The Dy. Commissioner of Income-tax, Jammu v. M/s. Chenab Agro Chemicals Ltd,, Kathua

ITA 227/ASR/2011 | 2005-2006
Pronouncement Date: 09-12-2011 | Result: Dismissed

Appeal Details

RSA Number 22720914 RSA 2011
Bench Amritsar
Appeal Number ITA 227/ASR/2011
Duration Of Justice 7 month(s) 4 day(s)
Appellant The Dy. Commissioner of Income-tax, Jammu
Respondent M/s. Chenab Agro Chemicals Ltd,, Kathua
Appeal Type Income Tax Appeal
Pronouncement Date 09-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 09-12-2011
Assessment Year 2005-2006
Appeal Filed On 05-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: AMRITSAR BENCH: A MRITSAR BEFORE SHRI H L KARWA HONBLE VICE PRESIDENT AND SHRI D K SRIVASTAVA HONBLE ACCOUNANT MEMBER ITA NO. 196/ASR/2011 AY: 2004-05 I.T.O. KATHUA V M/S CHENAB AGRO CHEM LTD SICOP INDUSTRIAL AREA KATHUA CROSS OBJECTIONS NO. 09/ASR/2011 ARISING OUT OF ITA NO. 196/ASR/2011 AY: 2004-05 M/S CHENAB AGRO CHEM LTD V. I.T.O. KKATHUA SICOP INDUSTRIAL AREA KATHUA ITA NO. 227/ASR/2011 AY: 2005-06 D.C.I.T. CIRCLE-I JAMMU V M/S CHENAB AGRO CHEMIC ALS LTD SIDCO KATHUA CROSS OBJECTIONS NO. 11/ASR/2011 ARISING OUT OF ITA NO. 227/ASR/2011 AY: 2005-06 M/S CHENAB AGRO CHEMICALS P LTD V D.C.I.T. CIRCLE I JAMMU SIDCO KATHUA ITA NO. 197/ASR/2011 AY: 2005-06 I.T.O. KATHUA V M/S GOLDEN TIN INDUSTRIES SICOP INDUSTRIAL AREA KATHUA CROSS OBJECTIONS NO. 10/ASR/2011 ARISING OUT OF ITA NO. 197/ASR/2011 AY: 2005-06 2 M/S GOLDEN TIN INDUSTRIES V. I.T.O. KATHUA SICOP INDUSTRIAL AREA KATHUA ITA NO. 201/ASR/2011 AY: 2007-08 I.T.O. WARD 1(2) JAMMU V KRISHNA CHEMICALS PLOT NO 57 PHASE I GANGYAL JAMMU CROSS OBJECTIONS NO. 14/ASR/2011 ITA NO. 201/ASR/2011 AY: 2007-08 KRISHNA CHEMICALS V. I.T.O. WARD 1(3) JAMMU PLOT NO 57 PHASE I GANGYAL JAMMU ITA NO. 232/ASR/2011 AY: 2007-08 I.T.O. WARD 1(3) JAMMU V M/S S.P.M. INDUSTRIES NO. 57 PHASE 1 GANGYAL JAMMU CROSS OBJECTIONS NO. 15/ASR/2011 ARISING OUT OF ITA NO. 232/ASR/2011 AY: 2007-08 M/S S.P.M INDUSTRIES NO. 57 V I.T.O. WARD 1(3) J AMMU PHASE I GANGYAL JAMMU APPELLANT BY: SHRI TARSEM LAL RESPONDENT BY: NONE DATE OF HEARING: 09.12.2011 DATE OF PRONOUNCEMENT: 09.12.2011 ORDER PER BENCH : THE APPEALS BY THE REVENUE AND THE CROSS OBJECTIO NS BY THE ASSESSEES INVOLVE COMMON ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 3 2. THE COMMON GROUNDS OF APPEALS ARE AS UNDER:- 1 ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN ALLOWING RELIEF ON ACCOUNT OF DEDUCTION U/S 80IB ON CENTRAL EXCISE DUTY REFUND BY RELYING UPON ORDERS OF HON'BLE HIGH COURT IF J&K JAMMU WHICH HAS BEEN DELIVERED NOT ON MERITS OF THE ISSUE BUT H OLDING THE RECEIPT TO BE A CAPITAL RECEIPT ONLY BECAUSE THE POLICY UNDER WHI CH THE SAME WAS PAID ENVISAGED TACKLING THE UNEMPLOYMENT IN THE STATE WH ICH CANNOT BE SAID TO BE A GOOD TEST FOR DECIDING WHETHER A RECEIPT IS A TRADING RECEIPT OR A CAPITAL RECEIPT. