Income Tax Appellate Tribunal - Chandigarh
Acit, Chandigarh vs Green Field Enterprises, Chandigarh on 22 November, 2016
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 266/CHD/2016
Assessment Year: 2011-12
The ACIT, Vs M/s Green Field Enterprises,
Circle 5(1), SCO 36, 1 s t Floor, Sector 26,
Chandigarh. Chandigarh.
PAN: AAGFG6666C
(Appellant) (Respondent)
Appellant by : Shri Sushil Kumar,CIT-DR
Respondent by : Shri Ajay Jain,CA
Date of Hearing : 16.11.2016
Date of Pronouncement : 22.11.2016
O R D E R
PER BHAVNESH SAINI,JM This appeal by revenue has been directed against the order of ld. CIT(Appeals)-2 Chandigarh dated 22.01.2016 for assessment year 2011-2012.
2. The effective grounds of appeal in departmental appeal are regarding deletion of addition of Rs. 1,62,11,136/- which was made by the Assessing Officer under the provisions of Section 80IB of the Income Tax Act and deletion of addition of Rs. 45,12,173/- which 2 was made by the Assessing Officer by denying the benefit of deduction claimed under section 80IB of the Income Tax Act.
3. On the first issue of disallowance of deduction under section 80IB of the Act on Excise Duty Refund of Rs. 1,62,11,136/- by treating the Excise Duty Refund as revenue receipt instead of capital receipts, it is noted in the impugned order that assessee had claimed deduction of Rs. 1.62 Cr under section 80IB of the Act on Excise Duty Refund. The Assessing Officer questioned the assessee regarding said claim and assessee had filed reply. The Assessing Officer had disallowed the claim of assessee on the ground that Excise Duty Refund is not profit derived from industrial activity by applying the ratio of decision of Hon'ble Punjab & Haryana High Court in the case of Liberty Shoes 293 ITR 478. The assessee submitted before ld. CIT(Appeals) that deduction under section 80IB of the Act is allowable on Excise Duty Refund in view of decision of ITAT Chandigarh Bench in the case of M/s Shivalik Agro Chemicals dated 20.12.2011 in ITA No. 968/CHD/2010. The ld. CIT(Appeals) noted that his predecessor, in the case of the assessee in assessment year 2009-10 vide order dated 05.11.2012 decided the issue in favour of the assessee following order of the Tribunal in the case of M/s Shivalik Agro Chemicals (supra). The Tribunal, in this case has held that Excise Duty Refund 3 is a capital receipt and so, is not to be included in the income. The ld. CIT(Appeals), accordingly, deleted the addition.
4. As regards the second issue of disallowance under section 80IB of the Act on the rebate and discount received from the suppliers of Rs. 45,12,173/-, it is noted in the impugned order that assessee had claimed deduction under section 80IB on rebate and discount amounting to Rs. 45,12,173/-. The Assessing Officer did not allow deduction on the ground that it was not the business of the assessee to earn rebate and discount. The assessee submitted before ld. CIT(Appeals) that rebate and discount received by the assessee was of material purchased which was shown separately without deducting the same from the bills. According to the assessee, the amount was deducted from the purchases and was shown separately on the credit side of the Profit & Loss Account and since the credits relate to material purchased, the assessee was entitled for deduction under section 80IB of the Act. It was also submitted that the predecessor of the ld. CIT(Appeals) has allowed deduction under section 80IB of the Act on the similar nature of rebate and discount in assessee's case for assessment year 2010-11.
5. The ld. CIT(Appeals) noted that the impugned rebate and discount relate to purchase of materials. 4 The assessee has not deducted this amount from the purchases but has shown separately in the Profit & Loss Account. Since in preceding assessment year 2010-11, ld. CIT(Appeals) has deleted the similar addition, therefore, addition was deleted.
6. The ld. counsel for the assessee, at the outset submitted that both the issues have already been considered by ITAT Chandigarh Bench in the case of the assessee for preceding assessment year 2010-11 in ITA 971/2013 dated 02.05.2016, whereby identical issue have been decided in favour of the assessee by dismissing departmental appeal. The copy of the order of the Tribunal is filed on record and supplied to the ld. DR as well. The findings in paras 4 to 11 of this order are reproduced as under :
"4. On ground No. 2, revenue challenged the order of the ld. CIT(Appeals) in holding that Excise Duty ref und of Rs. 1,39,00,952/- received by the assessee constituted a capital receipt not liable to tax.
