TaxTMI 
TaxTMI 
2011 (12) TMI 524
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....f assessment proceedings, the claim of the assessee for the said deduction was examined by the AO and on such examination, he found that the assessee had included sales tax benefit of Rs. 74,75,000/- received during the year under consideration in the profits eligible for deduction u/s 80IA. The assessee, therefore, was called upon by the AO to explain as to how the said amount of sales-tax benefit was profit derived from the eligible undertaking so as to allow deduction u/s 80IA(4) thereon. In reply, it was submitted on behalf of the assessee that the said sales-tax benefit had been received by him for its wind power project under the 1998 Power Generation Policy of the State Government and the same was sold to M/s Liberty Oil Mills after obtaining the necessary approval from the concerned Sales Tax authority. It was submitted that the sales-tax benefit so received was dependent upon the power generation achieved by his plant and if there was no generation of power, the assessee would not have got the sales-tax benefit. It was contended that the sales-tax incentive given by the State Government for encouraging installation of Wind Energy Generation Unit in Maharashtra thus had a d....
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....IT(Appeals) did not find merit in the main submissions made on behalf of the assessee on this issue. He, however, found some merit in the alternative contention raised on behalf of the assessee and accepting the same to that extent, he directed the AO to reduce the net amount of sales-tax incentive to the extent of Rs. 70,20,084/- from the profits of the industrial undertaking of the assessee eligible for deduction u/s 80IA(4) for the following reasons given in paragraph Nos. 9 to 12 of his impugned order : "9. I have considered the submissions. The decision of the A.O. is covered by the Supreme Court decision in the case of Sterling Foods Vs. CIT 237 ITR 597. The appellant's submission that sales tax incentive is nothing but additional sales consideration has no force. The sales tax benefit is granted to the appellant as an incentive to reduce the cost of capital employed. The income earned by way of sale of the entitlement to the third party cannot be said to be derived from an industrial undertaking. In view of the above Supreme Court decision, 'derived' has a much narrower connotation than attributable according to the Supreme Court. It has also been held in a number of decis....
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....hat the assessee had taken into account the sales-tax benefit while ascertaining the feasibility of his windmill business which again shows that there was a direct nexus between the industrial undertaking of the assessee and the sales-tax incentive received by him. He contended that the ultimate source of sales-tax incentive is undisputedly the windmill of the assessee and the said incentive, therefore, has to be regarded as the income derived from the windmill. He contended that even the tariff of the of the electricity generated in windmill is dependent inter alia, on the sales-tax incentive received by the assessee and this benefit, therefore, can be considered as part of the sales price. In support of his contention, the learned counsel for the assessee has relied on the decision of Mumbai Special Bench of ITAT in the case of MIRC Electronics Ltd. reported in 319 ITR (AT) 130 as well as the decision of coordinate bench of this Tribunal in the case of Addl. CIT vs. The Total Packaging Services rendered vide an order dated 4th Nov., 2011 in ITA No. 5364/Mum/2009. He submitted that the decision of the Division Bench of the Tribunal in the case of The Total Packaging Services (supr....
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....Liberty India, therefore, was not available to the Special Bench of ITAT while deciding the case of MIRC Electronics Ltd. (supra). The learned counsel for the assessee has also relied on the decision of coordinate bench of the Tribunal in the case of The Total Packaging Services (supra). He has contended that the Tribunal in the said decision has relied on the decision of Hon'ble Gauhati High Court in the case of Meghalaya Steels Ltd. 332 ITR 91 wherein the decision of Hon'ble Supreme Court in the case of Liberty India (supra) was considered by the Hon'ble Gauhati High Court. We have carefully perused the decision of Hon'ble Gauhati High Court in the case of Meghalaya Steels Ltd. (supra). In the said case, the following two substantial questions of law had arisen for the consideration of the Hon'ble Gauhati High Court : (i) 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 the assessee is entitled to a deduction under section 80-IB 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 In....
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....und No. 2 is relating to assessee's alternative claim that while computing the deduction u/s 80IA(4), the net amount of sales-tax benefit should be reduced after allowing the expenses, such as, interest etc. which are attributable to the earning of sales-tax benefit. In this regard, it is observed that the learned CIT(Appeals) has already allowed deduction on account of office and administrative expenses on pro-rata basis from the amount of sales-tax benefit received by the assessee which is liable to be excluded from the profits eligible for deduction u/s 80IA(4). As regards the interest and other expenses, the learned counsel for the assessee has not been able to raise any arguments to convince us that the said expenditure was directly or indirectly attributable to the earning of sales-tax benefit. He has not been able to explain as to what could be the expenditure involved under the said heads which can be said to have been incurred for the purpose of earning sales-tax benefit which has been received by the assessee under the scheme of the State Govt. We, therefore, find no merit in ground No.2 raised by the assessee and dismiss the same. 9. In ground No. 3, the assessee has ra....