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIAT ING THE JUDGMENTS OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF PONNI SUGAR & SAWHNEY STEEL AND PRESS WORKS LTD WHEREIN THE HON'BLE SUPR EME COURT HAD HELD SUCH RECEIPTS TO BE THE REVENUE RECEIPTS IN AS MUCH AS IN THAT CASE PAYMENTS WERE MADE ONLY AFTER THE INDUSTRIES HAD BE EN SET UP AND PAYMENTS WERE NOT MADE FOR PURPOSE OF SETTING UP OF INDUSTRIES. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT CONSIDERI NG THE DECISION IN THE CASE OF SEAHAM HARBOUR DOCK COMPANY WHICH LAYS DOWN TWO IMPORTANT TESTS FOR DETERMINING WHETHER RECEIPTS IS A TRADING RECEIPT OR A CAPITAL RECEIPT. 4. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN FACTS AND CIRCUMSTANCES AND IN LAW IN NOT APPRECIAT ING AND APPLIED THE PURPOSE TEST AS LAID DOWN BY THE JUDGMENTS OF THE H ON'BLE SUPREME COURT. IN THE CASE OF ASSESSEE THE MONEY RECEIVED BY THE ASSESSEE ON ACCOUNT OF REFUND OF CENTRAL EXCISE WAS NOT SUPPOSED TO BE SPENT IN A PARTICULAR MANNER FOR PURPOSE OF SUBSTANTIAL EXPANS ION OF THE INDUSTRY. 5. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 3. BRIEFLY THE GROUNDS NO. 1 TO 5 REVOLVE AROUND T HE ISSUE OF EXCISE DUTY REFUND WHICH WAS CLAIMED AS EXEMPT IN VIEW OF SECTI ON 80IB OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT) BEING ALLOWABLE TO T HE ASSESSEE. THE AO HAS NOT ALLOWED THE CLAIM OF THE ASSESSEE AND HELD THAT THE RECEIPTS ON ACCOUNT OF EXCISE DUTY REFUND GRANTED IN VIEW OF GOVERNMENT NOTIFICAT ION WAS NOT ELIGIBLE TO BE CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S 80IB OF THE ACT. 4 4. ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHREE BALA JI ALLOWS V. CIT AND ANOTHER (2011) 333 ITR 335 (J&K) HELD THAT THE EXCISE DUTY R EFUND IS TO BE TREATED AS CAPITAL RECEIPT AND NOT LIABLE TO BE TAXED. NOW THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL AGAINST THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD SHRI TARSEM LAL LD. DR AT LENGTH. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF SHREE BALAJI ALLOWS V. CIT AND ANOTHER (2011) 333 ITR 335 (J&K). THE I SSUES BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT FOR DETERMINATION WERE A S UNDER:- (1) WHETHER THE AMOUNT OF EXCISE REFUND AND INTERES T SUBSIDY RECEIVED BY THE APPELLANTS-ASSESSEES 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 14 2002 AND CENTRAL EXCISE NOTIFICATION NOS. 56 AND 57 DATED NOVEMBER 14 200 2 AND OTHER NOTIFICATION ISSUED ON THE SUBJECT PERTAINING TO T HE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU AND KASHMIR IS A CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS OF THE ACT OR REVENUE RECEIPT AS OPINED BY THE AUTHORITIES UNDER THE ACT? (2) WHETHER THE APPELLANTS-ASSESSEES ARE ENTITLED T O DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE EXCISE DUTY REFUND A ND INTEREST SUBSIDY ETC. BEING THE INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING IN CASE THE EXCISE REFUND AND INTEREST SUBSIDY WERE FOUND TO BE REVENUE RECEIPT. 