Income Tax Appellate Tribunal - Amritsar
Reliable Plastice., Jammu vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH: AMRITSAR.
BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND
SHRI MEHAR SINGH, ACCOUNTANT MEMBER.
I.T.A. No.108(ASR)/2010.
(Assessment year: 2002-03)
M/s.Reliable Plastics, The Income tax Officer,
Gangyal, Ward 1(3), JAMMU.
JAMMU.
(Appellant) Vs. (Respondent)
Appellant by: Shri S.K. Bansal, Adv,
Respondent by: Shri Tarsem Lal, D.R.
ORDER
Per H.L. Karwa, Vice President.
This appeal filed by the assessee is directed against the order of the CIT(A), Jammu dated 29-12-2009, relating to the assessment year 2002-03.
2. At the time of hearing of the appeal, Shri S.K. Bansal, Advocate, the learned counsel for the assessee, did not press for ground Nos.1 to 3 and 6 and, therefore, no findings are given in respect of these grounds of appeal.
3. Ground Nos.4 and 5 of the appeal read as under:-
"4. That the ld. CIT(A) has also erred in law in holding that the interest subsidy is not allowable as deduction u/s.80IB and it is liable to tax in view of the judgments of the Hon'ble Tribunal Amritsar Bench mentioned in the order under appeal, the appellant in this respect with respect submits that when the Hon'ble Tribunal decided the cases referred to in the appellate order. The Hon'ble Tribunal did not have before it the judgment of Supreme Court CIT Madras Vs. Poni Sugar and Chemicals Ltd. 2008) 306 ITR 392 (SC). The appellant 2 submits that in view of Ponni Sugar Mills case the deductionu/s.80IB to interest subsidy cannot be denied.
5. That in addition and without prejudice to ground No.4 it is submitted that interest subsidy is given when the unit increases its production, the interest subsidy therefore is capital in nature and no tax can be imposed on it."
4. Briefly stated, the facts of the case are that the assessee has received interest subsidy of Rs.88,773/- during the year. The A.O. held that since the interest subsidy is a form of receipt and a taxable entity, the same is to be subjected to tax. He, therefore, taxed the same.
5. On appeal, the CIT(A) confirmed the order of the A.O., observing as under:-
"3. From ground Nos.3 and 4, the appellant has contested Assessing Officer's finding of treating interest subsidy as taxable. The Assessing Officer has given detailed reasons for treating such subsidy as taxable. The issue happens to be covered against the appellant vide Hon'ble ITAT, Amritsar Bench's decision in the case of M/s.Kashmir Tubes Vs. ITO in ITA No.145(ASR)/2005 on 7-12-2007. This issue has again come under the consideration of jurisdictional ITAT in the case of M/s.Shree Balaji Alloys, Kathua Vs. ITO, Kathua in their ITA No.255(ASR)/2009 for assessment year 2005-06 dated 26-11-2009. As the facts and circumstances and issues of the appellant are identical and similar with the issues involved in the above jurisdictional ITAT's decision, therefore, grounds of appeal are dismissed and Assessing Officer's finding is confirmed."
6. We have heard the rival submissions and have also perused the material available on record. It is seen that while deciding the issue the CIT(A) had followed the decision of this Bench of the Tribunal in the case of M/s.Shree Balaji Alloys, Kathua Vs. ITO, Kathua in ITA No.255(ASR)/2009 for the assessment year 2005-06 dated 26-11-2009. The 3 order of the Tribunal in the case of M/s.Shree Balaji Alloys, Kathua was challenged by the assessee (M/s.Shree Balji Alloys, Kathua) before the Hon'ble jurisdictional High Court. In our view, the issue raised in this appeal is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon'ble jurisdictional J & K High Court in the case of M/s. Shree Balaji Alloys, Kathua (2011) 333 ITR 335 (J&K). The issue before the Hon'ble High Court was as under:-
"Whether the amount of excise refund and interest subsidy received by the appellants-assesses, in pursuance of the incentives announced and sanctioned vide Government of India, Ministry of Commerce and Industry (Department of Industrial Policy and Promotion)'s Office Memorandum No.1(13)2000- NER dated June 4, 2002 and Central Excise Notification Nos.56 and 57, dated November 14,2002 and other notifications issued on the subject, pertaining to the industrial policy introduced in the State of Jammu & Kashmir, is a capital receipt and, thus, not liable to tax under the provisions of the Act, or revenue receipt, as opined by the authorities under the Act?"
