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Tax Publishers DCIT v. Montage Enterprise (P) Ltd. [I.T.A. Nos. 4907 & 4909/Del/2017, dt. 14-12-2020] : 2020 TaxPub(DT) 5483 (Del-Trib) Refund of excise whether eligible for deduction under section 80-IB -- Whether it is a taxable income or a capital receipt -- Applicability of MAT on the same *Facts:* Assessee was in receipt of refund of excise duty as part of Government incentive to promote industries. Assessee's unit from where refund of excise duty was received was eligible for section 80-IB deduction as well. They declared the refund of excise duty as a capital profit in the profit and loss account. It was the case of the revenue that the same is taxable but is not eligible for deduction under section 80-IB. Assessee's plea was it was a capital receipts outside the scope of tax itself thus no adjudication or applicability of section 80-IB would arise on the same as it is outside the scope of income tax. On higher appeal the Commissioner (Appeals) upheld the views of the assessee holding that the said excise duty receipt was akin to a capital subsidy receipt thus outside the scope of tax as it was a capital receipt. On higher appeal by the revenue -- Held in favour of the assessee/against the revenue that the order of the Commissioner (Appeals) requires no intervention. The receipt of excise duty refund was a capital receipts as decided in the earlier year decisions of the assessee themselves. *Editorial Note:* The decision discusses a key take away point on MAT taxation as well as a citation as to whether exempt income or exempt capital receipts/gains even if shown under erstwhile schedule VI/now schedule III of Companies Act, 2013 can be taxed under MAT provisions. The decision of JSW Steel & Anr. v. ACIT (2017) 49 CCH 97 (ITAT-Mum) : 2017 TaxPub(DT) 0651 (Mum-Trib) was read here. The basic premise of this decision being -- What is shown in the Schedule VI is the profit as per requirements of the Companies Act, 1956, which warrants certain accounting compulsions and certain disclosure compulsions. The disclosure compulsion being certain capital receipts and extraordinary items are also shown as profit before exceptional/extraordinary items as well. This does not mean that the same will be taxable in the first place when it was only a capital receipt outside the scope of taxing provisions of the Income Tax Act. The decision of Apollo Tyres in Apex Court which held that schedule VI profits cannot be tinkered with for MAT purposes to that extent needs to be watered down to enable dilute a reading that what is not taxable is not income in the first place and though Schedule VI warrants disclosure of the same it cannot be brought into normal tax nor under MAT. It was this principle which was applied in this decision given that the refund of excise duty was held to be a capital receipt. What will happen to this decision given the insertion of section 2(24)(xviii) in the statute as of now is a bone to pick especially on refund of items like intervening subsidies or incentives etc. The verdict relates to a year prior to the insertion of section 2(24)(xviii) as well.

Tax Publishers

DCIT v. Montage Enterprise (P) Ltd. [I.T.A. Nos. 4907 & 4909/Del/2017, dt. 14-12-2020] : 2020 TaxPub(DT) 5483 (Del-Trib)

Refund of excise whether eligible for deduction under section 80-IB -- Whether it is a taxable income or a capital receipt -- Applicability of MAT on the same

Facts:

Assessee was in receipt of refund of excise duty as part of Government incentive to promote industries. Assessee's unit from where refund of excise duty was received was eligible for section 80-IB deduction as well. They declared the refund of excise duty as a capital profit in the profit and loss account. It was the case of the revenue that the same is taxable but is not eligible for deduction under section 80-IB. Assessee's plea was it was a capital receipts outside the scope of tax itself thus no adjudication or applicability of section 80-IB would arise on the same as it is outside the scope of income tax. On higher appeal the Commissioner (Appeals) upheld the views of the assessee holding that the said excise duty receipt was akin to a capital subsidy receipt thus outside the scope of tax as it was a capital receipt. On higher appeal by the revenue --

Held in favour of the assessee/against the revenue that the order of the Commissioner (Appeals) requires no intervention. The receipt of excise duty refund was a capital receipts as decided in the earlier year decisions of the assessee themselves.

Editorial Note: The decision discusses a key take away point on MAT taxation as well as a citation as to whether exempt income or exempt capital receipts/gains even if shown under erstwhile schedule VI/now schedule III of Companies Act, 2013 can be taxed under MAT provisions. The decision of JSW Steel & Anr. v. ACIT (2017) 49 CCH 97 (ITAT-Mum) : 2017 TaxPub(DT) 0651 (Mum-Trib) was read here. The basic premise of this decision being --

What is shown in the Schedule VI is the profit as per requirements of the Companies Act, 1956, which warrants certain accounting compulsions and certain disclosure compulsions. The disclosure compulsion being certain capital receipts and extraordinary items are also shown as profit before exceptional/extraordinary items as well. This does not mean that the same will be taxable in the first place when it was only a capital receipt outside the scope of taxing provisions of the Income Tax Act. The decision of Apollo Tyres in Apex Court which held that schedule VI profits cannot be tinkered with for MAT purposes to that extent needs to be watered down to enable dilute a reading that what is not taxable is not income in the first place and though Schedule VI warrants disclosure of the same it cannot be brought into normal tax nor under MAT. It was this principle which was applied in this decision given that the refund of excise duty was held to be a capital receipt. What will happen to this decision given the insertion of section 2(24)(xviii) in the statute as of now is a bone to pick especially on refund of items like intervening subsidies or incentives etc. The verdict relates to a year prior to the insertion of section 2(24)(xviii) as well.