TaxTMI 
TaxTMI 
2010 (9) TMI 320
X X X X Extracts X X X X
X X X X Extracts X X X X
.... circumstances of the case, the Income Tax Appellate Tribunal was justified and correct in law in holding that the assessee is entitled to a deduction under Section 80IB of the Income Tax Act, 1961 on the transport subsidy and interest subsidy received by it? ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified and correct in law in holding that assessee is entitled to a deduction under Section 80IB of the Income Tax Act, 1961on the Central Excise duty refund received by it? 3. The assessee filed its return of income relevant for the assessment year 2006-07. It had shown, inter alia, the following income in its profit and loss account:- i) Transport Subsidy ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transport of raw materials and finished goods to and from certain selected areas with a view to promoting growth of industries in those areas. One of the areas so se includes the North Eastern Region comprising the States of Assam, Meghalaya, Manipur, Nagaland and Tripura. 6.2 Clause 6 of the Scheme deals with the details thereof and provides that a transport subsidy would be given to industrial units located in the selected areas in respect of raw materials, which are brought into and finished goods, which are taken out of such areas. The subsidy on the transport cost of raw materials would be given on the basis of the cost of transport between Siliguri and the location of the industrial unit in these States and the calculation would be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t broadly provides for two types of tax incentives namely investment-linked incentives and profit-linked incentives Chapter VI-A provides for incentives in the form of tax deduction which belong to the category of profit-linked incentives, In other words, what attracts incentives under Section 80IB of the Act is the generation of operational profits. The Supreme Court noted that Section 80IB of the Act provides for allowing of a deduction in respect of profits and gains derived from the business of the assessee and thereby Parliament intended to cover sources of profits and gains not beyond the first degree. In other words, there must be o direct nexus between the generation of profits and gains and the source of profits and gains, the latt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irectly relatable to the industrial activity of the assessee, they do not fall within the first degree contemplated by the Act and as explained by the Supreme Court in Liberty India. 11. Learned counsel for the assessee referred to Commissioner of Income Tax vs. Rajaram Maize Products, [2002] 251 ITR 427. However, we cannot see how the assessee can derive any support from this decision. In that case, the question was whether the power subsidy received was of a revenue nature or not. That is not the issue before us because admittedly the subsidies in this case are of a revenue nature. 12. The expression "derived from" occurring In Section 80IB of the Act in relation to the business of an Industrial undertaking is narrower In connota....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the assessee it the conditions laid down In the Notifications are fulfilled. In the present case, there is no dispute that the assessee was entitled to the central excite duty refund. 15. The Central Board of in Excise and Customs in its Circular dated 19th December, 2002 clarified that the refund is not on account of excess payment. of excise duty but is basically designed to give effect to the exemption and to operationally the exemption given by the Notifications, in that sense, the central excise duty rotund does nut appear to bear the character of income since whet is refunded to the assessee is the amount paid under the modalities provided by the Department of Revenue for giving effect to the exemption Notifications. There is als....