7. The Hon'ble High Court decided the issue, observing as under:-
"In this view of the matter, the incentives provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional permanent source of employment to the unemployed in the State of Jammu and Kashmir, were in fact, in the nature of creation of new assets of industrial atmosphere and environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assessees alone.4
Thus, looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the public interest, the incentives provided by the office memorandum and statutory notifications issued in this behalf, to the appellants-assessees, cannot be construe as mere production and trade incentives, as held by the Tribunal.
Making of additional provision in the scheme that incentives would become available to the industrial units, entitled thereto, from the date of commencement of the commercial production, and that these were not required for creation of new assets cannot be viewed in isolation, to treat the incentives as production incentives, as held by the Tribunal, for the measure so taken, appears to have been intended to ensure that the incentives were made available only to the bona fide industrial units so that larger public interest of dealing with unemployment in the State, as intended, in terms of the Office Memorandum, was achieved.
The other factors, which had weighed with the Tribunal in determining the incentives as production incentives may not be decisive to determine the character of the incentive subsidies, when it is found, as demonstrate in the Office Memorandum, amendment introduced thereto and the statutory notification too that the incentives were provided with the object of creating avenues for perpetual employment, to eradicate the social problem of unemployment in the State by accelerated industrial development.
For all what ha been said above, the finding of the Tribunal on the first issue that the excise duty refund, interest subsidy and insurance subsidy were production incentives, hence revenue receipt, cannot be sustained, being against the law laid down by the hon'ble Supreme Court of India in Sahney Steel case [1997] 228 ITR 253 and Ponni Sugars case [2008] 306 ITR 391.5
The finding of the Tribunal that the incentives were revenue receipt is, accordingly, set-aside holding the incentives to be capital receipts in the hands of the assessee.
In view of our above finding on the first issue, there is no need to opine on the second issue, which was raised in the alternative."
8. Respectfully following the judgment of the Hon'ble Jurisdictional J & K High Court in the case of M/s.Shree Balaji Alloys (supra), we hold that the interest subsidy received by the assessee is a capital receipt not exigible to tax. In view of the above, we allow ground Nos.4 and 5 of the assessee's appeal.
9. Ground Nos.7 and 8 of the appeal read as under:-
"7. That the ld. CIT(A) has also not been justified in confirming the demand raised on account of interest u/s.234-B of Rs.25,309/- as legally no demand on account of interest can be created against he appellant.
8. In addition and without prejudice to ground No.(7) above it I submitted that in any case interest charged u/s.234-B is excessive as it could only be charged as per sub-section (3) of section 234-B upto the date of processing of the case u/s.143(1) and not up to date of passing of order u/s.147."
9.1 After hearing the learned representatives of both parties, we restore this issue to the file of the A.O. with the direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee.
610. In the result, the appeal is allowed partly for statistical purposes.
Order pronounced in the Open Court on 14th June, 20111.
Sd/- Sd/-
(MEHAR SINGH) (H.L. KARWA)
ACCOUNTANT MEMBER. VICE PRESIDENT.
th
Dated: 14 June, 2011.
KC/-
Copy of the order forwarded to:
(1) The Assessee: M/s.Reliable Plastics, Jammu. (2) The ITO, Ward 1(3), Jammu.
(3) The CIT, Jammu.
(4) The CIT(A), Jammu.
(5) The Sr.D.R., ITAT, Asr.
True Copy By order
Asstt. Registrar,
Income tax Appellate Tribunal,
Amritsar.