R.N. Knitfab Pvt. Ltd., Ludhiana v. DCIT, Ludhiana

ITA 298/CHANDI/2012 | 2008-2009
Pronouncement Date: 27-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 29821514 RSA 2012
Assessee PAN AABCR9687E
Bench Chandigarh
Appeal Number ITA 298/CHANDI/2012
Duration Of Justice 4 month(s) 23 day(s)
Appellant R.N. Knitfab Pvt. Ltd., Ludhiana
Respondent DCIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 27-07-2012
Date Of Final Hearing 19-07-2012
Next Hearing Date 19-07-2012
Assessment Year 2008-2009
Appeal Filed On 05-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO.298/CHD/2012 (ASSESSMENT YEAR:2008-09) R.N. KNITFAB PVT. LTD. VS. THE D.C.I.T. 251 GURU VIHAR CIRCLE III RAHON ROAD LUDHIANA. LUDHIANA. PAN: AABCR9687E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K.GOYAL RESPONDENT BY : SHRI N.K.SAINI DR DATE OF HEARING : 19.07.2012 DATE OF PRONOUNCEMENT : 27.07.2012 O R D E R PER SUSHMA CHOWLA J.M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-I LUDHIANA DA TED 9.12.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED U/S 143(3) OF INCOME TAX ACT 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAD FILED REVISED GROUNDS OF APPEAL WHICH ARE AS UNDER: 1. A. BECAUSE THE LD. CIT(A) HAS ERRED ON FACTS AN D LAW BY CONFIRMING THE AO'S ORDER WHEREBY CLAIM OF DEDUCTION U/S 80IB PERTAINING TO EXCISE DUTY REFUND I.E. RS. 20 07 5427- HAS BEEN DECLINED WHEREAS IN PURSUANCE TO THE DECISION OF CIT V. DHARAM PAL PREM CHAND LTD. ( 2009) 317 ITR 353 (DELHI) THE SAID HAS A DIRECT NEXUS WITH THE MANUFA CTURING ACTIVITY. B. ALTERNATIVELY IN PURSUANCE TO THE INCENTIVES AN NOUNCED AND SANCTIONED VIDE GOVERNMENT OF INDIA MINISTRY OF COMMERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION)'S OFFICE MEMORA NDUM NO.L(13) 2000- NRE DT. 14.06.2002 AND CENTRAL EXCISE NOTIFICATION NOS. 56 AND 57 DT. 11.11.2002 AND OTHER NOTIFICATIONS ISSUED ON THE SU BJECT PERTAINING TO THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU AND KASHMIR IT IS A 2 CAPITAL RECEIPT AND THUS NOT LIABLE TO TAX UNDER THE PROVISIONS O F THE INCOME TAX ACT 1961. 2. BECAUSE THE LD. CIT(A) HAS ERRED ON FACTS AND L AW BY CONFIRMING THE AO'S ORDER WHEREBY CLAIM OF DEDUCTION U/S 80IB PERTAINING TO TRANSPORT SUBSIDY I.E RS. 8 99 113/- HAS BEEN DECLI NED AS THE SUBSIDY IS NOT A PROFIT DERIVED FROM THE BUSINESS. 3. BECAUSE THE LD. CIT(A) HAS ERRED ON FACTS AND LAW B Y CONFIRMING THE AO'S ORDER WHEREBY CLAIM OF DEDUCTION U/S 80IB PERTAINING TO INTEREST ON FDR HAS BEEN DECLINED AS THE SAID INTEREST INCOM E IS NOT THE INCOME DERIVED DIRECTLY FROM THE BUSINESS ACTIVITY OF THE ASSESSEE. 4. BECAUSE THE LD. CIT(A) HAS ERRED ON FACTS AND LA W FOR HAVING NOT ASSIGNED ANY REASONING WITH REGARD TO GROUND OF APP EAL (IV) RAISED BEFORE CIT(A) SINCE THERE WAS NEVER HAVING RAISED T HE CLAIM U/S 80IB QUA THE SALE OF FIXED ASSETS. 3. THE ISSUE IN GROUND NO.1A. AND 1B. RAISED BY THE ASSESSEE IS IN ALTERNATE IN RESPECT OF CLAIM OF DEDUCTION UNDER SE CTION 80IB OF THE ACT ON EXCISE DUTY REFUND . THE ASSESSEE HAS CLAIMED T HE SAID RECEIPT TO BE IN DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY AND HENCE ALLOWABLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ALTER NATE PLEA OF THE ASSESSEE WAS THAT THE SAID RECEIPT IS A CAPITAL REC EIPT AND NOT LIABLE TO BE TAXED UNDER THE PROVISIONS OF THE ACT IN ACCORDANCE WITH THE INDUSTRIAL