6. THE HON'BLE HIGH COURT OF JAMMU AND KASHMIR WHIL E DECIDING THE MATTER HAS DISCUSSED THE SALIENT FEATURES OF THE NEW INDUS TRIAL POLICY AMENDMENTS INTRODUCED THERETO AND STATUTORY NOTIFICATION ETC. THE HON'BLE HIGH COURT FURTHER DISCUSSED THE DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD (1997) 228 ITR 253 (S.C) AND OBSERVED AS UNDER:- 5 26 A PERUSAL OF THE OFFICE MEMORANDUM DATED JUNE 1 4 2002 INDICATING NEW INDUSTRIAL POLICY AND OTHER CONCESSI ONS FOR THE STATE OF JAMMU AND KASHMIR MAKES IT EXPLICIT THAT THE CONCE SSIONS WERE ISSUED TO ACHIEVE TWIN OBJECTS VIZ. (I) ACCELERATION OF INDUS TRIAL DEVELOPMENT IN THE STATE OF JAMMU AND KASHMIR WHICH HAD BEEN FOUND LA GGING BEHIND IN SUCH DEVELOPMENT AND (II) GENERATION OF EMPLOYMENT IN THE STATE OF JAMMU & KASHMIR. 27 AMENDMENT INTRODUCED TO THE OFFICE MEMORANDUM VI DE NOTIFICATION OF NOVEMBER 28 2003 OF THE GOVERNMENT OF INDIA MI NISTRY OF COMMERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POLICY AND P ROMOTION) ELOQUENTLY DEMONSTRATES THE CENTRAL GOVERENMENTS INTENTION IN EXTENDING THE INCENTIVES. THE GOVERNMENTS OBJECTIVE AS CONVEYE D BY THE HONBLE PRIME MINISTER A SRINAGAR ON APRIL 19 2003 WAS F OR CREATION OF ONE LAKH EMPLOYMENT AND SELF-EMPLOYMENT OPPORTUNITIES IN JAM MU AND KASHMIR STATE. 28 TO ACHIEVE THE PURPOSE AND OBJECTIVE REFERRED TO HEREINABOVE IT WAS INTER ALIA PROVIDED IN THE CENTRAL EXCISE NOT IFICATIONS THAT THE EXEMPTIONS CONTAINED IN THE NOTIFICATIONS WOULD BE AVAILABLE ONLY ON PRODUCTION OF CERTIFICATE FROM GENERAL MANAGER OF T HE CONCERNED DISTRICT INDUSTRIES CENTRE TO THE JURISDICTIONAL DEPUTY COMM ISSIONER OF CENTRAL EXCISE OR THE ASSISTANT COMMISSIONER OF CENTRAL EXCIS E AS THE CASE MAY BE TO THE EFFECT THAT THE UNIT HAD CREATED REQUIRE D ADDITIONAL REGULAR EMPLOYMENT WHICH WOULD NOT HOWEVER INCLUDE EMPLO YMENT PROVIDED BY THE INDUSTRIAL UNITS TO DAILY WAGERS OR CASUAL EMPL OYEES ENGAGED IN THE UNITS. 29 A CLOSE READING OF THE OFFICE MEMORANDUM AND THE AMENDMENT INTRODUCED THERETO WITH PARAGRAPH NO. 3 APPEARING I N THE CENTRAL EXCISE NOTIFICATION NOS. 56 AND 57 OF NOVEMBER 11 2002 T HUS MAKES IT AMPLY CLEAR THAT THE ACCELERATION OF DEVELOPMENT OF INDUS TRIES IN THE STATE WAS CONTEMPLATED WITH THE OBJECT OF GENERATION OF EMPLO YMENT IN THE STATE OF JAMMU AND KASHMIR AND THE GENERATION OF EMPLOYMENT SO CONTEMPLATED WAS NOT ONLY CASUAL OR TEMPORARY; BUT WAS ON THE OTHER HAND OF PERMANENT NATURE. 