TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 257
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..... The Assessee is an undertaking or an enterprise referred to Sec.80-IC(2)(iii) of the Act viz., an undertaking which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning- on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States. There is no dispute with regard to the question as to whether the Assessee is entitled to claim deduction u/s.80-IC(2)(iii) of the Act. While arriving at the profits on which the aforesaid deduction was claimed by the assessee the assessee considered the transport subsidy, Central Insurance subsidy, power subsidy....
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....red as income from other sources and therefore was not eligible for deduction u/s.80-IC(2)(a)(iii) of the Act. The CIT accordingly issued a show cause notice u/s.263 of the Act dated 26.3.2013 and after considering the reply of the Assessee, concluded as follows :- "12. In this case the assessee in its accounts presented the subsidies as well as the incentives after netting off and the AO has failed to take notice of the fact that the subsidies and incentive is not allowable as deduction u/s 80lC of the I T Act' 61. The AO. has also failed to take notice of wrong claim made by the assessee in his return of income. Therefore, the order passed by him is erroneous and prejudicial to the interest of revenue. In view of the above the order passed by the AO. is set aside with the direction that he should pass the assessment order after examining the allowability of deduction of subsidies and incentive u/s 80IC of the I T Act'61 with reference to the relevant documents, facts and evidences and the case laws referred to in para 4 of this order. He is also directed to examine thoroughly the amount of subsidies and incentive of any nature received from central and state government.....
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....empted to distinguish the decision, in Jai Bhagwan Oil & Flour Mills case (supra), in any manner whatsoever, when this decision makes it more than abundantly clear that transport subsidy goes on to reduce the cost of production of the industrial undertaking leading to earning of profits and making of gains by the industrial undertaking. 94. Put shortly, there is an existence of direct nexus between transport subsidy, on the one hand, and the manufacturing/production activities of industrial undertaking, on the other, stands well established. Unless shown otherwise, the industrial undertakings, in the present set of appeals, which have been granted transport subsidy, are entitled to claim deductions in terms of the directions of the learned Tribunal." 2. Power Subsidy : " 105. From a combined reading of the two decisions, rendered in Rajaram Maize Products (supra) and Eastern Electro Chemical Industries case (supra), what becomes transparent is that power subsidy is meant to enable a person meet a certain percentage of expenditure on power and is, therefore, revenue in nature. However, though revenue in nature, the fact remains that it helps in not only growth of the indust....
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....n Pancharatna Cement (P)Ltd. case (supra), and the law laid down therein." 3.Interest Subsidy : " 112. The facts are, therefore, not in dispute on this aspect. The dispute is : Whether the interest subsidy is payable on non-operational or operational subsidy? If the object of the relevant Scheme is borne in mind, it clearly shows that interest subsidy, having aimed at reducing the interest payable on working capital by an industrial undertaking, helps directly in reducing the cost of manufacturing or production activities and establish thereby direct and first degree nexus between the industrial activities of the assesseerespondents, on the one hand, and the interest subsidy, on the other, received by the assessee-respondents and, in consequence thereof, since 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 concerned." 10. The Hon'ble Gauhati High Court had distinguished the decision of the H....
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....e respectively. These aspects of DEPB and Duty Drawback Scheme give rise to the inference that the decision, in Liberty India (supra), was rendered, in the light of its own facts, and not for universal application. This inference gets strengthened from the following observations made in Liberty India case (supra) : " The next question is - what is duty drawback? Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944 empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of Section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of duty draw....