2016 (5) TMI 1368 - AT - Income Tax

Excise Duty refund received - whether the receipt constituted as capital receipt not liable to tax - Held that - The issue is covered in favour of the assessee by order of ITAT Chandigarh Bench in the case of the same assessee for preceding assessment year 2009-10 in which the CIT(Appeals) deleted similar addition also confirmed by ITAT 2016 (5) TMI 929 - ITAT CHANDIGARH as held the central excise duty refund does not appear to bear the character of income since what is refunded to the assessee is the amount paid under the modalities provided by the Department of Revenue for giving effect to the exemption notifications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its customers. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is therefore an inextricable link between the manufacturing activity the payment of central excise duty and its refund. - Decided in favour of the assessee. Addition on account of rebate and discount relates to purchase of material which was shown on the credit side of the Profit & Loss Account - eligible for deduction under section 80IB - Held that - CIT(Appeals) correctly found that impugned rebate and discount relates to purchase of material. The assessee has not deducted this amount from the purchases but has shown it separately on credit side of the Profit & Loss Account. Similarly disallowance made under section 80IB of the Act on rebate and discount was allowed by the ld. CIT(Appeals) in the case of sister concern of the assessee M/s Industrial Equipment Co. in assessment year 2006-07 and therefore following the order of his predecessor ld. CIT(Appeals) correctly allowed this ground of appeal of the assessee.

Summary

Issues:
1. Excise Duty refund treated as capital receipt not liable to tax.
2. Addition of rebate and discount under section 80IB of the Income Tax Act.

Excise Duty Refund Issue:
The appeal by Revenue challenged the order of CIT(Appeals) regarding the Excise Duty refund of &8377; 1,39,00,952 received by the assessee, contending it constituted a capital receipt not taxable. The assessee claimed deduction under section 80IB on Excise Duty received, which was disallowed by the Assessing Officer. The CIT(Appeals) allowed the deduction based on a previous ITAT Chandigarh Bench decision. The Tribunal referred to a Gauhati High Court judgment supporting the assessee's position. The Tribunal dismissed the appeal, citing the precedent set by the Gauhati High Court and the Supreme Court's judgment on a related matter. The Tribunal upheld the order in favor of the assessee based on the previous decision for the assessment year 2009-10.

Rebate and Discount Issue:
The Revenue challenged the CIT(Appeals) order on the addition of &8377; 37,66,509 under section 80IB for rebate and discount related to material purchases. The Assessing Officer disallowed the deduction, arguing it was not the assessee's business to earn rebates and discounts. The CIT(Appeals) allowed the deduction, noting that the rebate and discount were related to material purchases and were separately shown in the accounts. The Tribunal referenced a previous decision involving a sister concern of the assessee and upheld the CIT(Appeals) order. The Tribunal found the issue covered in favor of the assessee based on the previous ITAT Chandigarh Bench decision. Consequently, the Tribunal dismissed the departmental appeal on this ground.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, upholding the CIT(Appeals) orders based on previous decisions and legal interpretations. The judgments relied on precedent and legal interpretations to determine the tax treatment of Excise Duty refunds and deductions for rebates and discounts related to material purchases under section 80IB of the Income Tax Act.