2013 (2) TMI 210 - HC - Income Tax

Disallowance u/s 40 (ia) - excise duty refund - Held that - As decided in M/s Shree Balaji Alloys v. CIT 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT the refund of excise duty by the assessee has to be treated as Capital Receipt in view of Section 80IB then there is no escape from the conclusion that such income would not be subjected to any tax - against revenue.

Summary

Issues Involved:
1. Appeal against order dated 27.07.2012 for assessment year 2008-09 & order dated 05.10.2012 for assessment year 2006-07.
2. Treatment of excise duty refund as Capital Receipt.
3. Disallowance under Section 40 (ia) of the Income Tax Act.

Analysis:

Issue 1: Appeal against Orders
The judgment addressed appeals under Section 260A of the Income Tax Act against orders dated 27.07.2012 and 05.10.2012 for assessment years 2008-09 and 2006-07, respectively. The Division Bench referred to a previous judgment regarding the treatment of excise duty refund as a Capital Receipt, which was held not liable to be taxed. Consequently, the appeals on this issue were deemed to be covered against the revenue and were liable to be dismissed.

Issue 2: Treatment of Excise Duty Refund
The judgment highlighted that the excise duty refund is to be considered a Capital Receipt, following a precedent set by a Division Bench in a previous case. As per Section 80IB, such income would not be subjected to any tax. The learned senior counsel did not dispute this proposition during the proceedings, further solidifying the conclusion that the excise duty refund should not be taxed.

Issue 3: Disallowance under Section 40 (ia)
The judgment also discussed disallowances made under Section 40 (ia) of the Income Tax Act. The counsel for the Revenue argued that certain amounts were not deductible under this section, including fees for technical services and various expenditures. However, the Division Bench's conclusion regarding the treatment of excise duty refund as a Capital Receipt meant that such income would not be taxable. Therefore, the appeals failed on this ground as well, leading to their dismissal.

In conclusion, the appeals were dismissed based on the treatment of the excise duty refund as a Capital Receipt and the consequent non-taxability of such income. The judgment emphasized the legal precedent set by the Division Bench and the implications it had on the taxation of specific types of income and expenditures.