2012 (12) TMI 374 - AT - Income Tax

Excise duty refund deemed capital receipt; appeals allowed. Interest charge under sec. 234-B ruled arbitrary.

The Tribunal held that the excise duty refund is to be treated as a capital receipt, allowing the appeals of both assessees. The issue of whether the ... Excise duty refund/set off - whether said amount is to be included in the business profits for the purpose of deduction u/s 80IB of the Income Tax Act - held that:- looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construed as mere production and trade incentives, as held by the Tribunal - receipt are capital receipt - Decided in the favour of the assessee. Decision in Shree Balaji Alloys v. CIT [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] followed. Issues involved:1. Whether the excise duty refund set off is a capital or revenue receipt.2. If the excise duty refund is a revenue receipt, whether it should be included in business profits for deduction under section 80IB of the Income Tax Act.3. The charging of interest under section 234-B.Analysis:1. The case involved a dispute regarding the nature of excise duty refund received by the assessee. The appellant claimed deduction under section 80IB of the Income Tax Act on the excise duty refund, which was initially disallowed by the Assessing Officer. The issue was whether the excise duty refund should be treated as a capital or revenue receipt. The appellant argued that the refund should be considered a capital receipt based on previous decisions by the Hon'ble Jammu & Kashmir High Court. The Tribunal held that the excise duty refund is to be treated as a capital receipt in the hands of the assessee, following the decision of the High Court.2. In relation to the second issue, the Hon'ble Jammu & Kashmir High Court did not opine on it due to their finding on the first issue. Since the excise duty refund was held to be of a capital nature, the Tribunal concluded that there was no need to decide the second question regarding the inclusion of the refund in business profits for deduction under section 80IB.3. Another issue raised was the charging of interest under section 234-B, which was considered arbitrary, unjust, and illegal by the appellant. Although this issue was not referred to the Special Bench initially, both parties consented to its adjudication due to its consequential nature. The Tribunal found this issue to be only consequential and decided accordingly.In conclusion, the appeals of both assessees were allowed, with the Tribunal holding that the excise duty refund is to be treated as a capital receipt. The second question was not addressed due to the nature of the excise duty refund, and the issue of interest under section 234-B was decided as consequential and held accordingly.