Excise duty exemptions do not fall within the scope of 'income' as defined under Section 2(24)(xviii) of the Income Tax Act, 1961, as the provision specifically omits the term 'exemption' despite including other forms of subsidies and incentives.

ORDER

Per Udayan Dasgupta, J.M.:

This appeal is filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi dated 29.05.2025 passed u/s 250 of the Income Tax Act, 1961 (henceforth the Act) which has emanated from the order of the NFAC, Delhi dated 31.05.2021 passed u/s 143(3) of the Act, 1961.

Grounds of appeal taken by the assessee in Form No. 36 are as follows:

“1. Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition made by the Ld. AO in treating Central Excise Duty Exemption Rs 1,05,43,860 as revenue receipt chargeable to tax under section 2(24)(xviii) of the Act instead of treating it as a capital receipt. Further, the Ld. CIT(A) has erred in not appreciating that a) Hon'ble ITAT in Appellant's own case (ITA 587/Asr/2019) for AY 2016-17 has decided this issue in its favour vide order dated 15 June 2023 b) Central Excise Duty Exemption does not fall under section 2(24)(xvi) of the Act as it is exemption and not refund of duty e) without prejudice, 64% of Rs 1,05,43,860 i.e. Rs 67,48,070 is not real income and only a book entry and therefore cannot be taxed.

2. Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition made by the Ld. AO of Rs 3,29,00,000 under section 68 of the Act without 2 appreciating that the Appellant filed bank statement, ITR, PAN and address data, loan confirmation and the fact that they have been repaid during the year itself and thus discharged its onus of prove casted under section 68 of the Act.

3. The appellant craves to alter, amend and modify any ground of appeal.

4. Necessary cost be awarded to the assessee.”

Brief facts of the case are that the assessee is a partnership firm, engaged in the business of manufacturing/recycling of used lead acid battery of pure/refined/unrefined lead ignots, which are required for manufacturing of batteries. The assessee has set up his manufacturing unit in Jammu & Kashmir and return of income for the year has been filed u/s 139 declaring a total income of Rs.4.93 crores which was subsequently revised at a lesser figure of Rs.4.73 crores. The said return was selected for scrutiny under CASS on the issues of reduction of income in revised return and for verification of unsecured loans. In course of assessment proceedings, the assessee has failed to submit full clarification and details regarding the unsecured loans as appearing in his audit financials and has failed to reply to the show cause notice issued by the AO which has resulted in an addition of Rs.3.29 crores on account of unsecured loans u/s 68 of the Act.

It was further observed that the assessee has claimed excise duty refunds of Rs.1.05 crores and has considered the same as capital receipts and claimed exemption u/s 10 of the Act. In absence of any reply or any clarification in course of assessment proceedings, the said refund of excise duty has been considered as revenue receipt and has been added back to the total income of the assessee.

The matter carried in appeal before the ld. first appellate authority has been dismissed by observing as follows:

“5.2. During the appellate assessment proceedings that the excise duty refund payable by the Central Government was a capital receipt and hence the same was correctly claimed as exempt uls 10 of the Act.

I have gone through and carefully perused the assessment order passed by the AO, written submissions filed by the appellant firm and section 2(24)(xviii) of the Act.

Central Excise Duty refund was paid back to the industrial units set up in Jammu & Kashmir in order to attract the investments & businesses in the state of Jammu & Kashmir.

Such refund was payable to the industrial units on yearly basis and not just at the time of establishment of industrial undertaking. Thus, the nature of refund receipt was revenue in nature and not capital nature as was claimed by the appellant firm. Section 2(24)(xviii) of the Act clearly mentions that s