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TMI Blog2016 (5) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961. 3. It is prayed that the order of the Ld. CIT (A) be set aside and that of the Assessing Officer may be restored. 4. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off." 3. The only issue raised by the Department in this appeal is with regard to allowability of excise duty refund of Rs. 1,54,36,258/- received by the assessee, held by the CIT (Appeals) as capital receipt not liable to tax under the provisions of Income Tax Act, 1961 (in short 'the Act'). 4. Briefly, the facts of the case are that the assessee had claimed deduction of Rs. 1,54,36,258/- under section 80IB of the Act on excise duty refund. The Assessing Officer disallowed the deduction claimed by the assessee applying the ratio of the decision of the Hon'ble Punjab & Haryana High Court in the case of Liberty Shoes Ltd. Vs. CIT, 293 ITR 478. 5. Before the learned CIT (Appeals), apart from making detailed submissions with regard to merits of the case, it was submitted that deduction under section 80IB is allowable on excise duty refund in view of the decision of the I.T.A.T., Chandigarh Bench in the case of M/s Shivalik Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim a refund on fulfilment of certain conditions. In the next month, after verification of the claim, the central excise duty so deposited is refunded to the assessee if the conditions laid down in the notifications are fulfilled. In the present case, there is no dispute that the assessee was entitled to the centralexcise duty refund. 18. The Central Board of Excise and Customs in its Circular dt. 19th Dec., 2002 clarified that the refund is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operationalise the exemption given by the notifications. In that sense, the central excise duty refund does not appear to bear the character of income since what is refunded to the assessee is the amount paid under the modalities provided by the Department of Revenue for giving effect to the exemption notifications. 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 profit or gain directly derived by the assessee from its industrial activity. The payment of central excise duty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment proceedings, the Assessing Officer noted that either very little or no expenditure has been debited under various heads of expenses by the assessee. Rejecting the book results, the Assessing Officer estimated various expenses including the wages which were estimated at Rs. 31,49,900/-. Further, it was held that the business profits of the assessee be reduced by this amount and hence, deduction under section 80IC of the Act was also reduced by the same. 16. Before the learned CIT (Appeals), the assessee submitted that the Assessing Officer has erred in comparing wages of the assessee firm with its sister concern i.e. M/s Industrial Equipment Company, Panchkula for the purposes of wages without appreciating the fact that the nature of business activity is different at M/s Industrial Equipment Company Panchkula and M/s Green Field Enterprises, Kathua. In M/s Green Field Enterprises, Kathua, large number of DG sets are produced, where in Panchkula, DG sets are not produced at all. Further, it was submitted that since the partners in the said firm are different from the assessee, the comparison of expenses on the basis of that they are in same business and claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input in comparison to M/s Industrial Equipment Company. The details of ESI and PF, etc. paid by the assessee with the returns of respective funds filed, were shown to us to emphasize the fact that there is no understatement of wages in the books of the assessee. 19. The learned D.R. relied on the order of the Assessing Officer as well as that of the learned CIT (Appeals). He opined that the estimation of wages reduced to Rs. 25 lacs is quite a reasonable estimate made by the learned CIT (Appeals). 20. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. We observe that the Assessing Officer got an impression from the books of the assessee that it is showing lesser wages and in order to quantify the understatement of wages he compared the said expenses of the assessee with that of its sister concern, M/s Industrial Equipment Company. After this exercise, the Assessing Officer estimated the wages to be 31,49,000/-. The explanation of the assessee before the Assessing Officer as well as the learned CIT (Appeals) was that the expenses on account of wages incurred by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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