TMI Blog2020 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... R O.P. KANT, A.M.: These appeals have been preferred by Revenue, against the consolidated order dated 15/07/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-30, New Delhi [in short the Ld. CIT(A) ]for assessment years 2012-13 and 2013-14, involving a common issue in dispute in same set of circumstances and therefore, these appeals were heard together and dispose off by way of this consolidated order for the sake of convenience. 2. For the sake of brevity, the grounds of appeal raised in ITA No.5129/Del/2016 for assessment year 2012-13 are as under: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in directing the AO to delete addition of ₹ 5,58,42,712/- made 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the demerged company). The year wise amount spent in the case of the assessee company is given as under: (in Rs) Particulars Up to 31.3.2010 F.Y.2010-11 Upto 31.3.2011 Plant Machinery 59,74,32,116 - 59,74,32,116 Civil Works 18,57,80,476 - 18,57,80,476 Total 78,32,12,592 - 78,32,12,592 As per the scheme of demerger, all the assets and liabilities, have been vested in the resultant/ assessee Company. Further, all the incentives, subsidies and other benefits enjoyed like excise duty, income tax concession and exemptions, incentives granted by Central and State Govts., local authority or by another person, whether availed/ available to the erstwhile unit of 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 Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment proceedings and has also submitted that the excise duty refund is a revenue receipt, which has been credited to the P L Account. The nature of the excise duty refund received is like a benefit of cash assistance, arising from business and therefore, same will form part of profits and gains from business. Accordingly, it is submitted by the AR that in view of the fact that the excise duty refund is a revenue receipt and therefore, same cannot be further reduced from the block of assets, for determining depreciation on the reduced WDV. For the above view, the AR has also relied upon the judgment of the Apex Court in the case of Commissioner of Income Tax vs. Meghalaya Steels Ltd. [2016] 383 ITR 217, wherein it has been held that the subsidy forming part of P L Account, being revenue in nature, has to be treated as derived from business or an industrial undertaking and will form part of business income, on which deduction u/s 80IB/ 80IC, 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 Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays credited to the P L Account and therefore, it was always treated as revenue receipt in the books of account from A.Y. 2007-08 onwards. However, the appellant did not make submission before the A.O. as well as before Ld. CIT(A), regarding nature of excise duty refund. However, the submissions now made on account of nature of excise duty refund and decision of Apex court in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC), was not available earlier. Therefore, it is submitted that now the ratio led down by the Hon'ble Supreme Court, is equally applicable to the facts of the appellant, since the excise duty refund is a revenue receipt, forming part of profits and gains, arising from business. Therefore, as per AR, this excise duty refund has already suffered tax. On identical facts, as to whether excise duty refunds are revenue receipt or capital receipt, the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy while working out the depreciation allowance. From the above, following facts emerged: The excise duty refund is given to the appellant on account of the manufacturing activities carried out in the notified area, upon fulfillment of certain conditions; and The Excise duty refund, is derived from the manufacturing activities and purchasing the assets from this excise duty refund on fulfillment of certain conditions, is nothing, but application of profits, The excise duty refund is of the nature of revenue receipt, forming part of Profits and Gains, arising from business. The same is a revenue receipt, as has been held by Hon'ble Supreme Court, in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC) and therefore, this excise refund, being a revenue receipt, cannot be reduced from the cost of Plant Machinery. 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 opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same which was to be demerged company and thereby recomputed the claim of deprecation u/s 32 (1) of the Act by reducing the actual cost of asset by ₹ 78,32,12,592/-. 8. Ld. AR for the assessee by relying upon CBDT Circular No. 37/2016 dated 02.11.2016 contended that benefit of deduction u/s 80IC is admissible on profits enhanced by disallowance made u/s 32 of the Act which makes the claim of depreciation as revenue neutral and further contended that the assessee is entitled to claim benefit of statutory deductions u/s 80IC on additional income arising from disallowance of claim of depreciation. 9. On the other hand, Id. DR also by relying upon Explanation 7 10 to section 43 (1) contended that the actual cost of resulting company shall also be nil and as such, actual cost of asset is to be reduced by the amount of ₹ 78,32,12,592/-. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the disallowance made u/s 32 of the Act and in these circumstances, the claim of depreciation is revenue neutral. 13. So far as question of treating the refund of excise duty as part of the cost is concerned, it is the case of the assessee that the entire cost has been paid by the assessee for plant machinery and as such, it cannot be reduced from the cost of asset. Ld. AR for the assessee relied upon order passed by CIT (A) datedl5.07.2016 in assessee s own case for AYs 2012-13 2013-14 where in excise duty refund has not been treated in the form of capital subsidy or grant which can be reduced from the cost of assets. 14. Since findings returned by the Id. CIT (A) are based upon the decision rendered by Hon ble Apex Court in CIT vs. Meghalaya Steels Ltd. - (2016) 383 1TR 217 (SC), we are of the considered view that 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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