POLICY INTRODUCED IN THE STATE OF JAMMU & KASHMIR. WE FIND THAT THE ISSUE RAISED BY GROUND NO.1B. IS COVERED BY THE ORD ER OF THE TRIBUNAL IN THE CASE OF SHIVALIK AGRO CHEMICALS VS. ADDL.CIT IN ITA NO.968/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08 . THE TRIBUNAL VIDE ORDER DATED 20.12.2011 VIDE PARAS 15 TO 17 HAD REFERRED TO THE RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN SHREE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 AND OTH ERS DATE OF DECISION 31.1.2011 HELD THE RECEIPTS TO BE CAPITAL RECEIPTS IN THE HANDS OF THE ASSESSEE. THE ALTERNATE ISSUE RAISED BY THE ASSESSEE WHETHER THE EXCISE DUTY REFUND IS DERIVED FROM THE MANUFACTURIN G ACTIVITIES WAS NOT ADJUDICATED BY THE TRIBUNAL IN VIEW THEREOF VI DE PARA 18 OF THE ORDER. THE RELEVANT PARAS OF THE ORDER OF THE TRIB UNAL ARE AS UNDER: 3 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE RAISED VIDE GROUND NO.3 BY T HE ASSESSEE WAS IN CONNECTION WITH THE ADDITION MADE B Y THE AUTHORITIES BELOW ON ACCOUNT OF EXCISE DUTY REF UND BY HOLDING THAT IT HAD NO NEXUS WITH THE MANUFACTUR ING ACTIVITIES CARRIED ON BY THE ASSESSEE AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T. THE ASSESSEE HAS RAISED AN ALTERNATE PLEA BY WAY OF ADDITIONAL GROUND OF APPEAL NO.1 WHEREIN IN VIEW OF THE RATIO LAID DOWN BY JAMMU & KASHMIR HIGH COURT IN M/ S SHREE BALAJI ALLOYS & OTHERS (SUPRA) IT IS CLAIMED THAT THE SAID EXCISE DUTY REFUND IS A CAPITAL RECEIPT AN D HENCE NOT INCLUDIBLE AS INCOME OF THE ASSESSEE. TH E ADDITIONAL GROUND OF APPEAL NO.1 BEING PURELY LEGAL IS ADMITTED FOR ADJUDICATION. 16. FIRST WE TAKE UP ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE. THE ASSESSEE HAD SET UP MANUFACTURING UNIT AND STARTED COMMERCIAL PRODUCTIO N AT SAMBA WHICH IS BACKWARD AREA OF STATE OF JAMMU & KASHMIR. THE ASSESSEE HAD CLAIMED DEDUCTION 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 UN DER SECTION 80IB OF THE ACT THE SAID DEDUCTION WAS ALL OWED BY THE ASSESSING OFFICER. HOWEVER THE ASSESSING OFFICER HELD THAT A SUM OF RS.139.80 LACS BEING EXC ISE DUTY REFUND RECEIVED BY THE ASSESSEE WAS NOT ELIGIB LE FOR THE SAID DEDUCTION UNDER SECTION 80IB OF THE AC T AS THE SAME WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING. SIMILAR ISSUE OF RECEIPT OF EXCISE DU TY REFUND AROSE BEFORE THE HON'BLE JAMMU & KASHMIR HIG H COURT IN BUNCH OF APPEALS WITH LEAD ORDER IN M/S SH REE BALAJI ALLOYS & OTHERS VS. CIT IN ITA NO.2 OF 2010 & OTHERS. THE HON'BLE COURT VIDE ORDER DATED 31.1.20 11 AFTER CONSIDERING THE SCHEME FORMULATED BY THE STAT E GOVERNMENT HAD ALSO REFERRED TO THE RATIOS LAID DOW N BY THE HON'BLE SUPREME COURT IN SAWHNEY STEEL & PRE SS 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 SCHEMES IN THE TWO CASES THE SUBSIDY IN 4 SAWHNEY STEEL & PRESS WORKS LTD. & 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 TH E LATER DECISION OF THE HON'BLE SUPREME COURT IN M/S MEPCO INDUSTRIES LTD. MADURAI VS. CIT & ANOTHER 2009 (97) SUPREME 564 WHEREIN SIMILAR PRINCIPLE HA D BEEN HELD AND IT HAS ALSO BEEN LAID DOWN THAT THE NATURE OF THE SUBSIDY IN EACH OF THE CASES WAS SEPA RATE AND DISTINGUISHED. IT WAS FURTHER HELD THAT THERE IS NO STRAIGHT JACKET PRINCIPLE OF DISTINGUISHING A CAPIT AL RECEIPT FROM A REVENUE RECEIPT. 