TaxTMI 
TaxTMI 
TaxTMI 
2015 (5) TMI 674
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....section 80-IC. 3. For that on the facts and in the circumstances of the case, the learned Commissioner of Income-tax was not justified in treating the bona fide new and distinct manufacturing unit set up by the appellant as a unit set up by splitting up of existing unit, thereby denying the exemption claimed under section 80-IC." 2. The assessee-company, engaged in the business of manufacturing of iodized salt, filed its return of income on October 31, 2005. It was carrying out its activities in Dibrugarh. It has claimed its profits as eligible under section 80-IB(4) of the Act. The Assessing Officer (AO) vide his order passed under section 143(3) of the Act had arrived at the conclusion that subsidies received by the assessee were not eligible business profits for claiming deduction under section 80-IC of the Act. Out of subsidies amounting to Rs. 51,83,218 he allowed only Rs. 15.77 lakhs as profits eligible for deduction. While examining the records for the year under appeal, the Commissioner of Income-tax was of the view that the order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. He observed that the Assessing Officer had not d....
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...., that the process did not result any manufacture or production of any new article or thing, that application of the end product was the same as the raw material, that the process did not result into bringing into existence of commercially different commodity, that the process of spraying iodine and crushing of salt did not produce any article or thing that could be said to be a manufacture or producing activity carried on by an industrial undertaking, that the activity of spraying iodine to salt could at best be said as a blending process. Finally, he held that the activity of processing common salt to crush/powder iodized salt cannot be termed as manufacture or production of an article or thing specified in the notified industries as per the second proviso to section 80-IB(4) of the Act and in the Fourteenth Schedule as per section 80-IC(2)(b) of the Act, that the issue had not been examined at all by the Assessing Officer while granting the assessee deduction under section 80-IB/80-IC of the Act. The other issues confronted to the assessee in the show-cause notice was that there was splitting up of existing business. The examination of records for the year under consideration, a....
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....n the opportunity of being heard by him at the time of proceedings under section 263 of the Act. The Assessing Officer was not required to give further opportunity to the assessee. 3. Before us, the authorised representative (AR) contended that the assessee had set up its second unit for manufacturing and crushing of iodized salt and commenced commercial production on July 8, 1999 that for that transport, interest subsidies were received, that the Assessing Officer completed the assessment under section 143(3) of the Act and had allowed the exemption under section 80-IC of the Act, that the Commissioner of Income-tax arbitrarily held that activities carried on by the assessee were only processing and did not fall within the purview of manufacturing/ producing, that he wrongly held that the new unit was established by the assessee by splitting the business. He further argued that by directing the Assessing Officer not to give opportunity of hearing, he had denied the assessee opportunity of representing his case before the Assessing Officer, that he had pre-decided the issue about the eligibility under section 80-IB/ 80-IC of the Act, that by holding that second unit was establishe....
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....ction should only set aside the order and direct the Assessing Officer for making fresh assessment instead of himself passing final orders. In the case under consideration the Commissioner of Income-tax has decided the two issues instead of remitting them back to the file of the Assessing Officer by holding that the assessee was not engaged in the manufacturing/production and that second unit was established by the splitting up of its existing business. He had left no option for the Assessing Officer to decide the issue on the merits. The provisions of section 263 of the Act were incorporated in the Act to revise the orders that were found to be erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax as senior officer had to indicate the omissions/commissions of the Assessing Officer while passing the revisionary orders. But, in the case before us, the Commissioner of Income-tax had taken over the role of the Assessing Officer. In our opinion, direction of the Commissioner of Income-tax was not justified. Besides, by directing the Assessing Officer not to give opportunity of hearing he has violated the basic principles of natural justice. Thus, on ....
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.... is a direct, intrinsic and first degree nexus between a subsidy, on the one hand, and the profits and gains, on the other, derived from, or derived by, the industrial undertaking concerned. If a subsidy goes to reduce the cost of production of an industrial under taking, the resultant profits and gains are deductible under the provisions of section 80-IB or section 80-IC, as the case may be. The expression 'derived from' has been used in section 80-IB, and it means that it is the business of the undertaking, which is the direct source from which the profits and gains are derived. In the case of a subsidy, the expression 'derived from', appearing in section 80-IB, would, logically extended, mean that the subsidy provided by the State, directly affects the business activity of the industrial undertaking. The Supreme Court in Mepco Industries Ltd. v. CIT [2009] 319 ITR 208 (SC) held that in each case, the nature of subsidy needs to be examined by the court. Consequently, without determining the nature of subsidy, including the object thereof, the impact of the subsidy on the operation of the industrial undertaking cannot be determined. The Supreme Court in Sahney Stee....
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....o, help in reduction of the cost of manufacturing of the industrial unit concerned inasmuch as subsidy on transportation of the finished goods was promised to be given on the finished goods actually produced by the industrial unit in accordance with the manufacturing programme approved by the Government concerned. Thus, it was transparent that there was a direct nexus between the transport subsidy, on the one hand, and the profits earned and gains made, by the industrial undertakings, on the other. Such a direct nexus could not but be termed as the first degree nexus between the two, namely, the transport subsidy, on the one hand, and the resultant profits and gains on the other. (b) The Industrial Policy, 1997, as extended by the Industrial Policy of Assam, 2003, provided for power subsidy to be given to eligible industrial units for a period of 5 years from the date of commercial production, the power subsidy being available in the form of reimbursement of fully paid power bills with certain ceiling. When the cost of production is reduced by granting subsidy on electricity charges, it necessarily helps the industry to run more profitably. Here again, a direct nexus between the p....