Calcutta High Court
M/S. Brahmaputra Carbon Ltd. ... vs Additional Commissioner Of ... on 27 February, 2023
O-123
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITA/134/2012
M/s. BRAHMAPUTRA CARBON LTD. KOLKATA & ANR.
VS.
ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-3, KOLKATA & ORS.
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
Date : 27th FEBRUARY, 2023
Appearance :
Mr. Subhas Agarwal, Adv.
...for appellant
Mr. Soumen Bhattacharjee, Adv.
...for respondent
The Court :- This appeal filed by the assessee under Section 260A of the Income
Tax Act, 1961 (the Act) is directed against the order dated 18.4.2012 passed by the
Income Tax Appellate Tribunal, "A" Bench, Kolkata in I.T.A. No. 282/Kol/2010 for the
assessment year 2005-06. The appeal was admitted on 30.11.2012 on the following
substantial question of law :-
i) "Whether the transport subsidy received by the undertaking engaged in
manufacturing process is covered by the meaning of the expression
"business income" within the meaning of Section 80 IC of the Income Tax
Act, 1961 ?"
The substantial question of law which has been admitted for consideration arise
in the assessee's own case for the assessment year 2011-12 in I.T.A. No. 140 of 2019
and by judgment dated 26.09.2022, the appeal filed by the revenue was dismissed.
Thus the substantial question of law which has been admitted for consideration in this
appeal stood answered in favour of the assessee in assessee's own case in ITA No. 140
of 2019. The operation portion of the judgment reads as follows :-
"The short issue involved in this issue is whether the refund of excise
duty obtained by the respondent/assessee could have been treated as
profit from business and the assessee could have been granted the benefit
of deduction under section 80IC of the Act. We find that identical issue
was decided by the High Court of Gauhati in the case of Commissioner of
Income-tax vs. Meghalaya Steels Ltd., 332 ITR 91 (Gauhati). The operative
portion of the decision reads as follows :-
"18. Insofar as the second question is concerned, the Central excise duty
refund claimed by the assessee is on the basis of an exemption notification
issued by the Ministry of Finance (Department of revenue) being Notification No.
32 of 1999 and Notification No. 33 of 1999 both dated 8-7-1999. In terms of
these notifications, a manufacturer is required to first pay the Central excise
duty and thereafter claimed 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 Central excise duty refund.
19. The Central Board of Excise and Customs in its circular dated 19-12-2002
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.
20. 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 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 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."
Identical view was taken by the High Court of Jammu & Kashmir in
ITA No.2 of 2010, dated January 31, 2010 in the case of Shree Balaji
Alloys & Ors. vs. Commissioner of Income Tax & Anr., wherein it was held
as follows :-
"24) A close reading the Office Memorandum and the amendment introduced
thereto with para No. 3 appearing in the Central Excise Notification Nos. 56 and 57
of November 11, 2002, thus, makes it amply clear that the acceleration of
development of industries in the State was contemplated with the object of
generation of employment in the State of Jammu and Kashmir and the generation
of employment, so contemplated, was not only casual or temporary; but was on the
other hand, of permanent nature.
25) Considered thus, the paramount consideration of the Central Government in
providing the incentives to the New Industrial Units and Substantial Expansion of
the existing units, was the generation of employment through acceleration of
industrial development, to deal with the social problem of unemployment in the
State, additionally creating opportunities for self employment, hence a purpose in
Public Interest.
30) For all what has been said above, the finding of the Tribunal on the first issue
that the Excise Duty Refund, Interest Subsidy and Insurance Subsidy were
Production Incentives, hence Revenue Receipt, cannot be sustained, being against
the law laid down by Hon'ble Supreme Court of India in Sahney Steel and Ponni
Sugars cases (supra)."
The appeal filed by the revenue against the decision in the case of
Shree Balaji Alloys in Civil Appeal No. 10061 of 2011 was dismissed by the
Hon'ble Supreme Court by order dated April 19, 2016. The order reads as
follows :-
"Heard Mr. K. Radhakrishnan, learned senior counsel appearing for the
Revenue as well as Mr. Ajay Vohra, learned senior counsel appearing for the
respondents.
The issue raised in these appeals is covered against the Revenue by the decision of
this Court in "Commissioner of Income Tax, Madras Vs. Ponni Sugars and
Chemicals Ltd.", reported in (2008) 9 SCC 337, or in the alternate, in
"Commissioner of Income Tax Vs. M/s Meghalaya Steels Ltd.", reported in (2016) 3
SCALE 192.
The appeals are, therefore, dismissed.
No costs."
As against the order passed in the case of Meghalaya Steels Ltd., the
revenue had preferred appeal before the Hon'ble Supreme Court in
Commissioner of Income-tax vs. Meghalaya Steels Ltd., 383 ITR 217 (SC)
and the appeal filed by the revenue was dismissed.
Thus, the issue having been settled in favour of the assessee in the
aforementioned decisions, we are inclined to apply the same to the case on
hand.
In light of the above, the appeal filed by the revenue is dismissed and the
substantial question of law is answered against the revenue."
Thus following the above decision in the assessee's own case the appeal of the
assessee is allowed and the substantial question of law is answered in favour of the
assessee.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
Pkd/GH.
