TaxTMI 
TaxTMI 
2013 (11) TMI 1524
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....as fact in allowing the disallowances made by the Assessing Officer in respect of value added tax remission of Rs. 46,67,034 under section 80-IC of the Income-tax Act, 1961, from the total income of the assessee. The Commissioner of Income- tax (Appeals) in his order has cited the hon'ble jurisdictional Income-tax Appellate Tribunal verdict in the case of Plast India Enterprises (P.) Ltd. in I. T. A. No. 50/Gau/2009 in which value added tax remission was treated akin to central excise duty refund and that the hon'ble Gauhati High Court had already given relief in the latter in the case of Meghalaya Steels Ltd. The Department has filed in appeal against the hon'ble Gauhati High Court's verdict on the issue of central excise refund before the hon'ble Supreme Court. The result is yet to attain finality. 3. In the assessment year 2009-10, the Revenue has taken the following effective grounds of appeal : 1. On the facts and circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in law as well as fact in allowing the disallowances made by the Assessing Office....
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.... accounting treatment given by the appellant) for the purpose of computation of the appellant's profits and gains from the business of industrial undertaking under section 80-IC of the Income-tax Act, 1961. 3. That both Assessing Officer as well as the Commissioner of Income-tax (Appeals) ought to have held that the various types of subsidies mentioned in ground No. 1 above were integral and inseparable part of the appellant's income from business of industrial undertaking and, therefore, the appellant was eligible for deduction under section 80-IC of the Income-tax Act, 1961 on such subsidies/incomes. 5. In the assessment year 2009-10, the assessee has taken the following effective grounds of appeal : 1. That both Assessing Officer as well as the Commissioner of Income-tax (Appeals) erred in law as on facts in denying the benefit of deduction under section 80-IC of the Income-tax Act, 1961 to the appellant on the following subsidies/incomes : (Rs.) (a) Transport subsidy 40,79,509 (b) Interest subsidy 1,43,445 (c) Insurance subsidy 26,513 (d) Power subsidy 7,00,000 &nbs....
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....ing to value added tax/CST remission had also been decided by this Tribunal in favour of the assessee in I. T. A. No. 43 of 2009 in the case of ACIT v. G. L. Coke Pvt. Ltd. vide order dated April 5, 2010. This Tribunal has already decided the issue in I. T. A. No. 50/ Gau/2009 in the case of ACIT v. Plast India Enterprises vide order dated April 5, 2010. In this decision, the hon'ble Tribunal held that the amount of transport subsidy, power subsidy, interest subsidy and insurance subsidy would go to reduce the corresponding expenditure incurred under those heads and resultant profit would be the profits and gains of the business of the industrial undertaking eligible for deduction under section 80-IC of the Income-tax Act. The Tribunal also took the view that all these subsidies were interlinked, interlaced and had a direct nexus with the manufacturing activities of the assessee which are inseparable from the related expenditure incurred by the assessee. So far as the, central excise duty refund and value added tax remission are concerned, the hon'ble Tribunal took the view that this has a direct nexus with the manufacturing business of the assessee and hence were eligible ....
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....ictional High Court in the case of CIT v. Meghalaya Steels Ltd. and Pride Coke Pvt. Ltd. and for this our attention was drawn towards pages 66, 68, 104 and 135 of the paper book which contain the decision of the hon'ble jurisdictional High Court reported in CIT v. Meghalaya Steels Ltd. [2013] 356 ITR 235 (Gauhati). It was further submitted that the issue relating to the allowability of the deduction under section 80-IB/80-IC of the Income-tax Act in respect of central excise duty refund/value added tax remission is covered by the orders of this hon'ble Bench in the following cases : S. No. I. T. A. No. Date of order Issue Name of the assessee i. 46/Gau/2009 19-03-2010 Central excise refund Meghalaya Steels Ltd. ii. 202/Gau/2008 19-03-2010 Central excise refund Satyam Ispat Ltd. iii. 50/Gau/2009 05-04-2010 Central excise refund and VAT remission Plast India Enterprises Pvt. Ltd. iv. 43/Gau/2009 05-04-2010 VAT remission G. L. Coke Pvt. Ltd. v. 58/Gau/2009 05-04-2010 VAT remission JBB Lime Industry 8. The learned Departmental representative, on the other hand, relied on the order of the Commissioner of Income-tax (Appeals). 9. We have go....
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....owever, the subsidy is given for the purpose of operating an industry more profitably, the subsidy would be revenue receipt and, being revenue receipt, it has to be taxed in accordance with law meaning thereby that the profits and gains derived from, or derived by, an industrial undertaking in a case, where operational cost is reduced by providing subsidy, in any form, the profits and gains earned, because of such subsidy, would be eligible for deduction under section 80-IB or section 80-IC, as the case may be. The principle deducible from the cases of Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC) ; CIT v. Rajaram Maize Products [2001] 251 ITR 427 (SC) and CIT v. Eastern Electro Chemical Industries [1999] 9 SCC 20 is that when a subsidy, granted by the Government, is operational in nature, which helps in generation of profits for any industrial undertaking, such a profit is, indeed, covered by the provisions embodied in sec tion 80-IB or section 80-IC, as the case may be. Held, that there was clear finding of the Tribunal that there was a direct nexus between the subsidies, on the one hand, and the profits and gains derived by, or derived from, the industrial un....
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....ling the assessees to claim deduction under section 80-IB or section 80-IC, as the case may be. (c) The scheme of the interest subsidy clearly showed that it reduced the interest payable on working capital advanced to an industrial undertaking by a scheduled bank or Central/State financial institutions. The interest subsidy aimed at reducing the interest pay able on working capital by an industrial undertaking helped directly in reducing the cost of manufacturing or production activities and established thereby direct and the first degree nexus between the industrial activities of the assessee, on the one hand, and the interest subsidy, on the other, received by the assessee and, in consequence thereof, since the interest subsidy results into profits and gains derived from or derived by, an industrial undertaking, there is no reason as to why such profits and gains, earned by an industrial undertaking on the strength of such a subsidy, namely, interest subsidy, be not allowed to be deducted from the taxable income of the industrial undertaking. (d) So far as the insurance subsidy was concerned, it was under the Central Comprehensive Insurance Scheme, 1997. Under the scheme, the i....