Excise Duty Exemption is Capital Receipt, neither chargeable to Income Tax nor categorised under Book Profit: ITAT [Read Order]

The Kolkata Bench, of the Income Tax Appellate Tribunal, held that excise duty exemption is a capital receipt which neither chargeable to Income Tax nor categorised under book profit.

The assessee ,Greenply Industries ltd engaged in the business of manufacturing and trading plywood, laminate and allied products for which they filed an e-return of income of Rs.49,12,19,250/-on 29.11.2015.  The AO observed an international transaction of Rs.195.93 crores and a domestic transactionof Rs.149.48 crores of the assessee and transferred the same to the Transfer Pricing Officer (‘TPO’) who passed the order under section 92CA of the Act by suggesting the upward adjustment of Rs.43,67,295/- for the Corporate Guarantee to Associated Enterprises (AE) and a downward adjustment in respect of the purchase of eligible unit from anon-eligible unit at Rs.4,67,33,912/-. The AO disallowed the amortization of leasehold land at Rs.18,73,242/- and made disallowance under section 14A of the Act at Rs.31,038/-. The income of the assessee was declared at Rs.54,42,24,737/- and was computed under section 115JB of the Act at Rs.3,23,17,984/-.

The assessee claimed excise duty exemption in terms of Excise Notification No. 50/2003 dated 10.06.2003, for the Manufacturing units of the appellantwhich were eligible for 100% excise duty exemption in respect of goods manufactured and cleared from such units for 10 years from the date of commencement of commercial production. The CIT(Appeals) has allowed the deduction under the normal provisions of the Act.

The assessee claimed deduction of amortisation of leasehold land expenses at Rs.18,73,242/- as per the Accounting Standard 19 as a deduction for amortisation of leasehold land and land development charges for various lands taken on lease by the assessee forthe periods up to 99 years for carrying on the business.Theassessee stated that the two units owned by the assessee are covered by the Excise Notification No. 50/2003 dated 10.06.2003 and further claimed that the excise duty and sales tax exemption are capital receipt and to be excluded in the computation of income.

The Tribunal observed that the excise duty exemption has been admittedly the capital receipt and the alleged capital receipt cannot be categorised as part of the book profit. It was observed that the excise duty exemption is a capital receipt which was not chargeable to tax under the normal provisions of the Income Tax Act and not to be included as part of the book profit for computing the minimum alternative tax as per the provisions of section 115JB of the Act.

The Tribunal viewed that the amortization of leasehold land and land development charges of Rs.18,73,242/- deserves to be allowed as an expenditure under section 37 of the Act. Revenue in cross-appeal challenged the order of CIT(Appeals) in deleting the arm’s length price adjustment of Rs.2,48,39,215/-.

Shri A.T. Varkey, Judicial Member & Shri Manish Borad, Accountant Member observed that the TPO failed to take note of the fact that the eligible units were newly established in the industrial area developed by Uttranchal Pradesh.

The Tribunal partly allowed the appeal filed by the assessee and dismissed the cross-appeal by the revenue. Shri Ashok Tulsyan appeared on behalf of the assessee and Shri Amit Kumar Pandey appeared on behalf of the Revenue.

To Read the full text of the Order CLICK HERE

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