2014 (1) TMI 1766 - AT - Income Tax

Excise duty refund deemed capital receipt, not income. Tribunal decision upheld.

The A.C.I.T., Circle 2 (1), Chandigarh. Versus M/s Shivalik Agro Chemicals,

The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, determining that the excise duty refund should be treated as a capital receipt and ... Deduction under section 80IB - excise duty refund - Held that:- The issue arising in the present appeal are identical to the issue before the Tribunal in earlier years and following the same parity of reasoning, we uphold the order of the CIT (Appeals) in holding that the excise duty refund was capital receipt in the hands of the assessee Issues:1. Whether excise duty refund should be treated as a capital receipt or included as income in the hands of the assessee.2. Whether the excise duty refund is eligible for deduction under section 80IB of the Income Tax Act.Analysis:Issue 1: Excise Duty Refund as Capital ReceiptThe Revenue appealed against the Commissioner of Income-tax (Appeals) order regarding the treatment of excise duty refund as a capital receipt. The Revenue contended that the excise duty refund should be included as income in the hands of the assessee. The Tribunal considered the earlier order in the assessee's case where excise duty refund was held to be a capital receipt. The Tribunal referred to the decision of the Hon'ble Jammu & Kashmir High Court in M/s Shree Balaji Alloys & Others Vs. CIT and upheld that the excise duty refund was a capital receipt and not to be included as income. The Tribunal dismissed the grounds raised by the Revenue, confirming that the excise duty refund was a capital receipt, following the same reasoning as in the earlier case.Issue 2: Eligibility for Deduction under Section 80IBThe Assessing Officer had denied the deduction under section 80IB of the Act on the excise duty refund received by the assessee, stating it had no nexus with the manufacturing process. The Tribunal, while addressing the issue of whether the excise duty refund was derived from the manufacturing activities carried out by the assessee and hence eligible for deduction under section 80IB, did not provide a specific ruling on this matter. The Tribunal focused on the nature of the excise duty refund as a capital receipt and did not delve into its eligibility for deduction under section 80IB. Therefore, the Tribunal dismissed the grounds related to this issue without detailed analysis.In conclusion, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) regarding the treatment of excise duty refund as a capital receipt, dismissing the Revenue's appeal. However, the Tribunal did not specifically address the eligibility of the excise duty refund for deduction under section 80IB of the Income Tax Act. The judgment highlighted the distinction between revenue and capital receipts based on legal precedents and upheld that the excise duty refund was a capital receipt in the hands of the assessee.