PR COMMISSIONER OF INCOME TAX 1 CHANDIGARH vs. M/S SHIVALIK AGRO CHEMICAL NEELAM CINEMA COMPLEX

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ITA/265/2016HC Punjab & HaryanaPHHC01110463201626 September 2016Author: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE AVNEESH JHINGAN3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first issue concerning the excise duty refund was answered against the revenue in light of the Supreme Court's judgment dated 19.04.2016 in CIT, Jammu Vs M/s Shree Balaji Alloys. Regarding the second issue, the Court found that it did not raise a substantial question of law. The Tribunal had accepted the assessee's contention that the certificate from the District Industries Centre was not conclusive proof of production commencement. The Tribunal considered various other documents and facts, including the first sale bill being issued after 01.04.2006, the mention of AY 2007-2008 in Form 10CCB with a commencement date of 07.05.2006 which was accepted by the revenue, and low power consumption bills. The Tribunal's inference that production commenced only after 31.03.2006, supported by nil quantity manufactured in excise returns for the year ending 31.03.2006 and production indicated only in May 2006 excise returns, was found by the High Court not to be perverse or arbitrary. Therefore, the appeal was dismissed.

What were the facts?

This appeal by the revenue challenges an order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment year 2011-2012. The dispute revolves around a deduction claimed by the assessee, M/s Shivalik Agro Chemical, under Section 80IB of the Income Tax Act, 1961. The revenue's primary contention relates to an excise duty refund of Rs. 2,23,11,239/- received by the assessee, which the ITAT held to be a capital receipt not liable to tax. A secondary issue concerns the year of commencement of production for the purpose of the deduction, with the revenue arguing that Assessment Year 2006-07 should have been considered the first year, based on a certificate from the District Industries Centre, Jammu.

What were the issues?

The Tribunal had to decide two substantial questions of law raised by the revenue: 1. Whether, in the facts and circumstances, the ITAT was correct in holding that the excise duty refund of Rs. 2,23,11,239/- constituted a capital receipt not liable to tax under the Income Tax Act, 1961. 2. Whether, in the facts and circumstances, the ITAT was correct in not treating Assessment Year 2006-07 as the first year of commencement of production, when a certificate from the District Industries Centre, Jammu, indicated the commencement date as 02.03.2006. The revenue argued that the excise duty refund was a capital receipt. For the second issue, the revenue contended that the certificate from the District Industries Centre, Jammu, clearly showed the commencement of production on 02.03.2006, thus making AY 2006-07 the first year. The judgment records no specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 80IB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA-265-2016 (O&M) Date of decision:- 26.09.2016 Pr. Commissioner of Income Tax-I, Chandigarh ...Appellant Versus M/s Shivalik Agro Chemical, Neelam Cinema Complex, Sector 17-E, Chandigarh. ...Respondent CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE HON’BLE MR. JUSTICE DEEPAK SIBAL Present:- Ms. Urvashi Dhugga, Advocate, for the appellant. * * * * S.J. VAZIFDAR, C.J. (ORAL) This is an appeal against the order of the Tribunal in respect of the assessment year 2011-2012. 2. The matter relates to the deduction claimed by the assessee under Section 80IB of the Income Tax Act, 1961. 3. The revenue-appellant contends that this appeal raises the following substantial questions of law:- “(i) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is right in holding that the excise duty refund received by the assessee amounting to Rs. 2,23,11,239/- constituted capital receipt not liable to tax under the provision of Income Tax Act, 1961? (ii) Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT is right in not treating A.Y. 2006-07 as the first year of commencement of production when the certificate issued by District Industries Centre, Jammu, clearly show the date of commencement was 02.03.2006?” Amodh Sharma 2016.09.26 16:45 I attest to the accuracy and authenticity of this document chandigarh

ITA-265-2016 (O&M) 2

4.

Ms. Dhugga, learned counsel appearing on behalf of the appellant invites our attention to the judgement of the Supreme Court dated 19.04.2016 in Civil Appeal No. 10061 of 2011 titled as CIT, Jammu and another Vs M/s Shree Balaji Alloys and other connected appeals. In view of the said judgement, this issue is answered against the appellant.

5.

The second question does not raise any question of law much less a substantial question of law. The issue pertained to the year in which the respondent-assessee had commenced production. The Assessing Officer had relied upon a certificate of permanent registration with the District Industries Centre, Jammu dated 04.03.2006 in which the date of commencement of production was mentioned as 02.03.2006. The Tribunal, however, accepted the contention that this certificate did not establish that the production had commenced and in any event is not conclusive of the issue. The Tribunal referred to several other documents and facts and circumstances which established that the production had commenced only after 01.04.2006. For instance, the first sale bill was issued after 01.04.2006. The initial assessment year 2007-2008 is mentioned in form 10CCB of the assessee’s audit report and no objection had ever been raised in respect thereof. In that form, the date and year of commencement of operation was mentioned as 07.05.2006 which was accepted by the revenue. In fact, in the previous assessment year, the work had been shown as being in progress. Further, still even the power consumption bills for the six months period ending 16.03.2006 showed that only five units had been consumed. Based thereon, the Tribunal’s inference that there was no production activity till 31.03.2006 cannot be faulted. The excise returns submitted by the assessee Amodh Sharma 2016.09.26 16:45 I attest to the accuracy and authenticity of this document chandigarh

ITA-265-2016 (O&M) 3 for the year ending 31.03.2006 are of nil quantity manufactured and it was the excise returns for the month of May, 2006 that for the first time indicated the production. The Tribunal’s decision is entirely one on facts which can neither be said to be perverse or arbitrary.

6.

The appeal is, therefore, dismissed. (S.J. VAZIFDAR) CHIEF JUSTICE (DEEPAK SIBAL) JUDGE 26.09.2016 Amodh Whether speaking/reasoned Yes/No Whether reportable Yes/No Amodh Sharma 2016.09.26 16:45 I attest to the accuracy and authenticity of this document chandigarh

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