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2018 (3) TMI 1976 - AT - Income TaxDeduction u/s 80IC - excise duty refund claiming allowance u/s 80IC - HELD THAT - Issue is covered in assessee s own case for A.Y 2005-06 2012 (4) TMI 802 - ITAT KOLKATA held that refund is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operationalise the exemption give by the notifications. 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. Even assuming the refund does amount to income in the hands of the assessee, it is a profit or gain directly derived by the assessee from its industrial activity. The payment of Central Excise duty has a direct nexus with the manufacturing activity. The issue of payment of Central Excise duty would not arise in the absence of any industrial activity. Therefore, an inextricable link between the manufacturing activity, the payment of Central Excise duty and its refund. - Decided against revenue.
Issues:
Whether the CIT(A) was justified in allowing the deduction u/s 80IC of the Act in the case involving excise duty refund. Analysis: The Appellate Tribunal ITAT Kolkata heard an appeal by the revenue against the CIT(A)'s order for the assessment year 2011-12. The main issue was whether the CIT(A) was correct in allowing the deduction u/s 80IC of the Act. The revenue relied on the AO's order, while the Assessee's representative argued that the excise duty refund should be considered for the deduction under section 80IC. The Assessee referred to a previous order in their favor for A.Y 2005-06 and cited a decision of the Hon'ble High Court of Guwahati in the case of Meghalaya Steels Ltd. The Tribunal noted that the issue was previously addressed in the Assessee's own case and reproduced relevant portions of the order. The Tribunal found that the excise duty refund was not derived from the industrial undertaking of the Assessee, as clarified by the Central Board of Excise and Customs. The Tribunal agreed with the Assessee's argument and allowed the claim for deduction u/s 80IC. The Tribunal highlighted that the Assessing Officer and CIT(A) had previously treated the excise duty refund as not eligible for deduction u/s 80IC based on a decision of the Hon'ble Calcutta High Court. However, the Tribunal found that the issue was squarely covered in favor of the Assessee by the decision of the Hon'ble Guwahati High Court in the case of CIT vs. Meghalaya Steels Ltd. The Tribunal emphasized that the excise duty refund did not bear the character of income but was a refund designed to give effect to exemptions. The Tribunal concluded that the refund was directly derived from the Assessee's industrial activity, and there was a clear link between the manufacturing activity, payment of excise duty, and its refund. Therefore, the Tribunal allowed the Assessee's claim for deduction u/s 80IC. In the final decision, the Tribunal found no error in the CIT(A)'s order and dismissed the grounds raised by the revenue. Consequently, the appeal of the revenue was dismissed, and the order was pronounced in the open court on 23rd March 2018.
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