M/S. Brahmaputra Carbon Ltd. Kolkata & Anr v. Additional Commissioner Of Income Tax, Range-3, Kolkata & Ors

IN THE HIGH COURT AT CALCUTTASPECIAL 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. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 27[th] FEBRUARY, 2023 Appearance :Mr. Subhas Agarwal, Adv.…for appellantMr. Soumen Bhattacharjee, Adv.…for respondent The Court :- This appeal filed by the assessee under Section 260A of the IncomeTax Act, 1961 (the Act) is directed against the order dated 18.4.2012 passed by theIncome Tax Appellate Tribunal, “A” Bench, Kolkata in I.T.A. No. 282/Kol/2010 for theassessment year 2005-06. The appeal was admitted on 30.11.2012 on the followingsubstantial question of law :- i)“Whether the transport subsidy received by the undertaking engaged inmanufacturing process is covered by the meaning of the expression“business income” within the meaning of Section 80 IC of the Income TaxAct, 1961 ?”manufacturing process is covered by the meaning of the expression“business income” within the meaning of Section 80 IC of the Income TaxAct, 1961 ?” The substantial question of law which has been admitted for consideration arisein the assessee’s own case for the assessment year 2011-12 in I.T.A. No. 140 of 2019and 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 thisappeal stood answered in favour of the assessee in assessee’s own case in ITA No. 140of 2019. The operation portion of the judgment reads as follows :- “The short issue involved in this issue is whether the refund of exciseduty obtained by the respondent/assessee could have been treated asprofit from business and the assessee could have been granted the benefitof deduction under section 80IC of the Act. We find that identical issuewas decided by the High Court of Gauhati in the case of Commissioner ofIncome-tax vs. Meghalaya Steels Ltd., 332 ITR 91 (Gauhati). The operativeportion of the decision reads as follows :- “18. Insofar as the second question is concerned, the Central excise dutyrefund claimed by the assessee is on the basis of an exemption notificationissued 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 ofthese notifications, a manufacturer is required to first pay the Central exciseduty and thereafter claimed a refund on fulfilment of certain conditions. In thenext month, after verification of the claim, the Central excise duty so depositedis refunded to the assessee if the conditions laid down in the notifications arefulfilled. In the present case, there is no dispute that the assessee was entitledto the Central excise duty refund. 19. The Central Board of Excise and Customs in its circular dated 19-12-2002clarified that the refund is not on account of excess payment of excise duty butis basically designed to give effect to the exemption and to operationalise theexemption given by the notifications. In that sense, the Central excise dutyrefund does not appear to bear the character of income since what is refundedto the assessee is the amount paid under the modalities provided by theDepartment of revenue for giving effect to the exemption notifications. There isalso nothing to suggest that the assessee has recovered or passed on theexcise duty element to its customers. 19. The Central Board of Excise and Customs in its circular dated 19-12-2002clarified that the refund is not on account of excess payment of excise duty butis basically designed to give effect to the exemption and to operationalise theexemption given by the notifications. In that sense, the Central excise dutyrefund does not appear to bear the character of income since what is refundedto the assessee is the amount paid under the modalities provided by theDepartment of revenue for giving effect to the exemption notifications. There isalso nothing to suggest that the assessee has recovered or passed on theexcise duty element to its customers. 20. Even assuming the refund does amount to income in the hands of theassessee, it is a profit or gain directly derived by the assessee from itsindustrial activity. The payment of Central excise duty has a direct nexus withthe manufacturing activity and similarly, the refund of the Central excise dutyalso has a direct nexus with the manufacturing activity. The issue of paymentof Central excise duty would not arise in the absence of any industrial activity.There is, therefore, an inextricable link between the manufacturing activity, thepayment of Central excise duty and its refund. In the circumstances, we are ofthe opinion that question No. 2 must be answered in the affirmative in favour ofthe assessee and against the revenue.” Identical view was taken by the High Court of Jammu & Kashmir inITA 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 introducedthereto with para No. 3 appearing in the Central Excise Notification Nos. 56 and 57of November 11, 2002, thus, makes it amply clear that the acceleration ofdevelopment of industries in the State was contemplated with the object ofgeneration of employment in the State of Jammu and Kashmir and the generationof employment, so contemplated, was not only casual or temporary; but was on theother hand, of permanent nature. 25) Considered thus, the paramount consideration of the Central Government inproviding the incentives to the New Industrial Units and Substantial Expansion ofthe existing units, was the generation of employment through acceleration ofindustrial development, to deal with the social problem of unemployment in theState, additionally creating opportunities for self employment, hence a purpose inPublic Interest. 30) For all what has been said above, the finding of the Tribunal on the first issuethat the Excise Duty Refund, Interest Subsidy and Insurance Subsidy wereProduction Incentives, hence Revenue Receipt, cannot be sustained, being againstthe law laid down by Hon’ble Supreme Court of India in Sahney Steel and PonniSugars cases (supra).” The appeal filed by the revenue against the decision in the case ofShree Balaji Alloys in Civil Appeal No. 10061 of 2011 was dismissed by theHon’ble Supreme Court by order dated April 19, 2016. The order reads asfollows :- “Heard Mr. K. Radhakrishnan, learned senior counsel appearing for the Revenue as well as Mr. Ajay Vohra, learned senior counsel appearing for therespondents. The issue raised in these appeals is covered against the Revenue by the decision ofthis Court in “Commissioner of Income Tax, Madras Vs. Ponni Sugars andChemicals 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) 3SCALE 192. The appeals are, therefore, dismissed. No costs.” As against the order passed in the case of Meghalaya Steels Ltd., therevenue had preferred appeal before the Hon’ble Supreme Court inCommissioner 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 theaforementioned decisions, we are inclined to apply the same to the case onhand. The issue raised in these appeals is covered against the Revenue by the decision ofthis Court in “Commissioner of Income Tax, Madras Vs. Ponni Sugars andChemicals 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) 3SCALE 192. The appeals are, therefore, dismissed. No costs.” As against the order passed in the case of Meghalaya Steels Ltd., therevenue had preferred appeal before the Hon’ble Supreme Court inCommissioner 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 theaforementioned decisions, we are inclined to apply the same to the case onhand. In light of the above, the appeal filed by the revenue is dismissed and thesubstantial question of law is answered against the revenue.” Thus following the above decision in the assessee’s own case the appeal of theassessee is allowed and the substantial question of law is answered in favour of theassessee. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)