPT. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A), JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE LD. A.O. BY M AKING AN ADDITION OF RS.30,000/- U/S.40A(IA) OF THE INCOME T AX ACT AND DENIED THE LEGITIMATE BENEFIT OF SECTION 80IB OF TH E INCOME TAX ACT, 1961 FOR WHICH THE ASSESSEE IS RIGHTFULLY ELIG IBLE ON SUCH INCOME. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE THE LD. CIT(A), JAMMU HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE AND IS CONTRARY TO THE PRINCIPLES OF NATURAL J USTICE AS THE APPELLANT HAD FURNISHED ALL THE INFORMATION IN SUPP ORT OF HIS CLAIM IN GOOD FAITH. 5. THAT THE IMPOSITION OF INTEREST U/S.234B AND 234 C IS UNJUSTIFIED AND ILLEGAL. 3. FIRSTLY, WE WILL DECIDE GROUND NOS.1 AND 2 OF T HE APPEAL. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF ALUMINIUM AND COPPER INGOTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED A SUM OF RS.9,63,80,558/- ON ACCOUNT OF EXCISE DUTY REFUND. ON THIS AMOUNT, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 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. 4. 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. 5. WE HAVE HEARD THE LEARNED D.R. AND HAVE ALSO PER USED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ORDER OF THE T RIBUNAL DATED 26-11-2009 3 PASSED IN THE CASE OF M/S.SHREE BALAJI ALLOYS, KATH UA WAS CHALLENGED IN APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COUR T AND THE ISSUE BEFORE THE HONBLE JURISDICTIONAL 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? 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 4 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 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. 5 7. 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.9,63,80,558/- RECEIVED BY THE ASSESSEE 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. 8, THE ASSESSEE THROUGH HIS COUNSEL, SHRI JOGINDER SINGH, C.A., HAS FILED THE WRITTEN SUBMISSIONS AND SUBMITTED THAT THE ASSE SSEE DID NOT WANT TO PRESS GROUND NO.3 OF APPEAL AND ACCORDINGLY WE DISMISS T HE SAME AS NOT PRESSED. 9. GROUND NO.4 OF THE APPEAL IS GENERAL IN NATURE A ND HENCE NO FINDINGS ARE BEING GIVEN. 10. GROUND NO.5 OF THE APPEAL RELATES TO THE CHARGI NG OF INTEREST U/S.234B& 234C OF THE ACT. WE FIND THAT THIS GROUN D OF APPEAL IS CONSEQUENTIAL IN NATURE AND WE HOLD ACCORDINGLY. 11. 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: SHRI AMIT GUPTA, 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 ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, 6