2012 (11) TMI 845 - AT - Income Tax

Capital Receipt vs Revenue Receipt - Deduction u/s 80IB - Excise duty refund, interest subsidy and insurance subsidy Held that - Incentives provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional permanent source of employment to the unemployed in State of Jammu and Kashmir, were in fact, in the nature of creation of new assets of industrial atmosphere and environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone Order of CIT(A) in holding that the Excise Duty refund is to be treated as capital receipt in the hands of the assessee and not liable to be taxed is confirmed appeal by revenue is dismissed. Decisions in in the case of Shree Balaji Alloys v. CIT and Another 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT followed.

Summary

Issues:
Whether the CIT(A) was right in allowing relief on deduction u/s 80IB on Central Excise Duty refund by relying upon High Court orders?
Whether the CIT(A) was right in not appreciating judgments of the Supreme Court in similar cases?
Whether the CIT(A) was right in not considering the decision in Seaham Harbour Dock Company for determining trading or capital receipt?
Whether the CIT(A) was right in not applying the purpose test as laid down by the Supreme Court?
Whether the Excise Duty refund should be treated as a capital receipt and not liable to be taxed?

Analysis:
The Appellate Tribunal ITAT, Amritsar, heard ten appeals filed by the Revenue against separate orders of CIT(A), Jammu, involving common issues. The Revenue raised common grounds in all appeals regarding the deduction u/s 80IB on Central Excise Duty refund. Despite notices sent for a hearing, neither the assessees nor their representatives attended. The facts presented by the Revenue were undisputed, leading to no repetition. The issues in dispute were found in favor of the assessee based on the decision of the Jurisdictional High Court in a similar case.

The High Court discussed the industrial policy and incentives provided for the State of Jammu and Kashmir, emphasizing the objective of accelerating industrial development and generating employment. The Court referred to the purpose test laid down by the Supreme Court and concluded that the incentives were in the public interest, aimed at eradicating unemployment. The Court held that the Excise Duty refund should be treated as a capital receipt, not liable to be taxed, based on previous case law and the public interest served by the incentives.

Following the High Court's judgment, the Tribunal confirmed the CIT(A)'s decision that the Excise Duty refund is a capital receipt and not taxable. Consequently, all ten appeals filed by the Revenue were dismissed. The judgment was pronounced in open court on 1st June 2012.