2022 (9) TMI 653 - AT - Income Tax

Nature of receipt - excise duty and interest subsidy - Revenue or capital receipt - HELD THAT - The decision of the ld. Commissioner on the issue in hand is not only based on the peculiar facts and circumstances but also upon the judgment of Shree Balaji Alloys Ors. 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT wherein while considering the Central Excise Notifications No. 56/57 of 11.11.2002 which arepari-materiato the notifications No. 56/57 dated 14.11.2012 issued by the Central Excise Department as involved in the instant case, on the basis of which the Assessee had claimed deduction u/s. 80IB for its unit at Samba and Udhampur ( Jammu Kashmir), has clearly held that excise duty refund and interest subsidy were production incentives and capital receipts in the hands of the Assessee. The said judgement of the Hon ble High Court has also been scrutinized and approved by the Hon ble Apex Court in Shri Balaji Alloys 2016 (4) TMI 1161 - SC ORDER wherein dismissed the appeal filed by the Revenue by holding that the issue raised in these appeals is covered against the Revenue. Assessing Officer in the subsequent cases for the A.Y. 2014-15 and 2015-16, has allowed the excise duty refund and interest subsidy as capital receipts . Addition made under MAT provisions - Once the foundation lost its existence, then the building would automatically collapse. In simple meaning, once it is determined that receipt is not in the nature of income, then it cannot be considered in the book profit for the purpose of computation u/s. 115JB of the Act. As the addition in the instant case could not survive under normal provision of the Act, thus the addition under MAT provisions also will not survive, hence stands deleted. Consequently, decision of the ld. Commissioner on this issue is set aside and the appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Classification of excise duty refund and interest subsidy as 'capital receipts' or 'revenue receipts'.
2. Inclusion of excise duty refund and interest subsidy in book profit under MAT provisions.

Issue-wise Detailed Analysis:

1. Classification of Excise Duty Refund and Interest Subsidy:

The primary issue addressed was whether the excise duty refund and interest subsidy received by the Assessee should be classified as 'capital receipts' or 'revenue receipts'. The Assessee initially declared these amounts as 'revenue receipts' but later revised the return, classifying them as 'capital receipts' based on specific judgments and notifications.

The Assessing Officer (AO) rejected the revised classification, treating these amounts as 'revenue receipts' and adding them to the total income. The AO based this decision on the pending SLP before the Supreme Court against the judgment of the Jammu & Kashmir High Court in the case of Shree Balaji Alloys, which had held such receipts as 'capital in nature'.

The Commissioner of Income-tax (Appeals) [CIT(A)], however, allowed the Assessee's claim, referencing the Jammu & Kashmir High Court's decision in Shree Balaji Alloys and the Supreme Court's dismissal of the Revenue's SLP against this decision. The CIT(A) emphasized that the incentives were intended to promote industrial development and employment in Jammu & Kashmir, thus serving a public interest and qualifying as 'capital receipts'.

2. Inclusion in Book Profit under MAT Provisions:

The second issue was whether these 'capital receipts' should be included in the book profit for the purpose of Minimum Alternate Tax (MAT) under Section 115JB of the Income-tax Act. The CIT(A) upheld the AO's addition of these receipts to the book profit under MAT provisions, citing the ITAT Bangalore's decision in B&B Infotech Ltd. and the Supreme Court's decision in Apollo Tyres Ltd.

The Assessee argued that receipts not classified as income under the normal provisions of the Act should not be included in book profit under MAT provisions. The Assessee relied on various judgments, including the Kolkata High Court's decision in PCIT vs. Ankit Power Ltd., which held that non-income receipts should not be included in book profit under Section 115JB.

The Tribunal agreed with the Assessee, referencing the Kolkata High Court's decision and a similar ruling by the ITAT Delhi in SRF Limited vs. ACIT. It concluded that once a receipt is determined to be a 'capital receipt' and not taxable under normal provisions, it cannot be included in book profit under MAT provisions. The Tribunal set aside the CIT(A)'s decision on this issue, thereby deleting the addition under MAT provisions.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to classify the excise duty refund and interest subsidy as 'capital receipts', dismissing the Revenue's appeal. It also ruled in favor of the Assessee regarding the inclusion of these receipts in book profit under MAT provisions, allowing the Assessee's appeal and deleting the addition. The final judgment reflected a thorough consideration of the relevant legal precedents and the specific facts of the case.