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2014 (12) TMI 220 - AT - Income TaxBenefit of deduction u/s 80IB – Excise duty refund directly related to manufacture of goods or not – Held that:- AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking - assessee has paid the excise duty on the goods manufactured and sold and as such it forms part of the sale price of assessee - payment of central excise duty is integrally connected with the manufacturing and sale of goods produced by assessee - as per the industrial policy resolution declared for the state of J&K and consequent to Central Excise Department Notification, assessee became eligible for refund of excise duty paid after set off of CENVAT credit - in sum and substance, it is only a refund of an amount already paid by assessee and reduced from the sale price while computing the profit - therefore, when assessee gets refund of an expenditure already incurred the same has to be deemed to be the profits and gains of business or profession carried on by assessee in terms of section 41(1)(a) of the Act – after excise duty refund received by assessee has to be treated as part of the business profit, hence, eligible for deduction u/s 80IB - assessee will be eligible to claim deduction u/s 80IB on the income accruing from refund of excise duty. Issue covered by the decision of SC in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] or not – Held that:- The facts are clearly distinguishable and do not apply to the facts of the present case - In case of Liberty India, the hon’ble Supreme Court was considering the profits derived from sale/transfer of DEPB/Duty Draw Back Benefits - DEPB/Duty Draw Back Benefits, is given under a scheme framed under the Customs Act and it is transferable, in other words, it is a marketable commodity - Excise duty refund by assessee in the present case is neither a marketable commodity nor transferable - It is only a refund of expenditure already incurred by assessee, hence the decision will not apply – the order of the CIT(A) is upheld – Decided against revenue. Taxability of excise duty refund – Capital receipt or not – Held that:- Assessee has not only treated excise duty refund as a revenue receipt in its books of account but has also shown it as income in the return of income filed for the AYs - This issue was never raised by assessee at the assessment stage - Though, before the FAA assessee raised this issue by way of an additional ground, but, the CIT(A) neither examined nor considered the issue by making a detailed analysis - Since for arriving at proper conclusion as to whether excise duty refund is in the nature of capital or revenue, factual aspects relating to industrial policy resolution and notification granting incentives have to be looked into, which has not been done either by AO or by CIT(A), we are not inclined to enter into this issue at this stage - the order of CIT(A) allowing assessee’s claim of deduction u/s 80I is upheld, thus, the issue becomes academic – Decided against revenue. Validity of proceedings u/s 154 – Held that:- Exercise of jurisdiction u/s 154 of the Act for withdrawing benefit u/s 80IB in respect of excise duty refund is not valid as it is a debatable issue, though, considering the fact that CIT(A)’s order granting benefit u/s 80IB to assessee is upheld – the issue becomes academic – Decided against assessee.
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