Incentives in the form of Excise Duty Refund and Interest Subsidy not Taxable: ITAT [Read Order]

Incentives - ITAT - Taxscan

While dismissing the appeal in ACIT versus M/s Agro Life Science Corporation, Kolkata bench of Income Tax Appellate Tribunal ( ITAT ) ruled that Incentives in the form of excise duty refund and interest subsidy not taxable.

In instant case, Assessee is a partnership firm engaged in the business of manufacturing & trading agro chemical products having its factory in the state of Jammu and Kashmir. As per the industrial policy in 2002-2005 applicable in the state of Jammu and Kashmir, Assessee received the refund of excise duty and interest subsidy which was claimed as capital receipt not chargeable to tax.

Assessee made a submission that said refund amount was meant for promoting industry in the state of Jammu and Kashmir and the subsidy amount treated as capital receipt not taxable.in order to support his contention Assessee relied on the decision of Jammu & Kashmir High Court in the case of Shree Balaji Alloys vs. CIT.

However, AO concluded that aforesaid refund is in the nature of revenue subsidy and taxable under the Act by reasoning that no capital expenditure was incurred by the assessee out of such incentive. Accordingly, the amount of excise duty refund and interest subsidy was treated by the AO as revenue receipt subject to tax.

Upon appeal before CIT (A), Assessee reiterated the submissions made before AO and in support of its claim relied on various judgments. CIT (A) deleted the addition made by AO by pressing various judgments held at Jammu & Kashmir.

Aggrieved Revenue approached this Tribunal and relied on AO’s order. The tribunal bench heard the submission and perused the various case cited by both the parties. The Tribunal in the light of Judgment in Balaji Alloys was subsequently confirmed by the Apex Court held that incentives received by the assessee in the form of excise duty refund and interest subsidy are capital in nature and accordingly not chargeable to tax.

The bench comprising of Judicial Member N.V.Vasudevan and Accountant Member Waseem Ahmed, held that the decision CIT (A) in reversing the AO’s order was right and accordingly dismissed the appeal of Revenue.

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