5. The brief f acts of the issue are that assessee had cl aimed deduction of Rs. 1,39,00,952/- under section 80IB of the Act on Excise Duty received. The Assessing Off icer questioned the assessee regarding the said cl aim. The Assessing Off icer was not satisf ied with the explanation of the assessee and disallo wed deduction under section 80IB of the Act on Excise Duty received. During the course of appellate proceedings, the assessee 5 submitted that deduction under section 80IB is allo wable on Excise Duty received in vie w of the decision of ITAT Chandigarh Bench in the case of M/s Shival ik Agro Chemicals vide order dated 20.12.2011 in ITA 968/CHD/2010.
5(i) The ld. CIT(Appeals) noted that in preceding assessment year 2009-10 vide order dated 05.11.2012. Simil ar addition deleted by him by following decision of ITAT Chandigarh Bench in the case of M/s Shival ik Agro Chemicals (supra), accordingly, deleted the addition.
6. The ld. counsel f or the assessee, at the outset submitted that in preceding assessment year 2009-10, the Revenue pref erred appeal bef ore the Tribunal in ITA 147/2013 and departmental appeal on the same issue have been dismissed. Findings in para 8 to 10 of the order dated 06.04.2016 are reproduced as under :
8. We have heard the learned representatives of both the parties, perused the f indings of the authorities belo w and considered the material avail able on record.
The issue to be decided by us is whether the excise duty ref und can be treated as income derived f rom industrial activity f or the purposes of allo wing deduction under section 80IB of the Act. On perusal of the judgment of the Gauhati High Court in the case of Meghal aya Steels Ltd. (supra), we see that the same issue has been decided by the Hon'ble High Court in f avour of the assessee in f ollo wing terms :
"17. Insof ar as the second question is concerned, the central excise duty ref und claimed by the assessee is on the basis of 6 exemption notif ications issued by the Ministry of Finance (Department of Revenue) being Notif ication No. 32 of 1999 and Notif ication No. 33 of 1999, both dt. 8th July, 1999. In terms of these notif ications, a manuf acturer is required to f irst pay the central excise duty and thereaf ter claim a ref und on f ulf il ment of certain conditions. In the next month, af ter verif ication of the claim, the central excise duty so deposited is ref unded to the assessee if the conditions laid do wn in the notif ications are fulf illed. In the present case, there is no dispute that the assessee was entitled to the central excise duty ref und.
18. The Central Board of Excise and Customs in its Circular dt. 19th Dec., 2002 clarif ied that the ref und is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operational ise the exemption given by the notif ications. In that sense, the central excise duty ref und does not appear to bear the character of income since what is ref unded to the assessee is the amount paid under the modal ities provided by the Department of Revenue f or giving effect to the exemption notif ications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its customers. Even assuming the refund does amount to income in the hands of the assessee, it is a prof it or gain directly derived by the assessee f rom its industrial activity. The payment of central excise duty has a direct nexus with the manuf acturing activity and simil arly, the ref und 7 of the central excise duty also has a direct nexus with the manuf acturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, theref ore, an inextricable link between the manuf acturing activity, the payment of central excise duty and its ref und. In the circumstances, we are of the opinion that question No. 2 must be ans wered in the aff irmative, in favour of the assessee and against the Revenue. "
9. Since we observe that the issue in question bef ore the Hon'ble Gauhati High Court was exactly same, which is there in the present appeal, respectfully f ollowing the same, we dismiss the appeal of the Department."
10. Bef ore parting, we want to add that the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Meghal aya Steels Ltd. (supra), copy of which was provided to us by the learned counsel for the assessee during the course of hearing, stating that the issue of excise duty ref und has been decided in f avour of the assessee in this judgment arising out of the judgment of Gauhati High Court in the case of Meghalaya Steels Ltd. (supra). We observe that in this case bef ore the Hon'ble Apex Court, the only issue decided was in respect of the al lo wabil ity of transport subsidy, interest subsidy and po wer subsidy f or the purposes of deduction under section 80IB of the Act and not that of excise duty refund. Though no help of the said judgment can be taken in the present appeal, this also goes to sho w that the decision of the Gauhati High Court with regard to the excise duty refund has become f inal. 8
11. The appeal of the Department is dismissed."
7. On consideration of the rival submissions, we are of the vie w the issue is covered in f avour of the assessee by order of ITAT Chandigarh Bench in the case of the same assessee for preceding assessment year 2009-10 in which the ld. CIT(Appeals) deleted simil ar addition vide order dated 05.11.2012 and his order has been conf irmed by the Tribunal vide order dated 06.04.2016. Theref ore, follo wing the order of the Tribunal in the case of same assessee f or assessment year 2009-10, we dismiss this ground of appeal of the revenue.
