2016 (4) TMI 389 - AT - Income Tax

Tax Tribunal: 2008-09 Revenue appeal dismissed, 2009-10 excise duty refund qualifies for deduction

M/s. Nanda Mint & Pine Chemicals Ltd. Versus Asstt. Commissioner of Income Tax And Vica-Versa

M/s. Nanda Mint & Pine Chemicals Ltd. Versus Asstt. Commissioner of Income Tax And Vica-Versa - TMI Issues Involved:1. Non-booking of excise duty refund as revenue in the profit and loss account.2. Eligibility of central excise duty refund for deduction under section 80IB of the Income-tax Act, 1961.3. Higher deduction claimed under section 80IB due to sales to a sister concern.Issue-Wise Analysis:1. Non-booking of excise duty refund as revenue in the profit and loss account:The Revenue contended that the assessee did not book the excise duty refund as revenue in its profit and loss account, which led to an erroneous deletion of an addition of Rs. 10,18,41,937/-. The assessee argued that the excise duty collected from customers was included in sales and paid to the Central Government but not claimed as expenses, thus the refund was not required to be credited again. The Tribunal upheld the Commissioner of Income-tax(Appeals)' decision, stating that the accounting entries made by the assessee were in order and there was no need to add the excise duty element again to the assessed income.2. Eligibility of central excise duty refund for deduction under section 80IB:The Revenue argued that the excise duty refund was an incentive and not part of the profit derived from the industrial undertaking, citing the Supreme Court's decision in Liberty India versus CIT. The assessee contended that the excise duty refund was part of the sale receipt and directly derived from the manufacturing activity. The Tribunal referred to the jurisdictional High Court's decision in CIT versus Dharmpal Premchand Ltd, which was upheld by the Supreme Court in Meghalya Steels Ltd, concluding that the excise duty refund is part of the profit derived from the industrial undertaking and eligible for deduction under section 80IB.3. Higher deduction claimed under section 80IB due to sales to a sister concern:The Revenue claimed that the assessee showed higher net profit by making all sales to its sister concern, Mentha & Allied Products Ltd., and thus claimed a higher deduction under section 80IB. The assessee argued that the sale prices to the sister concern were lower or similar to those charged to other customers. The Tribunal found that the sale prices to the sister concern were indeed lower than those to other suppliers, indicating no profit diversion. The Tribunal upheld the Commissioner of Income-tax(Appeals)' decision, dismissing the Revenue's ground.Separate Judgments Delivered:- ITA No. 5063/Del/2011 for 2008-09: The appeal of the Revenue was dismissed on all grounds.- ITA No. 6172/Del/2012 for 2009-10: The appeal of the assessee was allowed, granting the deduction under section 80IB for the excise duty refund.Conclusion:The Tribunal dismissed the Revenue's appeal for the assessment year 2008-09, upholding the Commissioner of Income-tax(Appeals)' findings on all issues. For the assessment year 2009-10, the Tribunal allowed the assessee's appeal, affirming that the excise duty refund qualifies for deduction under section 80IB.