TaxTMI 
TaxTMI 
2020 (4) TMI 86
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....de on account of disallowance of depreciation u/s 32(1) r.w.s.43(l) of the Act. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by holding that excise refund being revenue receipt cannot be reduced from the cost of plant & machinery. 3. That the order passed by Ld. CIT(A) is perverse inasmuch as it has failed to appreciate the material facts and circumstances of the case as brought on record in the assessment order. 4. The order of the C1T (A) is perverse, erroneous and is not tenable on facts and in law. 5. That the grounds of appeal are without prejudice to each other. 6. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal. 3. Briefly stated facts of the case are that the assessee company was created by way of demerger of units of M/s Dharmpal Satyapal Ltd. For assessment year 2012-13, the assessee filed return of income on 29/09/2012 declaring loss of Rs. 12,70,68,682/-. For assessment year 2013-14, the assessee filed return of income on 30/09/2013, declaring loss of Rs. 2,39,31,771-. The case ....
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....f M/s Dharampal Satyapal Ltd., shall vest with and be available to the wholly owned subsidiary resultant/ assessee company, on same terms and conditions. (ii) Based on the aforesaid observations of the Special Auditor, and in the light of provision of Section 43(1), Explanation 7A, A.O. was of the opinion that the actual cost of capital asset transferred to the appellant company, shall be taken to be same, as it would have been, if the demerged company had continued to hold the capital asset for the purpose of its own business. (iii) In the assessment order, A.O. has observed that the 'actual cost', as defined in Section 43(1) of the Act, has been stated to be 'actual cost means the actual cost of assets to the assessee as reduced by that portion of the cost thereof, as has been met directly or indirectly by any other person or authority'. In the assessment proceedings, the assessee submitted that the refund of excise duty paid on the manufacturing activities, carried out in the notified area, is to promote the industries in such area. However, A.O. was of the views that excise duty refund, has been invested in assets in the notified area and therefore, as per Exp....
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....C, is allowable. (vi) The appellant has further submitted that the grant of excise duty exemption, was accorded as per the scheme of Central Govt, vide notifications issued in this regard (Notification No. 8/2004 of Central Excise dated 02.01.2004) to the existing unit and the exemption of excise duty so granted, was to be utilized in the development of the state by setting up or by making investment in another unit in the same state or other notified state. The quantum of such excise duty collected, but not deposited with Govt., has been the part of revenue receipts duly credited in the P & L Account on year to year basis, on the sales affected by the entrepreneurs. Therefore, it is further submitted that the Special Auditor failed to appreciate the scheme of excise duty exemption notified by the Central Govt, and wrongly observed that investment in Plant & Machinery, was made out of the Govt, grant by the erstwhile company M/s Dharampal Satyapal Ltd. As per notification of the Central Govt., such excise duty payable, but is exempt in this notification, and same shall be utilized by the manufacturer, only for investment in: • P & M in a manufacturing....
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.... jurisdictional High Court in the case of CIT vs. Dharampal Premchand Ltd [2009] 317 ITR 353-Delhi H.C] has held that 'the excise refunds received by the Units are eligible for deduction u/s 80IB of the Act and such deduction is inclusive of excise benefits received by the Units'. The SLP preferred by revenue against this judgment to the Hon'ble Supreme Court, was dismissed, on the ground that refund of excise duty should not be excluded in arriving at profit derived from business for the purpose of claiming deduction u/s 80IB of the Act, as has been correctly held by the jurisdictional High Court. Therefore, the excise duty refund cannot be treated as capital receipt, in order to reduce the same from the cost of investment made in Plant & Machinery, as per section 43(1) of the Act. The AR has further submitted that the Hon'ble Supreme Court, in the above referred case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC), has also approved the decision of jurisdictional High Court in the case of CIT vs. Dharampal Premchand Ltd [2009] 317 ITR 353-Delhi H.C]. (viii) It has been further submitted by the AR that from the ratio of the aforesaid ju....
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..... From the above, it is clear that the Excise duty refund, is a revenue receipt, forming part of total taxable income and therefore, same cannot be reduced from the block of assets, in order to determine the actual cost of assets. In view of the above facts and circumstances, I am of the considered opinion that Excise duty refund, is not in the form of capital subsidy or grant, which can be reduced from the cost of assets. Therefore, I agree with the argument of the appellant and in facts and circumstances as discussed above, with due respect, I differ from the findings of Ld.CIT(A) in the earlier Assessment years on the same issue and also, in view of the ratio laid down by Flon'ble Supreme Court, in the above referred case. Accordingly, findings of the A.O. are erroneous and therefore, disallowance of Rs. 5,58,42,712/-, is deleted. Accordingly, all the grounds, are hereby allowed for A.Y. 2012-13 & A.Y. 2013-14." 3.1 Aggrieved, the Revenue is in appeal before the Tribunal. 4. At the outset, before us, the Ld. counsel of the assessee submitted that issue in dispute is covered by the order of the Tribunal in ITA No. 4990/del/2014 for assessment ....
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....e Id. DR further contended that the excise duty is reimbursement to the assessee. 10. In the backdrop of the aforesaid facts and circumstances of the case and arguments addressed by the Id. AR of the parties to the appeal, the first question arises for determination in this case is:- "as to whether the assessee is entitled to claim benefit of statutory deduction u/s 80IC of the Act on additional income arising from disallowance of claim of depreciation and that the benefit of deduction u/s 80IC is admissible on profits enhanced by the disallowance made u/s 32 or that the claim of depreciation is revenue neutral? " 11. Before proceeding further, the relevant para of Circular No.37/2016 dated 02.11.2016 issued by the CBDT, relied upon by the Id. AR for the assessee, is extracted as under:- "Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia),40A(3),43B etc., of the Act. At times disallowance out of specific expenditure clai....
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....at the excise refund is in the nature of revenue receipt forming part of profits and gains arising from the business and as such cannot be reduced from the cost of plant & machinery. So, the findings returned by Id. CIT (A) on this issue are confirmed. 14.In view of what has been discussed above, we are of the considered view that AO as well as CIT (A) have erred in making addition of Rs. 6,40,38,391/- by disallowing the claim of depreciation of the asset made u/s 32 of the Act which would further entitle to the assessee the benefit of deduction u/s 80IC on profits enhanced by such disallowances made u/s 32 of the Act. Consequently, appeal filed by the assessee is partly'' allowed. " So, respectfully following the aforesaid referred to order dated 17.09.2018 in assessee's own case, the issue under consideration is decided in assessee's favour." 7. We find that in assessment year 2011-12, in ITA No. 823/Del/2015 in the case of the assessee itself, the excise refund has been held as revenue receipt and disallowance made on account of depreciation has been deleted observing as under: "13. So far as question of treating the refund of excis....