8. On ground No. 3, revenue challenged the order of ld. CIT(Appeals) in holding that addition of Rs. 37,66,509/- on account of rebate and discount relates to purchase of material which was sho wn on the credit side of the Prof it & Loss Account and assessee is eligible f or deduction under section 80B of the Income Tax Act.
8(i) The brief f acts of the issue are that assessee had claimed deduction under section 80IB on rebate and discount amounting to Rs. 37,66,509/-. The Assessing Off icer did not allo w deduction under section 80IB of the Act on the ground that it was not the business of the assessee to earn rebate and discount. The assessee submitted bef ore ld. CIT(Appeals) that rebate and discount received by the assessee was on material purchases which was sho wn separately without deducting the same f rom the bill. According to him, amount was deducted f rom the purchases and was sho wn separately on the credit side of the Prof it & Loss Account and since credits relate to 9 material purchases, theref ore, assessee is entitled for deduction under section 80IB of the Act. It was submitted that the predecessor of ld. CIT(Appeals) has allo wed deduction under section 80IB on simil ar nature of rebate and discount in the case of sister concern of the assessee in assessment year 2005-06.
9. The ld. CIT(Appeals) f ound that impugned rebate and discount relates to purchase of material. The assessee has not deducted this amount f rom the purchases but has sho wn it separately on credit side of the Prof it & Loss Account. Simil arly, disallo wance made under section 80IB of the Act on rebate and discount was allo wed by the ld. CIT(Appeals) in the case of sister concern of the assessee M/s Industrial Equipment Co. in assessment year 2006-07 vide order dated 10.09.2007 and theref ore, follo wing the order of his predecessor, ld. CIT(Appeals) allo wed this ground of appeal of the assessee.
10. The ld. counsel f or the assessee, at the outset submitted that IT AT Chandigarh Bench in the case of M/s Industrial Equipment Co. in assessment year 2006-07 in ITA 938/09 dismissed the departmental appeal vide order dated 15.10.2009, copy of the same is placed on record. He has, theref ore, submitted that issue is covered in f avour of the assessee.
11. Af ter considering rival submissions, we are of the vie w the issue is covered in f avour of the assessee by order of ITAT Chandigarh Bench in the case of M/s Industrial Equipment Co. (supra) in which the Tribunal has conf irmed order of the ld. CIT(Appeals) dated 10.07.2009 follo wed by ld. CIT(Appeals). No inf irmity in the order of the ld. 10
CIT(Appeals) have been pointed out, theref ore, this ground of appeal of the departmental appeal has no merit. The same is, accordingly, dismissed." It is, therefore, submitted that both the issues are covered in favour of the assessee.
6(i) On the other hand, ld. DR did not dispute the order of the Tribunal dated 02.05.2016, however, he has submitted that ld. CIT(Appeals) has deleted the addition by following the decision of ITAT Chandigarh Bench in the case of M/s Shivalik Agro Chemicals (supra) on the issue of Excise Duty Refund and the Tribunal in that case has followed decision of J & K High Court in the case of M/s Shree Balaji Alloys & others. He has, therefore, submitted that said decision is distinguishable.
7. On consideration of the rival submissions, we are of the view both the issues have already bee adjudicated by ITAT Chandigarh Bench in the case of same assessee in preceding assessment year 2010-11 vide order dated 02.05.2016 in which departmental appeals have been dismissed. The order of the Tribunal dated 02.05.2016 has already been reproduced above which shows that both the issues have been decided in the light of order of the Tribunal in the case of the same assessee with regard to Excise Duty Refund. The contention of ld. DR 11 is with regard to matter decided by the Tribunal in the case of M/s Shivalik Agro Chemicals (supra) in which matter, the appeal has already been decided and such an issue cannot be taken up in the case of the assessee. Both the grounds are, therefore, covered by order of ITAT Chandigarh Bench in the case of the same assessee for preceding assessment year 2010-11 dated 02.05.2016. The departmental appeal, thus, is fully covered by this order. Following the reasons for decision for assessment year 2010-11 (supra), we dismiss the departmental appeal.
8. In the result, appeal of the revenue is dismissed.
Order pronounced in the Open Court.
Sd/- Sd/-
( ANNAPURNA GUPTA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 22nd November,2016.
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR
Assistant Registrar,
ITAT/CHD