2018 (5) TMI 128 - AT - Income Tax

Nature of receipt - Excise Duty refund and interest subsidy - revenue or capital receipt - AO treated as revenue receipt subject to tax as the impugned amount was given to assessee after the commencement of commercial production - Held that - On identical facts and circumstances in the case of Shree Balaji Alloys (2011 (1) TMI 394 - Jammu and Kashmir High Court) has treated the impugned receipt as capital in nature and accordingly not chargeable to tax. The incentives received by assessee in the form of excise duty refund and interest subsidy are capital in nature and accordingly not chargeable to tax. We hold that the order of the CIT(A) is correct and in accordance with law and no interference is called for. - Decided against revenue.

Summary

Issues:
1. Treatment of excise duty refund and interest subsidy as capital receipt not chargeable to tax.

Analysis:
1. The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the treatment of excise duty refund and interest subsidy as capital receipts not subject to tax for the assessment year 2013-14.
2. The Revenue contended that the Commissioner erred in treating the amounts as capital receipts, arguing that they should be considered as taxable revenue.
3. The facts revealed that the assessee, a partnership firm engaged in manufacturing and trading agro chemical products, received the refund of excise/custom duty and interest subsidy as per the Industrial Policy applicable in the State of Jammu and Kashmir.
4. The Assessing Officer (AO) considered the incentive as a revenue subsidy, taxable under the Income Tax Act, stating that it was given for enhancing business profitability after the commencement of commercial production.
5. The assessee, relying on judgments and the nature of the incentive for promoting industry in Jammu and Kashmir, argued that the amounts were capital receipts not chargeable to tax.
6. The Commissioner (Appeals) deleted the addition made by the AO, citing judgments and the capital nature of the receipts, directing the AO to treat the excise duty refund and interest subsidy as capital receipts.
7. The Tribunal, after considering the arguments and judgments, upheld the decision of the Commissioner, concluding that the incentives received were capital in nature and not taxable, dismissing the Revenue's appeal.

This detailed analysis highlights the key arguments, legal interpretations, and decisions made in the judgment regarding the treatment of excise duty refund and interest subsidy as capital receipts not chargeable to tax.