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2011 (4) TMI 90 - AT - Income TaxDeduction u/s 80IB - Refund of excise duty - addition of income and denial of deduction u/s 80IB - Held that the Notification dated 14.11.2002 exempts the amount of excise duty paid by the assessee as such excise duty per se is not leviable. In order to ensure proper control over the transactions the Notification only requires the manufacturers to first deposit the excise duty and then claim the refund of the same next month. Thus the refund is assessee s own money itself in a way security deposit which is being refunded on submission of the evidence depositing the same. Therefore in our view this is not an income at all. Therefore the A.O in our view was not justified in making a separate addition of income and thereby denying the relief eligible u/s 80.IB of the Act on that amount.
Issues Involved:
1. Assessee's claim for deduction under Section 80IB in respect of refund of excise duty. Issue-Wise Detailed Analysis: 1. Assessee's Claim for Deduction under Section 80IB in Respect of Refund of Excise Duty: The appeal centers on the assessee's claim for deduction under Section 80IB concerning the refund of excise duty. The assessee, engaged in manufacturing aluminum wire rods in Jammu & Kashmir, claimed a deduction of Rs 5,85,84,089/- under Section 80IB, which included an excise duty refund of Rs 5,68,41,800/- received during the financial year. The Assessing Officer (A.O.) disallowed this claim, referencing the Supreme Court's decision in Liberty India vs. CIT 225 CTR 233 and the ITAT, Amritsar Bench's decision in M/s Shree Balaji Alloys vs. ITO for the assessment year 2005-06. The A.O. argued that the excise duty refund did not qualify for deduction under Section 80IB based on these precedents. The assessee countered by presenting the Delhi High Court's decision in CIT vs. Dharampal Premchand Ltd. 317 ITR 353, which had been affirmed by the Supreme Court, arguing that this decision should govern the case. The assessee also submitted various documents, including the Notification No. 56/2002 of Central Excise, excise refund orders, and ledger accounts, to support their claim. The Departmental Representative (D.R.) maintained that despite the Delhi High Court's decision, the Supreme Court's ruling in Liberty India supported the departmental stand. Upon careful review, the Tribunal concluded that the Delhi High Court's decision in Dharampal Premchand Ltd. applied to the case, favoring the assessee. The High Court had established that the refund of excise duty paid by the assessee did not impact the derivation of profits and gains for the purposes of Section 80IB. The methodology employed by the assessee, which resulted in a 'nil' net effect on the profit and loss account, was deemed appropriate. The Tribunal noted that the Supreme Court had dismissed the Department's appeal against the Delhi High Court's order in Dharampal Premchand Ltd., reinforcing the view that the excise duty refund should not be considered as income and thus should be eligible for deduction under Section 80IB. The Tribunal distinguished this case from Liberty India, emphasizing that Liberty India dealt with DEPB/Duty Drawback incentives, not excise duty refunds. In conclusion, the Tribunal allowed the appeal, affirming the assessee's entitlement to the deduction under Section 80IB for the excise duty refund. The decision was pronounced in open court on 29.04.2011.
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