Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

The D.C.I.T., Circle 5 (1) , Chandigarh, M/s Green Field Enterprises Versus M/s Green Field Enterprises, The Addl. CIT, Chandigarh

2016 (5) TMI 929 - ITAT CHANDIGARH

Allowability of excise duty refund - whether the excise duty refund can be treated as income derived from industrial activity for the purposes of allowing deduction under section 80IB ? - Held that:- As decided in Commissioner of Income-tax Versus Meghalaya Steels Ltd. [2010 (9) TMI 679 - GAUHATI HIGH COURT ] 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 ef .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unt 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 has a direct nexus with the manufacturing activity and similarly, the refund of the central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the assessee that M/s Industrial Equipment Company is more labour intensive, therefore, pays more wages and since the operation of the assessee are automated which require lesser labour, seems to be a correct explanation. Further, at the lower level, nobody pained to quantify the said difference because of the difference in the model of the business carried on by M/s Industrial Equipment Company and that of the assessee. If the Assessing Officer had to make a comparison, it is a trite law th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pplicable to it which have been complied with by it diligently, has also not been verified. Thus we direct the Assessing Officer to delete the disallowance - Decided in favour of the assessee - ITA No. 147/Chd/2013, ITA No. 146/Chd/2013 - Dated:- 6-4-2016 - Shri Bhavnesh Saini, Judicial Member And Ms. Rano Jain, Accountant Member For the Assessee : Shri T.N. Singla For the Department : Shri S.K. Mittal, DR ORDER Per Rano Jain, A. M. Both the cross appeals are directed against the order of learne .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the excise duty refund of ₹ 1,54,36,258- received by the assessee constituted a capital receipt not liable to tax under the provisions of Income-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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ana 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 Agro Chemicals in ITA No.968/Chd/2010 dated 20.12.2011. After considering the submission of the assessee, the learned CIT (Appeals) allowed the ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act. 7. The learned counsel for the assessee, apart from relying on the judgment of I.T.A.T., Chandigarh Bench in the case of M/s Shivalik Agro Chemicals (supra), relied on a number of judgments of various Benches and Tribunal and of High Courts. It was stated before us that the said issue was decided in favour of the assessee by the Amritsar Special Bench of I.T.A.T. in the case of Vinod Kumar Jain Vs. Vs. ITO, 152 TTJ 445. Heavy reliance was placed on the judgment of Gauhati High Court in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eated as income derived from industrial activity for the purposes of allowing deduction under section 80IB of the Act. On perusal of the judgment of the Gauhati High Court in the case of Meghalaya Steels Ltd. (supra), we see that the same issue has been decided by the Hon'ble High Court in favour of the assessee in following terms : "17. Insofar as the second question is concerned, the central excise duty refund claimed by the assessee is on the basis of exemption notifications issued b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t 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 asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y and similarly, the refund of the central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of central excise duty and its refund. In the circumstances, we are of the opinion that question No. 2 must be answered in the affirmative, in favour of the assessee and against the Revenue. &quo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ty refund has been decided in favour 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 before the Hon'ble Apex Court, the only issue decided was in respect of the allowability of transport subsidy, interest subsidy and power subsidy for 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 pre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aised by the assessee are as under : "2. That the learned CIT(A) has wrongly upheld the addition of ₹ 25,00,000/- on account of assumptions of less wages shown in Profit & Loss account. 3. That the learned CIT (A) has wrongly disallowed the deduction u/s 80IC on account of notional wages of ₹ 25,00,000/-." 15. Briefly, the facts are that during the assessment proceedings, the Assessing Officer noted that either very little or no expenditure has been debited under variou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er 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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ted that M/s Green Field Enterprises is more mechanized, where M/s Industrial Equipment Company is less mechanized. The nature of machinery used in both companies is different. The value of machinery as on 1.4.2008 in M/s Industrial Equipment Company was ₹ 6,43,465/- and M/s Green Field Enterprises was ₹ 83,86,189/-, which is much higher than M/s Industrial Equipment Company. It was stated that the assessee produces hi-tech generators, which is an automated industry requiring less la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpany. He was of the view that even if the factors which had been cited by the assessee are taken into consideration, the claim of wages made by it of ₹ 8,37,260/- cannot be acceptable in view of huge turnover of the assessee being more than 65 crores. However, he preferred to estimate the difference in wages at ₹ 25,00,000/-, i.e. he sustained the addition to the extent of ₹ 25,00,000/-. 18. Aggrieved by this, the assessee has come up in appeal before us. The learned counsel f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 ₹ 25 lacs is quite a reasonable estimate made by the learned CIT (Appeals .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed 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 cannot be compared with M/s Industrial Equipment Company, even if it is a sister concern, some difference on account of different business model was brought to the notice of the Assessing Officer as well as the CIT (Appeals). Without looking into this explanation of the assessee. The Assessing Officer .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version