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of <h1>Appeal Allowed: Excise Refund Not Taxable as Capital Receipt</h1> <h3>Mr. Brijkishore Ramvilas Maniyar, Versus The Dy. CIT, Cir. 15 (1), Mumbai</h3> The Tribunal allowed the appeal, holding that the central excise refund is a capital receipt not liable to be taxed, following the decision of the High ... - Issues Involved:1. Whether the central excise refund is a capital receipt and not liable to be taxed.2. Whether the central excise refund is business income but not a profit and gains derived from Industrial undertaking and hence not entitled for deduction u/s 80IB.Summary:Issue 1: Central Excise Refund as Capital ReceiptThe assessee argued that the central excise refund is a capital receipt and therefore not liable to be taxed. The CIT(A) rejected this claim, referring to the Hon'ble Supreme Court decisions in Sahney Steels Press Work and Ponni Sugar & Chemicals Ltd., concluding that the refund was a revenue receipt chargeable to tax. The CIT(A) reasoned that the refund was given as an incentive for doing business in a particular area and not for setting up new industrial undertakings or purchasing machinery, thus classifying it as operational aid or additional profit.However, the Tribunal noted that the Hon'ble Jammu & Kashmir High Court, in the case of Balaji Alloys vs. JCIT & Others, held that the excise refund under the same scheme was a capital receipt. The High Court emphasized that the incentives were aimed at accelerating industrial development and generating employment in Jammu and Kashmir, thus serving a public interest and creating new assets of industrial atmosphere and environment. Consequently, the Tribunal followed this decision, holding that the excise refund is a capital receipt not chargeable to tax.Issue 2: Deduction u/s 80IBGiven the conclusion that the excise refund is a capital receipt and not taxable, the question of allowing deduction u/s 80IB on the excise duty refund did not arise for consideration.Conclusion:The appeal of the assessee was allowed, and it was held that the central excise refund is a capital receipt not chargeable to tax, thus negating the need to consider deduction u/s 80IB.Order pronounced in the open court on the 23rd day of Dec. 2011.
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