M/s J.K. Aluminium Co vs. ITO (ITAT Delhi)

DATE: (Date of pronouncement)
DATE: May 11, 2011 (Date of publication)

Click here to download the judgement (jk_aluminum_excise_refund_80_IB.pdf)

Despite Liberty India, Excise Refund Eligible for s. 80IB

Pursuant to a subsidy scheme of the J&K Govt, the assessee paid excise duty and later received it as refund. Deduction u/s 80-IB was claimed in respect of the refund of excise duty. The AO & CIT (A) rejected the claim by relying on Liberty India vs. CIT 317 ITR 218 (SC) where it was held that duty drawback & DEPB were not eligible for deduction u/s 80-IB. On appeal to the Tribunal, HELD allowing the appeal:

In Liberty India vs. CIT 317 ITR 218 (SC), the Court was concerned with DEPB & Duty Drawback which was an incentive and not with the refund of excise duty paid. The scheme was different. Further, in CIT vs. Dharampal Premchand 317 ITR 353, the Delhi High Court held that excise duty refund was eligible u/s 80-IB on the ground that (a) there was a direct nexus between the refund of excise duty and the undertaking and (b) if the proper accounting methodology was followed for the payment and refund of excise duty, the net effect on the P&L A/c was nil. The department’s appeal against CIT vs. Dharampal Premchand was dismissed (after consideration) by the Supreme Court. This cannot be ignored. Also, the refund of excise duty is the assessee’s own money coming back and is not income at all.

Note: Receipt under the same Excise Refund Scheme was held to be a capital receipt in M/s Shree Balaji Alloys vs. CIT (J&K High Court)

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