ACIT, Chandigarh V. M/s Shivalik Agro Chemicals, Chandigarh

ITA 887/CHANDI/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5374 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-01-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: HARRY RICKY
• Keywords: Capital receipt
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.887 /CHD/2013 (ASSESSMENT YEAR : 2010-11) THE A.C.I.T., VS. M/S SHIVALIK AGRO CHEMICALS, CIRCLE 2(1), NEELAM CINEMA COMPLEX, CHANDIGARH. SECTOR 17, CHANDIGARH. PAN: AALFS7372Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI HARRY RICKY DATE OF HEARING : 08.01.2014 DATE OF PRONOUNCEMENT : 17.01.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 04.06.2013 RELATING TO ASSESSMENT YEAR 2010-11 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) IN APPEAL NO. 536/12-13, HAS ERRED IN DELETING THE FOL LOWING ADDITIONS:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT EXCISE DUTY REFUND WAS A CAPITAL RECEI PTS AND WAS NOT TO BE INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT LIKE IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD., VS. CIT 228 ITR 253 (SC), THE ASSESSEE WAS FR EE TO USE MONEY RECEIVED ON ACCOUNT OF EXCISE DUTY REFUND IN ITS BUSINESS ENTIR ELY AS IT LIKED. THUS, THE SAME IS LIABLE TO BE TAXED AS REVENUE RECEIPT. 2 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CA NCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AME ND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUES IN THE PRESENT APPEAL ARE COVERED BY THE ORD ER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEAR UNDER WHICH THE EXCISE DUTY REFUND HAS BEEN HELD TO BE CAPITAL RECEIPT. 3. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED EXCISE DUTY REFUND OF RS.1,42,15,110/- AGAINST WHICH DEDUC TION UNDER SECTION 80IB OF THE ACT WAS CLAIMED BY THE ASSESSEE. THE A SSESSING OFFICER HELD THAT THE SAID EXCISE DUTY REFUND HAD NO NEXUS WITH THE MANUFACTURING PROCESS OF THE ASSESSEE AND HENCE DEN IED THE DEDUCTION UNDER SECTION 80IB OF THE ACT. SIMILAR DISALLOWANC E WAS MADE IN THE EARLIER YEARS STARTING FROM 2007-08. THE TRIBUNAL IN ITA NO.968/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 20.12.2011 CONSIDERED THE ISSUE IN RELATION TO EXCI SE DUTY REFUND AND IN TURN FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE J AMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 AND OTHERS (DATE OF DECISION 31.1.2011), HELD THAT THE SAID EXCISE DUTY REFUND WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND DID NOT ADDRESS THE ISSUE OF WHETHER THE EXCISE DUTY REFUND WAS DERIVED FROM THE MANUFACTURING ACTIVITIES CARRIED ON BY THE ASSESSEE AND IN TURN BEING 3 ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE VIDE PARAS 15 TO 18 WH ICH ARE AS UNDER: 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE RAISED VIDE GROUND NO.3 BY THE ASSESSEE W AS IN CONNECTION WITH THE ADDITION MADE BY THE AUTHORITIE S BELOW ON ACCOUNT OF EXCISE DUTY REFUND BY HOLDING THAT IT HA D NO NEXUS WITH THE MANUFACTURING ACTIVITIES CARRIED ON BY THE ASSE SSEE AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF TH E ACT. THE ASSESSEE HAS RAISED AN ALTERNATE PLEA BY WAY OF ADD ITIONAL GROUND OF APPEAL NO.1 WHEREIN IN VIEW OF THE RATIO LAID DO WN BY JAMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTH ERS (SUPRA) IT IS CLAIMED THAT THE SAID EXCISE DUTY REFUND IS A CA PITAL RECEIPT AND HENCE NOT INCLUDIBLE AS INCOME OF THE ASSESSEE. TH E ADDITIONAL GROUND OF APPEAL NO.1 BEING PURELY LEGAL IS ADMITTE D FOR ADJUDICATION. 