The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that no income tax is payable on incentives received in form of excise duty refund, sales tax remission, sales/vat input tax refund.
The bench of Yogesh Kumar U.S. (Judicial Member) and M. Balaganesh (Accountant Member) has observed that the assessee was given incentives in the form of excise duty refund, sales tax remission, sales/ VAT input tax refund which is to be treated as capital receipts and is not chargeable to tax.
The assessee company is engaged in the business of manufacturing various types of pipes. In the wake of devastation caused by earthquake in the Kutch District of Gujarat, the Central Government, in public interest, issued Notification No.39/2001-Central Excise dated 31st July 2001.
During the year 2003, the assessee set up a pipe coating unit namely, Anti Corrosion and Concrete Weight Coating (ACCWC) at Mundra, Gujarat. Thereafter, in the year 2005, the assessee also set up another unit for pipe manufacturing namely, Integrated Pipe Unit (IPU) at Mundra, Gujarat.
The new units had been set up by the assessee in compliance with the aforesaid Notifications and the Certificate issued by the Customs and Central Excise, Ahmedabad certifying that the new units have been established during the period prescribed in the Notifications is enclosed at Page Nos. 86-87 of the Paper Book.
The assessee was eligible for composite option (Exemption & deferment of sales tax) of Incentive Scheme 2001 for economic development of Kutch district.
The assessee had offered the receipt of excise duty refund, sales tax remission and sales/ VAT input tax refund in the return of income. The assessee made a fresh claim by way of an additional ground before the CIT(A) that the receipts are to be construed as capital receipts not chargeable to tax as it was granted for the purpose of setting up all the industrial unit pursuant to devastations caused by earthquake in the Kutch District of Gujarat.
The tribunal found that the incentives claimed in 2001 for economic development of Kutch District of Gujarat are enclosed in pages 59 to 69 of the Paper Book. The copy of Notification No. 39/2001 dated 31.07.2001 issued by the Central Excise Department is enclosed in pages 70 to 72 of the Paper Book. Further, there is a clarification issued by the Department of Revenue, Ministry of Finance, Govt. of India dated 29.07.2008 clearly stating that intention behind the exemption scheme was to attract immediate investment by incentivizing setting up of new industrial units so as to generate employment.
The tribunal directed the AO to treat the receipt of aforesaid incentives under the Incentive Scheme as capital receipts not chargeable to tax.
Case Details
Case Title: Jindal Saw Ltd. Versus DCIT
Case No.: ITA Nos. 2758 & 2759/Del/2015
Date: 07/05/2025
Counsel For Appellant: Rohit Jain
Counsel For Respondent: Rajesh Kumar Dhanesta
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