2011 (6) TMI 1011 - AT - Income Tax

Summary

Issues involved:
The judgment involves the refusal of deduction under section 80IB of the Income Tax Act on Excise refund received by the assessee, and the treatment of Excise Duty refund as a revenue receipt instead of a capital receipt.

Refusal of Deduction under section 80IB:
The assessee appealed against the order of the CIT(A) which denied the deduction of &8377; 76,06,332/- under section 80IB of the Income Tax Act on Excise refund received. The grounds of appeal included arguments that Excise Duty has a direct nexus with the business of the assessee and is income derived from the business. The assessee contended that Excise Duty refund is a capital receipt and not a revenue receipt. The Tribunal admitted additional grounds raised by the assessee, citing the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. C.I.T., and decided in favor of the assessee based on the facts on record in the assessment proceedings.

Treatment of Excise Duty Refund as Capital Receipt:
The facts revealed that the assessee, engaged in manufacturing Menthol Crystals & Allied Products, received a sum of &8377; 76,06,332/- on account of Excise Duty refund during the relevant year. The Assessing Officer treated this amount as a revenue receipt, denying the claim of deduction under section 80IB. On appeal, the CIT(A) upheld the AO's decision based on a previous Tribunal order. However, the Hon'ble High Court, in a related case, held that such incentives provided for industrial development were in the nature of creating new assets for employment generation and were capital receipts, not liable to tax. Following this judgment, the Tribunal held that the Excise Duty refund received by the assessee was a capital receipt and not subject to tax under the Income Tax Act.

Conclusion:
The Tribunal allowed the appeal partly, holding that the Excise Duty refund was a capital receipt in the hands of the assessee, thereby overturning the decision of the lower authorities. Grounds not pressed were dismissed, and the appeal was allowed in part based on the judgment of the Hon'ble Jurisdictional High Court.