TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 551
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....on u/s 80IB was claimed by the assessee for the said assessment year. However, the claim of deduction u/s 80IB of the Act was made for the first time by the assessee in A.Y.2003-04 which was duly granted by the ld. AO in the scrutiny assessment proceedings u/s 143(3) r.w.s. 147 of the Act. During the course of assessment proceedings under appeal i.e. 2005-06, the ld. AO found that the assessee was in receipt of the following subsidies from the Government :- 1) Transport subsidy : Rs. 34,30,378/- 2) Subsidy on working capital interest : Rs. 1,52,177/- 3) Subsidy on Power Tariff : Rs. 14,00,000/- 4) Subsidy on long term loan interest : Rs. 2,40,000/- Rs.52,22,555/- The ld. AO concluded that the aforesaid subsidies were not entitled for deduction u/s 80IB of the Act as they cannot be construed as profits and gains derived from the industrial undertaking on the ground that the subsidy receipts are ancillary in nature or merely incidental to the business of the assessee and they are only supplementary in nature doled out by the Government for encouragement and growth of business in the backward area and the accrual of these subsidies was not dependent on the na....
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....ubmissions and perused the materials available on record. We find that this issue has been elaborately dealt with by the Hon'ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd vide order dated 29.05.2013 wherein their lordships had clearly distinguished the decision of the Hon'ble Apex Court in the case of Liberty India case and it is pertinent to go into the operative portion of the Hon'ble Gauhati High Court's decision in respect of each category of subsidy which is in dispute before us:- 1.Transport Subsidy "88. In the light of what have been discussed above, there can be escape from the conclusion that transport subsidy was aimed at reducing the cost of production of the industrial undertakings covered by transport subsidy Scheme. Thus, there was a first degree nexus between the transport subsidy, on the one hand, and cost of production, on the other. When cost is reduced, it naturally helps in earning of profit and, at times, higher profits. Such profits and gains ought to have been treated, and has rightly been treated, by the learned Tribunal, to be profits and gains derived from, or derived by, the industrial undertaking concerned. 89. The Revenue, it has ....
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....siness of the undertaking. Though the case of Pancharatna Cement (P.) Ltd. (supra) is, as right pointed out by the learned ASG, arose out of a writ petition and not an appeal under the Act, the fact remains that the law, laid down therein, is relevant in determining the controversy, which is required to be dealt with in this set of appeals. The relevant observations, appearing at para 32, in Pancharatna Cement (P.) Ltd. (supra), is, therefore, quoted below : " .....It cannot be gainsaid that having regard to the layout of investment and income designed for any commercial or business venture, reimbursement of the expenses incurred to whatever extent, would logically contribute to the profits and gains derived from the related enterprise and thus would augment the overall income. The amounts of subsidies as the facts of the case reveal are by way of Government assistance or grants under the schemes to provide stimulus to the willing industrial establishments to cater to the industrial growth in the region and, therefore, the same (subsidy) are aimed necessarily at neutralizing the expenses incurred and thus reinforce the eventual income of the business undertaking." (Emphasis suppli....
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....he cases at hand is also evident from the fact that the object behind DEPB was to neutralize the incidence of customs duty payment on the import duty of the export product and, hence, the DEPB scheme was not aimed at neutralizing the cost of production; rather, as observed by the Supreme Court, it was an incentive for export and entitlement arose, when export was made and not otherwise. 127. Most importantly, pointed out the Supreme Court, in Liberty India case (supra), that the Rules do not envisage a refund of an amount ' arithmetically equal' to exemption duty or central excise duty actually paid by an individual importer/manufacturer. This is the striking difference between subsidies on transportation cost, power, interest and insurance, in the cases at hand, on the one hand, and Duty Drawback Scheme, on the other, inasmuch as the subsidies, so provided to the assesses concerned, are arithmetically equivalent to the cost of raw materials actually used in the manufacturing process and the finished goods, which is actually taken to the existing market for sale within and outside the north-eastern region and, similarly, the assessees concerned have the right to receive power subs....
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....on the one hand, and the profits earned or the gains made, by an industrial undertaking, stand, as already observed at paragraph 127, well established. 131. Liberty India case (supra), it may be noted, is, thus, an exposition of law on the schemes of DEPB and Duty Drawback Scheme, which relate to export of goods by an industrial undertaking; whereas the Scheme of transport subsidy, interest subsidy, power subsidy and insurance subsidy, is inextricably and directly connected with the reduction of cost of production and manufacturing of an industrial undertaking entitling thereby the eligible industrial undertakings to claim deduction under Section 80IB or 80IC, as the case may be. 132. The decision, in Liberty India case (supra), is, therefore, not, in our considered view, relevant to the schemes of subsidies at hand." Similar addition made by the ld. AO for A.Y.2004-05 has been deleted by the ITAT, Kolkata 'A' Bench in assessee's own case reported in (2009) 118 ITD 273 (Kol). " 14. Apart from the above decisions of Courts, we also find that the Hon'ble Supreme Court in its landmark judgment in case of Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480 has held that a provision intend....
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....tion. Aggrieved by the ld. CIT(A)'s order, the revenue is in appeal before us on the following ground :- "4. That on the facts and circumstances of the case, Ld. CIT(A) overlooked the fact that A.O. made addition on account under valuation of raw materials on the basis of facts and assesee has no specific method of valuation to justify the lower rate adopted for valuing the closing stock." 10. The ld. DR stated that the rate chart containing the month-wise quantitative details together with its values as mentioned in the CIT(A)'s order were not produced before the AO by the assessee and was filed before CIT(A) as an additional evidence and accordingly the CIT(A) ought to have sought for a remand report from the AO before passing the order and hence there is violation of Rule 46A of the Income Tax Rules and prayed for setting aside this issue to the file of AO for his verification. 11. On the contrary, the ld. AR vehemently opposed the arguments advanced by the ld. DR and stated that the month-wise quantitative particulars together with their values have been duly filed before the ld. AO during the assessment proceedings vide letter dated 26.12.2007. Moreover, the revenue had not....