30 CONSIDERED THUS THE PARAMOUNT CONSIDERATION OF THE CENTRAL GOVERNMENT IN PROVIDING THE INCENTIVES TO THE NEW I NDUSTRIAL UNITS AND SUBSTANTIAL EXPANSION OF THE EXISTING UNITS WAS TH E GENERATION OF EMPLOYMENT THROUGH ACCELERATION OF INDUSTRIAL DEVEL OPMENT TO DEAL WITH THE SOCIAL PROBLEM OF UNEMPLOYMENT IN THE STATE AD DITIONALLY CREATING OPPORTUNITIES FOR SELF-EMPLOYMENT HENCE A PURPOSE IN PUBLIC INTEREST. 6 31 IN THIS VIEW OF THE MATTER THE INCENTIVES PROVI DED TO THE INDUSTRIAL UNITS IN TERMS OF THE NEW INDUSTRIAL POLICY FOR A CCELERATED INDUSTRIAL DEVELOPMENT IN THE STATE FOR CREATION OF SUCH INDU STRIAL ATMOSPHERE AND ENVIRONMENT WHICH WOULD PROVIDE ADDITIONAL PERMANE NT SOURCE OF EMPLOYMENT TO THE UNEMPLOYED IN HE STATE OF JAMMU A ND KASHMIR WERE IN FACT IN THE NATURE OF CREATION OF NEW ASSETS OF INDUSTRIAL ATMOSPHERE AND ENVIRONMENT HAVING THE POTENTIAL OF EMPLOYMEN T GENERATION TO ACHIEVE A SOCIAL OBJECT. SUCH INCENTIVES DESIGNED TO ACHIEVE PUBLIC PURPOSE CANNOT BY ANY STRETCH OF REASONING BE CO NSTRUED AS PRODUCTION OR OPERATIONAL INCENTIVES FOR THE BENEFIT OF ASSESS ES ALONE. 32 THUS LOOKING TO THE PURPOSE OF ERADICATION OF THE SOCIAL PROBLEM OF UNEMPLOYMENT IN THE STATE BY ACCELERATION OF THE INDUSTRIAL DEVELOPMENT AND REMOVING BACKWARDNESS OF THE AREA T HAT LAGGED BEHIND IN INDUSTRIAL DEVELOPMENT WHICH IS CERTAINLY A PUR POSE IN THE PUBLIC INTEREST THE INCENTIVES PROVIDED BY THE OFFICE MEM ORANDUM AND STATUTORY NOTIFICATIONS ISSUED IN THIS BEHALF TO THE APPELLA NTS-ASSESSEES CANNOT BE CONSTRUED AS MERE PRODUCTION AND TRADE INCENTIVES AS HELD BY THE TRIBUNAL. 33. MAKING OF ADDITIONAL PROVISION IN THE SCHEME TH AT INCENTIVES WOULD BECOME AVAILABLE TO THE INDUSTRIAL UNITS ENTITLED THERETO FROM THE DATE OF COMMENCEMENT OF THE COMMERCIAL PRODUCTION AND THAT THESE WERE NOT REQUIRED FOR CREATION OF NEW ASSETS CANNOT BE VIEWE D IN ISOLATION 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 FID E INDUSTRIAL UNITS SO THAT LARGER PUBLIC INTEREST OF DEALING WITH UNEMPLO YMENT IN THE STATE AS INTENDED IN TERMS OF THE OFFICE MEMORANDUM WAS AC HIEVED. 34. THE OTHER FACTORS WHICH HAD WEIGHED WITH THE T RIBUNAL IN DETERMINING THE INCENTIVES AS PRODUCTION INCENTIVES MAY NOT BE DECISIVE TO DETERMINE THE CHARACTER OF THE INCENTIVE SUBSIDIES WHEN IT IS FOUND AS DEMONSTRATED IN THE OFFICE MEMORANDUM AMENDMENT IN TRODUCED THERETO AND THE STATUTORY NOTIFICATION TOO THAT THE INCENTI VES WERE PROVIDED WITH THE OBJECT OF CREATING AVENUES FOR PERPETUAL EMPLOY MENT TO ERADICATE THE SOCIAL PROBLEM OF UNEMPLOYMENT IN THE STATE BY ACCE LERATED INDUSTRIAL DEVELOPMENT. 