TaxTMI 
TaxTMI 
2004 (7) TMI 294
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....ed against the order dt. 1st Oct., 2003, of the CIT(A), Palampur. The only dispute, common in both the appeals, involved in these appeals, is relating to calculation of deduction under s. 80-IA. 2. Parties have been heard and record perused. 3. Dealing first with Revenue's appeal in ITA No. 152/Chd/2004 for the asst. yr. 2000-01, the relevant facts are that the assessee is a partnership concern having set up an industrial unit at Paonta Sahib for the manufacture of calcite powder and limestone powder. It has claimed deduction under s. 80-IA for the entire income. On scrutiny of accounts, the AO observed that a sum of Rs. 10,55,869 had been credited by the assessee under the head 'freight subsidy' and deduction under s. 80-....
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....ITD 374 (Pune) (v) Rajasthan Petro Synthetic Ltd. vs. Dy. CIT (1997) 60 ITD 682 (Del) (vi) Sarda Plywood Industries Ltd. vs. CIT (2000) 163 CTR (Cal) 45 : (1999) 238 ITR 354 (Cal) and; (vii) CIT vs. S.P. Nayak & Ramesh M. Sree Ganesh Transports (1998) 148 CTR (Ker) 327. The CIT(A), after considering the various judgments referred to in his order, held that the transport subsidy was directly linked with the income of the assessee from the industrial unit and that the assessee was entitled to deduction in respect of the said subsidy. 5. Revenue is aggrieved. The learned Departmental Representative contended that the issue in this case is covered by the decision of Supreme Court in the case of CIT vs. Sterling ....
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....areas. In Himachal Pradesh, transport subsidy is given on the freight cost between the location of industrial unit in the State and the nearest railhead. The purpose of this scheme is to encourage entrepreneurs to locate industrial units in Himachal Pradesh in view of the Government policy to promote the industrial development of the backward areas. The aim is to reduce the disparity in the development amongst the various States and also create employment opportunities. It has to be appreciated that the Transport Subsidy Scheme, 1971 aims to indemnify the loss incurred by the industrial unit for the very fact that it is located in the backward area and therefore, it has to incur extra cost to make up for the natural disadvantages of poor in....
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....ee's business and it is that expenditure which the subsidy recoups and the purpose of the recoupment is to make up the possible profit deficit for operating in a backward area. This decision has been followed by the same High Court in the case of Sarda Plywood Industries Ltd. vs. CIT. 8. In our considered view, the distinction drawn by the CIT(A) between ss. 80HH and 80-IA is appreciable if we compare the language of the two provisions. We, therefore, reproduce ss. 80HH and 80-IA as applicable to asst. yr. 2000-01 as under: "80HH. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in acc....
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....f issue involved in this appeal. In this case, assessee has received transport subsidy for recouping the expenditure incurred as a result of setting up an industrial unit in the backward area. The grant of subsidy is directly connected with the business of the undertaking. If no expenditure is incurred by the assessee, there will be no recouping of the expenditure. The assessee is entitled to reimbursement of the expenses only when the expenditure is incurred. In other words, the cost incurred by the assessee on the freight outward and inward is reduced as part of it is borne by the Government of India by subsidising the cost. In Sahney Steel & Press Works Ltd. vs. CIT, their Lordships of the Supreme Court have held that subsidies given to ....