2014 (12) TMI 220

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....isallowance whether the issue in question is covered by the Apex Court's decision in the case of Liberty India Ltd., 317 ITR 218." 3. Briefly, the facts relating to the aforesaid issue are, assessee a company is engaged in the manufacture and sale of pesticides and fertilizers. Assessee for the purpose of manufacturing pesticides has set up a unit in Jammu and Kashmir (in short J&K). Government of India declared a new industrial policy holding out various concessions and incentives for the state of J&K vide notification No. 1(13)2000-NER, dated 14/06/2002 for enabling state of J&K to develop an environment for industrial development, improving availability of capital and increase in market access to provide fillip to private investment in the State. Pursuant to the said industrial policy of Government of India various incentives like capital subsidy, interest subsidy, insurance subsidy, etc. were announced for new units to be set up in the state of J&K. As part of the overall incentives to be provided for the new units to be set up in state of J&K, excise duty subsidy was also announced by Central Excise Department vide Notification NO. 56/02-CE dated 14/11/02 on the goods manuf....

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....isallowance of deduction u/s 80IB on the excise duty refund, assessee preferred appeals before ld. CIT(A). 5. Learned CIT(A) after considering the submissions of assessee in the context of various decisions placed before her allowed assessee's claim of deduction u/s 80IB on excise duty refund. The finding of the learned CIT(A) on this issue is reproduced hereunder: 5. The appellant is engaged in the business of pesticides and fertilizers. It had set up its manufacturing unit in Jammu & Kashmir which is the backward area. As per the Government Notification No. 1(13)/2000-NER dated 14.06.2002,the assessee is entitled for refund of Excise Duty of 100% for period of 10 years. This Notification was issued by Government of India to promote industrial development, to improve availability of capital and to increase market access in the backward State of Jammu & Kashmir. The mechanics of this exemption is, the manufacturer would submit a statement of Excise Duty paid to Excise authorities by 7th of the following month in which the Excise Duty was paid. The authorities, after due verification, would refund the Excise Duty to the manufacturer by 15th of the following month. In the insta....

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....ble business, hence, eligible for deduction u/s 80IB. In support of such contention ld. AR relied upon the following decisions: 1. CIT Vs. Dharam Pal Prem Chand Ltd., 317 ITR 353 (Del.) 2. CIT Vs. Meghalaya Steels Ltd., 332 ITR 91 (Gauhati) 3. M/s J.K. Aluminium Co., ITA No. 3303/Del./2010 4. Diamond Tool Industries Vs. DCIT, ITA No. 2080/Mum/11 5. Addl. CIT Vs. Total Packaging Services, ITA No. 5346/Mum/09 8. Having considered rival submissions and perused the orders of revenue authorities as well as other materials on record and after having applied our mind to the decisions relied upon by the parties, we do not find any infirmity in the order of ld. CIT(A) in allowing benefit u/s 80IB to assessee on excise duty refund for the following reasons. 9. It is clear from the assessment order that AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking. However, as can be seen from the facts brought on record, there is no dispute that assessee has paid the excise duty on the goods manufactured and sold and as such it forms part of the sale price of assessee. Therefore, ....

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.... under the industrial policy of the State Govt. of Jammu and Kashmir for attracting/setting up of new industries in the state and increasing the employment in the state, is a capital receipt not liable to tax. 2. The learned CIT(A) has erred in not adjudicating the ground relating to excise duty rebate received by the Respondent in pursuance of notification issued under the industrial policy of the State Government of Jammu and Kashmir, for attracting/setting up of new industries in the state and increasing the employment in the state, is capital receipt and not liable to tax." 12. Grounds raised by assessee in C.O. for AY 2008-09 are as under: "1. Excise duty rebate being an incentive granted to the Respondent in the State of Jammu and Kashmir, pursuant to the notification issued under the industrial policy of the State Govt. of Jammu and Kashmir for attracting/setting up of new industries in the state and increasing the employment in the state, is a capital receipt not liable to tax. 2. The learned CIT(A) has erred in not adjudicating the ground relating to excise duty rebate received by the Respondent in pursuance of notification issued under the industrial policy of th....