7. THE HON'BLE JURISDICTIONAL HIGH COURT CONCLUDED AS UNDER:- 35 FOR ALL WHAT HAS BEEN SAID ABOVE THE FINDING O F THE TRIBUNAL ON THE FIRST ISSUE THAT THE EXCISE DUTY REFUND INTEREST S UBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES HENCE REVENUE R ECEIPT CANNOT BE 7 SUSTAINED BEING AGAINST THE LAW LAID DOWN BY THE H ON'BLE SUPREME COURT OF INDIA IN SAHNEY STEEL CASE (1997) 228 ITR 253 AN D PONNI SUGARS CASE (2008) 306 ITR 392. 36 THE FINDING OF THE TRIBUNAL THAT THE INCENTIVES WERE REVENUE RECEIPT IS ACCORDINGLY SET ASIDE HOLDING THE INCENTIVES T O THE CAPITAL RECEIPT IN THE HANDS OF THE ASSESSES. 37 IN VIEW OF OUR ABOVE FINDING ON THE FIRST ISSUE THERE IS NO NEED TO OPINE ON THE SECOND ISSUE WHICH WAS RAISED IN THE ALTERNATIVE. 8. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'B LE JURISDICTIONAL HIGH COURT WE CONFIRM THE ORDERS OF LD. CIT(A) IN HOLDI NG THAT THE EXCISE DUTY REFUND IS TO BE TREATED AS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND NOT LIABLE TO BE TAXED. CROSS-OBJECTIONS NO. 09/ASR/2011 11/ASR/2011 10/A SR/2011 AND 14/ASR/2011 15/ASR/2011 9. THE CROSS-OBJECTIONS FILED BY THE ASSESSEES MERE LY SUPPORT THE ORDER OF LD. CIT(A) AND THEY HAVE NOT CLAIMED ANY EFFECTIVE RELIEF AND HENCE WE DISMISS THESE CROSS-OBJECTIONS AS INFRUCTUOUS. 10. IN CROSS OBJECTION NO. 15/ASR/2011 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1 THAT THE ORDER OF THE LD. CIT(A) IS WELL REASONE D ON THE LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) JAMMU WHILE PASSING THE ORDER UNDER SECTION 250 OF THE INCOME- TAX ACT 1961 ERRED IN NOT DISCUSSING THE SECOND IS SUE OF DEDUCTION UNDER SECTION 80IB IN RESPECT OF EXCISE DUTY REFUND AS AN ALTERNATE ISSUE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD MODIFY AMEND OR DELETE ANY OF THE GROUNDS OF CROSS OBJECTION AT THE TIME O F HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 11. IN GROUND NO. 1 OF THE CROSS-OBJECTION THE ASS ESSEE HAS MERELY SUPPORTED THE ORDER OF THE LD. CIT(A) AND THEREFORE WE DISMISS THE SAME HAS HAVING BECOME INFRUCTUOUS. 8 12. NOW WE WILL DISCUSS GROUND NO. 2 OF THE CROSS- OBJECTIONS NO. 15/ASR/2011. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF SHREE BALAJI ALLOWS V. CIT AND ANOTHER (2011) 333 ITR 335 (J&K) AND TH EREFORE WE DO NOT THINK IT NECESSARY TO GIVE ANY COMMENTS ON THIS ISSUE. 13. GROUND NO. 3 OF THE CROSS-OBJECTION IS GENERAL IN NATURE AND HENCE NO COMMENTS ARE BEING GIVEN. 14. IN THE RESULT ALL THE APPEALS FILED BY THE REV ENUE AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEES ARE DISMISSED. ORDER PRONOUNCED ON 09.12.2011 SD/- SD/- (D K SRIVASTAVA) (H L KARW A) ACCOUNTANT MEMBER VICE PRESIDENT AMRITSAR 09.12.2011 SURESH COPY TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE LD. CIT 5. THE D.R. INCOME TAX DEPARTMENT AMRITSAR