2017 (3) TMI 951

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....erest subsidy of Rs. 1,34,45,475forcomputing deduction u/s 801C without appreciating that the source of subsidy is the scheme of Government and not the eligible undertaking for being considered for the purpose of deduction u/s 801C. On the facts and in the circumstances of the case and in law, the C1T(A) erred in directing the AO to include interest subsidy for computing deduction u/s 80-IC without appreciating that interest subsidy being a receipt from Government under a scheme cannot be said to be income, the source of which is the industrial undertaking." "On the facts and in the circumstances of the case and in law, the C1T(A) erred in directing the AO to include interest subsidy for computing deduction u/s 801C without considering ....

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....ties as well as aforesaid judgment of the Hon'ble Supreme Court. The brief background is that during the year assessee company was engaged in the business of manufacturing of cotton yarn. It had a manufacturing unit at SIDCUL, Rudrapur, (Uttrakhand) and claimed benefit of deduction u/s 80-IC in the written filed by him. 5. During the course of assessment proceedings it was noted by the A.O. that assessee credited in its profit & loss account various items under the head other income which included TUFS interest subsidy amounting to Rs. 1,34,45,475/-. As per Assessing Officer, deduction 80-IC was not allowable on the said amount since this income could not be said to be derived by the undertaking of the assessee. The assessee submitted ....

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....ing to 1,34,45,475/- received back by the Assessee from banks under the scheme of the 'Ministry of Textile, it was submitted that the said amount is not in the nature of income and is merely re-imbursement out of the actual interest first paid by the Assessee to the Banks As per the scheme of the Ministry of Textile, the Assessee is entitled to receive back 5% of the interest actually paid by the Assessee to the Banks That the said reimbursement of interest would only reduce the interest cost of the Assessee already incurred by it and the same cannot be termed as any. income earned by the assessee. That the Ministry has made such mechanism to claim interest reimbursement, whereby the Assessee is first required to pay the amount of inter....

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....perational cost of the Assessee and thereby have dirt and first degree nexus with the profits. derived by the undertaking. Reliance was placed in the case of. CIT Vs. 1. Meghalaya Steels Ltd. 2. Pride Coke Pvt. Ltd. [2013] 356 ITR 235 [Gauhati] That the case law cited, and relied upon by the AO being CIT vs Gheria Oil.Grarnudyog Workers Welfare Association 330 ITR 117 (2011) has also been referred to and considered while settling the above ratio in the said judgment reported in [2013] .356 ITR 235 supra. Further, the said case law has been given on the basis of interpretation on. the said issue by the Hon'ble Supreme 'Court in the case of Sahney Steel and Press Works Ltd v CIT [1997] 228 ITR 253 (SC); CIT v Rajararn Maize Products [....