2012 (12) TMI 726 - AT - Income Tax

Revenue's Appeals Dismissed, Excise Duty Refund Not Taxable, Deductions Upheld

The Tribunal dismissed all five appeals filed by the Revenue, upholding the CIT(A)'s decisions. The Excise Duty refund was confirmed as a capital receipt ... Deduction u/s 80IB - Central Excise Duty refund & Interest subsidy - Capital or revenue receipt - Held that:- Looking to the the incentives provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State 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 & by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone - Following the decision of court in case of Shree Balaji Alloys v. CIT and Another [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] the receipt of Central Excise Duty Refund and interest subsidy to be treated as a ‘Capital Receipt’ as against its treatment as ‘Revenue receipt’ by the A.O and not liable to be taxed - Decided in the favour of the assessee. Late deposit of PF and disallowance u/s 40(a)(ia) – Held that:- first appellate authority has passed a well reasoned order based on facts and materials available on record, which requires no interference at our level - ground of the Revenue dismissed. Addition on account of late deposit of EPF u/s 36 and deduction u/s 80IB – Held that:- FAA has passed a well reasoned order based on facts and materials available on record, which requires no interference following the decision of the ITAT, Amritsar Bench, in the case of M/s. Sun Pharmaceuticals [] which is squarely applicable to the facts of the issue in hand, this ground of the revenue is dismissed - this ground of the Revenue is also dismissed. Issues Involved:1. Deduction under Section 80IB on Central Excise Duty refund.2. Addition on account of late deposit of PF and disallowance under Section 40(a)(ia).3. Addition on account of late deposit of EPF under Section 36.Detailed Analysis:1. Deduction under Section 80IB on Central Excise Duty Refund:The primary issue revolves around whether the Central Excise Duty refund qualifies for deduction under Section 80IB of the Income-tax Act, 1961. The Assessing Officer (AO) denied this claim, categorizing the refund as a revenue receipt rather than a capital receipt. However, the Commissioner of Income Tax (Appeals) [CIT(A)] allowed the claim, referencing the decision of the Hon'ble Jurisdictional High Court in the case of Shree Balaji Alloys v. CIT and Another (2011) 333 ITR 335 (J&K). The High Court concluded that the Excise Duty refund should be treated as a capital receipt, not liable to tax, as it was aimed at promoting industrial development and employment in Jammu and Kashmir.The Tribunal upheld the CIT(A)'s decision, emphasizing that the incentives were meant for public interest objectives, such as eradicating unemployment and accelerating industrial development, thereby classifying them as capital receipts.2. Addition on Account of Late Deposit of PF and Disallowance under Section 40(a)(ia):The Revenue contended that the CIT(A) erred in allowing deductions under Section 80IB for additions made due to late deposit of PF contributions and disallowances under Section 40(a)(ia). The Tribunal noted that similar issues had been previously adjudicated by the ITAT Amritsar Bench in the case of M/s. Sun Pharmaceuticals, ITA No.184(Asr)/2009 for the assessment year 2005-06, dated 11.06.2010. The Tribunal found no reason to deviate from the well-reasoned order of the CIT(A), which was consistent with the precedent set by the ITAT Amritsar Bench.3. Addition on Account of Late Deposit of EPF under Section 36:The Revenue also raised concerns regarding the CIT(A)'s decision to allow deductions under Section 80IB for additions made due to late deposit of EPF under Section 36. The Tribunal referenced the same precedent from the ITAT Amritsar Bench in the case of M/s. Sun Pharmaceuticals, ITA No.184(Asr)/2009, and upheld the CIT(A)'s order. The Tribunal reaffirmed that the CIT(A) had issued a well-reasoned order based on the facts and materials available, which required no interference.Conclusion:All five appeals filed by the Revenue were dismissed by the Tribunal. The Tribunal consistently upheld the CIT(A)'s decisions, aligning with the precedent set by the Hon'ble Jurisdictional High Court and the ITAT Amritsar Bench. The Excise Duty refund was confirmed as a capital receipt, not liable to tax, and the deductions under Section 80IB for late deposits of PF and EPF, and disallowances under Section 40(a)(ia) were upheld.