TaxTMI 
TaxTMI 
2015 (7) TMI 784
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....he present appeal the Court has by its order dated 20th April 2015 framed the following question of law for consideration: "Whether the ITAT has rightly upheld the decision of CIT (A) allowing relief to the Assessee Company by holding that refund of excise duty amounting to Rs. 12,46,29,000/- claimed by the Assessee Company from DGFT is not income under Section 5 read with Section 28(iii)(b) of the Act in the hands of Assessee Company?" 3. At the outset question Mr. P. Roy Chaudhuri, learned Senior Standing counsel for the Revenue clarifies that the relevant provision is Section 28 (iiic) of the Act. The above question will stand corrected accordingly. 4. The background facts are that the Assessee is a joint venture of the Tata Power Com....
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....sing Officer (AO) disallowed the deduction on the ground that the Assessee was "claiming double deduction of depreciation" wherein the capitalized project cost includes depreciation as per company law as well as depreciation under the Act. This disallowance was challenged by the Assessee before the CIT (A) in Grounds 5 and 6. However, in the written submissions filed before the CIT (A), the Assessee clarified that in AY 2009-10, it had transferred the depreciation to capital work in progress and inadvertently reflected it as unabsorbed depreciation in the return filed by it. On its own, while filing the return for the subsequent AY 2010-11, the Assessee had reversed the above claim for depreciation and brought forward nil amount of deprecia....
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....t be faulted. Where there is a refund of excise duty it would go to reduce the project cost/capital work in progress since it is relatable only to the capital assets. Even for the purpose of Section 28 (iiic) of the Act, the excise duty repaid to the Assessee as drawback would have to relate to the business income of the Assessee in order to be chargeable to tax under the head of 'profits and gains of business'. In the present case, however, it relates to the cost of acquisition of a capital asset which forms part of the overall project cost incurred in the pre-commissioning phase of the project. The duty drawback would therefore to that extent reduce the project cost and therefore cannot, in the AY in question, be treated as business incom....
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....source". 11. The Court in CIT v. Bokaro Steel Ltd (supra) approved the decision of this Court in ACIT v. Indian Drugs & Pharmaceuticals Ltd [1983] 141 ITR 134 (Del). In that case, receipts from sale of tender forms and supply of water and electricity from the contractors at the stage when the construction of the factory was in progress and the production had not yet commenced were held to be "directly related to the capital structure of the business" and therefore of "capital nature". 12. The above legal position has been further reiterated in CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC), and CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392 (SC). In Ponni Sugars (supra), the Court was considering the nature of the sub....