16. FIRST WE TAKE UP ADDITIONAL GROUND OF APPEAL RA ISED BY THE ASSESSEE. THE ASSESSEE HAD SET UP MANUFACTURING UN IT AND STARTED COMMERCIAL PRODUCTION AT SAMBA, WHICH IS BACKWARD A REA OF STATE OF JAMMU & KASHMIR. THE ASSESSEE HAD CLAIMED DEDUC TION UNDER SECTION 80IB OF THE ACT ON THE PROFITS EARNED FROM THE SAMBA MANUFACTURING UNIT AND AS THE ASSESSEE WAS FOUND TO HAVE FULFILLED ALL CONDITIONS LAID DOWN UNDER SECTION 80IB OF THE ACT, THE SAID DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER. HO WEVER, THE ASSESSING OFFICER HELD THAT A SUM OF RS.139.80 LACS BEING EXCISE DUTY REFUND RECEIVED BY THE ASSESSEE WAS NOT ELIGIB LE FOR THE SAID DEDUCTION UNDER SECTION 80IB OF THE ACT, AS THE SAM E WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. SIMILAR I SSUE OF RECEIPT OF EXCISE DUTY REFUND AROSE BEFORE THE HON'BLE JAMM U & KASHMIR HIGH COURT IN BUNCH OF APPEALS WITH LEAD ORDER IN M /S SHREE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 & OTHER S. THE HON'BLE COURT VIDE ORDER DATED 31.1.2011 AFTER CONS IDERING THE SCHEME FORMULATED BY THE STATE GOVERNMENT HAD ALSO REFERRED TO THE RATIOS LAID DOWN BY THE HON'BLE SUPREME COURT I N SAWHNEY STEEL & PRESS WORKS LTD. & OTHERS VS. CIT [228 ITR 253(SC)] AND CIT VS. PONNI SUGARS & CHEMICALS LTD. [306 ITR 392 (SC)] AND HELD THAT IN CONTEXT OF THE RESPECTIVE INCENTIVE SC HEMES IN THE TWO CASES, THE SUBSIDY IN SAWHNEY STEEL & PRESS WORKS L TD. & OTHERS (SUPRA) WAS HELD TO BE REVENUE RECEIPT WHEREAS THE SUBSIDY IN PONNI SUGARS & CHEMICALS LTD.(SUPRA) WAS HELD TO BE CAPITAL RECEIPT. FURTHER SUPPORT WAS TAKEN FROM THE LATER DECISION OF THE HON'BLE SUPREME COURT IN M/S MEPCO INDUSTRIES LTD., MADURAI VS. CIT & ANOTHER, 2009 (97) SUPREME 564, WHEREIN SIMIL AR PRINCIPLE HAD BEEN HELD AND IT HAS ALSO BEEN LAID DOWN THAT T HE NATURE OF THE SUBSIDY IN EACH OF THE CASES WAS SEPARATE AND DISTI NGUISHED. IT WAS FURTHER HELD THAT THERE IS NO STRAIGHT JACKET PRINCIPLE OF DISTINGUISHING A CAPITAL RECEIPT FROM A REVENUE REC EIPT. THE HON'BLE JAMMU & KASHMIR HIGH COURT FURTHER OBSERVED THAT TO DETERMINE THE NATURE AND INTENT OF THE INCENTIVES A S TO WHETHER THOSE WERE REVENUE RECEIPTS, THE PURPOSE UNDERLYING THE INCENTIVES WAS THE DETERMINATIVE TEST. ON CONSIDERING THE NE W INDUSTRIAL POLICY FORMULATED IN THE STATE OF JAMMU & KASHMIR A ND THE OBJECT BEHIND THE FORMULATION OF SUCH POLICY BY THE CENTRA L GOVERNMENT, THE COURT HELD THAT THE FINDING OF THE TRIBUNAL THA T EXCISE DUTY 4 REFUND, INTEREST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES, HENCE REVENUE RECEIPTS CANNOT BE SUSTAI NED, BEING AGAINST THE LAW LAID DOWN BY THE HON'BLE SUPREME CO URT OF INDIA IN SAWHNEY STEEL & PRESS WORKS LTD. & OTHERS (SUPRA ) AND PONNI SUGARS & CHEMICALS LTD. (SUPRA). THE COURT THUS HE LD THAT THE SAID INCENTIVES WERE CAPITAL RECEIPTS IN THE HANDS OF THE ASSESSEE. 17. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE EXCISE DUTY REFUND RECEIVED BY THE ASSESSEE WAS IN LIEU OF THE INCENTIVE SCHEME PROMULGATED IN THE STATE OF JAMMU & KASHMIR WHICH W AS CONSIDERED AT LENGTH BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTHERS (SUPRA). FOLLO WING THE ABOVE SAID RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT, WE HOLD THAT THE EXCISE DUTY REFUND OF RS.139.80 LA CS WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND WAS NOT TO BE INCLUDED AS INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION. IN VIEW THEREOF, WE ALLOW ADDITIONAL GROUND OF APPEAL NO.1. RAISED BY THE ASSESSEE. 18. AS WE HAVE HELD THE SAID RECEIPTS TO BE CAPITAL IN NATURE AND HENCE OUTSIDE THE PURVIEW OF TAX, WE ARE NOT ADDRES SING THE ISSUE RAISED VIDE GROUND NO.3 BY THE ASSESSEE AS TO WHETH ER THE SAID EXCISE DUTY REFUND IS DERIVED FROM THE MANUFACTURIN G ACTIVITIES CARRIED ON BY THE ASSESSEE AND HENCE ELIGIBLE FOR D EDUCTION UNDER SECTION 80IB OF THE ACT. GROUND NO.3 RAISED BY THE ASSESSEE IS THUS DISMISSED IN LIMINE. 5. THE ISSUE ARISING IN THE PRESENT APPEAL ARE IDEN TICAL TO THE ISSUE BEFORE THE TRIBUNAL IN EARLIER YEARS AND FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN HOLDING THAT THE EXCISE DUTY REFUND WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IN VIEW THEREOF, THE GROUND NOS.1 AND 2 RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JANUARY, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17 TH JANUARY, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5