2016 (4) TMI 389 - AT - Income Tax

Non-booking of excise duty refund as revenue in its profit and loss account - Held that - Assessee collected Central Excise Duty in respect of the unit eligible for deduction under section 80IB of the Act, in the sale bills issued to the customers and subsequently paid to the Central Government, however, same payment was not claimed in the profit and loss account as expenses as the assessee was eligible for refund of the said duty from the Central Excise Department, after verification of the payments in accordance to the notification issued. Since the assessee was to be refunded the central excise duty collected from the customers, which has already been credited by the assessee in the sales and therefore the assessee was not required to again credit the refund due from the Central Excise Department. In our considered opinion, the accounting entries made by the assessee in respect of excise duty refund are in order and there is no infirmity in the finding of the ld. Commissioner of Income-tax(Appeals) on the issue in dispute - Decided against revenue Deduction under section 80IB in respect of central excise duty refund - Held that - Excise duty was part of the sale receipt and thus derived from the business of manufacturing activity. Deduction under section 80IB in respect of central excise duty refund allowed. See CIT versus Dharmpal Premchand Ltd 2008 (11) TMI 231 - DELHI HIGH COURT - Decided against revenue Higher deduction claimed by the assessee under section 80-IB of the Act in respect of the sales made to its sister concern - CIT(A) allowed the claim - Held that - The sale price per unit paid to the assessee by the sister concern M/s MAPL is lower than the sale price per unit paid to the other suppliers. This fact has not been controverted by the Ld. DR. In such circumstances it cannot be said that profits have been diverted to the assessee from its sister concern . We find that order of the learned Commissioner of Income-tax(Appeals) on the issue in dispute is well reasoned and no interference on our part is required - Decided against revenue

Summary

Issues Involved:
1. Non-booking of excise duty refund as revenue in the profit and loss account.
2. Eligibility of central excise duty refund for deduction under section 80IB of the Income-tax Act, 1961.
3. Higher deduction claimed under section 80IB due to sales to a sister concern.

Issue-Wise Analysis:

1. Non-booking of excise duty refund as revenue in the profit and loss account:
The Revenue contended that the assessee did not book the excise duty refund as revenue in its profit and loss account, which led to an erroneous deletion of an addition of ?10,18,41,937/-. The assessee argued that the excise duty collected from customers was included in sales and paid to the Central Government but not claimed as expenses, thus the refund was not required to be credited again. The Tribunal upheld the Commissioner of Income-tax(Appeals)' decision, stating that the accounting entries made by the assessee were in order and there was no need to add the excise duty element again to the assessed income.

2. Eligibility of central excise duty refund for deduction under section 80IB:
The Revenue argued that the excise duty refund was an incentive and not part of the profit derived from the industrial undertaking, citing the Supreme Court's decision in Liberty India versus CIT. The assessee contended that the excise duty refund was part of the sale receipt and directly derived from the manufacturing activity. The Tribunal referred to the jurisdictional High Court's decision in CIT versus Dharmpal Premchand Ltd, which was upheld by the Supreme Court in Meghalya Steels Ltd, concluding that the excise duty refund is part of the profit derived from the industrial undertaking and eligible for deduction under section 80IB.

3. Higher deduction claimed under section 80IB due to sales to a sister concern:
The Revenue claimed that the assessee showed higher net profit by making all sales to its sister concern, Mentha & Allied Products Ltd., and thus claimed a higher deduction under section 80IB. The assessee argued that the sale prices to the sister concern were lower or similar to those charged to other customers. The Tribunal found that the sale prices to the sister concern were indeed lower than those to other suppliers, indicating no profit diversion. The Tribunal upheld the Commissioner of Income-tax(Appeals)' decision, dismissing the Revenue's ground.

Separate Judgments Delivered:
- ITA No. 5063/Del/2011 for 2008-09: The appeal of the Revenue was dismissed on all grounds.
- ITA No. 6172/Del/2012 for 2009-10: The appeal of the assessee was allowed, granting the deduction under section 80IB for the excise duty refund.

Conclusion:
The Tribunal dismissed the Revenue's appeal for the assessment year 2008-09, upholding the Commissioner of Income-tax(Appeals)' findings on all issues. For the assessment year 2009-10, the Tribunal allowed the assessee's appeal, affirming that the excise duty refund qualifies for deduction under section 80IB.