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 TES T. ON CONSIDERING THE NEW INDUSTRIAL POLICY FORMULATED IN THE STATE OF JAMMU & KASHMIR AND THE OBJECT BEHIND THE FORMULATION OF SUCH POLICY BY THE CENTRAL GOVERNMENT THE COURT HELD THAT THE FINDING OF THE TRIBUNAL THAT EXCISE DUTY REFUND INTEREST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES HENCE REVENUE RECEIPTS CANNOT BE SUSTAINED BEING AGAINST THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN SAWHNEY STEEL & PRESS WORKS LTD. & OTHERS (SUPRA) AND PONNI SUGARS & CHEMICALS LTD. (SUPRA). THE COU RT THUS HELD THAT THE SAID INCENTIVES WERE CAPITAL REC EIPTS 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 WAS CONSIDERED AT LENGTH BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN M/S SHREE BALAJI ALLOYS & OTHERS (SUPRA). FOLLOWING THE ABOV E SAID RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT WE HOLD THAT THE EXCISE DUTY REFUND OF RS.139.80 LACS WAS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE AND WAS NOT TO BE INCLUDED AS INCOME OF TH E ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN V IEW THEREOF WE ALLOW ADDITIONAL GROUND OF APPEAL NO.1. RAISED BY THE ASSESSEE. 5 18. AS WE HAVE HELD THE SAID RECEIPTS TO BE CAPITAL IN NATURE AND HENCE OUTSIDE THE PURVIEW OF TAX WE ARE NOT ADDRESSING THE ISSUE RAISED VIDE GROUND NO.3 BY THE ASSESSEE AS TO WHETHER THE SAID EXCISE DUTY REFUND IS DERIVED FROM THE MANUFACTURING ACTIVITIES CARRIED O N BY THE ASSESSEE AND HENCE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. GROUND NO.3 RAISED BY THE ASSESSEE IS THUS DISMISSED IN LIMINE. 4. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO T HE FACTS BEFORE THE TRIBUNAL IN SHIVALIK AGRO CHEMICALS VS. ADDL.CIT (S UPRA). FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JAMMU & KASHMIR HIGH COURT IN SHREE BALAJI ALLOYS & OTHERS VS. CIT (SUPRA) WE AL LOW GROUND NO.1B. RAISED BY THE ASSESSEE AND DISMISS GROUND NO.1A. RA ISED BY THE ASSESSEE. 5. GROUND NOS. 2 AND 3 ARE AGAINST THE COMPUTATION OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN RELATION TO TRANSP ORT SUBSIDY AND INTEREST ON BANK FDRS. 6. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE STAND COVERED AGAINST THE ASSESSEE BY THE RATIO LA ID DOWN BY THE HON'BLE SUPREME COURT IN LIBERTY INDIA [28 DTR 73(SC)]. 7. FOLLOWING THE SAID RATIO WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN NOT ALLOWING THE AFORESAID DEDUCTION UNDER SECTI ON 80IB OF THE ACT ON TRANSPORT SUBSIDY AND INTEREST ON FDRS AND DISMISS GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE. 8. THE ASSESSEE VIDE GROUND NO.4 HAS RAISED THE ISS UE THAT THERE WAS NO MERIT IN THE ORDER OF THE AUTHORITIES BELOW IN N OT ALLOWING THE CLAIM UNDER SECTION 80IB OF THE ACT ON PROFITS FROM SALE OF FIXED ASSET. THE PLEA OF THE ASSESSEE WAS THAT IT HAD NEVER CLAIMED THE AFORESAID DEDUCTION IN ITS RETURN OF INCOME. 9. WE FIND THAT NECESSARY DETAILS IN THIS REGARD AR E NOT AVAILABLE FROM THE PERUSAL OF THE RECORD. IN ORDER TO MEET THE EN DS OF JUSTICE WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF THE A SSESSING OFFICER TO VERIFY 6 THE CLAIM OF THE ASSESSEE AND IN THE ABSENCE OF ANY CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT THERE IS NO MERIT IN RECOMPUTING THE SAID DEDUCTION UNDER SECTION 80IB OF THE ACT. GROUND NO .4 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 27 TH JULY 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH