TaxTMI 
TaxTMI 
2018 (9) TMI 1011
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....ncome Tax Act, 1961 (hereinafter 'the Act'). 2. The only issue in this appeal of Revenue is against the order of CIT(A) directing the AO to allow deduction of interest subsidy under section 80IC of the Act. For this Revenue has raised the following three grounds: - "1. On the facts and in the circumstances of the case and in, law, the Ld. CIT(A) erred in directing the AO to include interest subsidy for computing deduction u/s 80IC without appreciating that the source of subsidy is the scheme of Government and not the eligible undertaking for being considered for the purposes of deduction. u/s. 80IC." 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to include interest -subsidy fo....
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....e case of CIT vs. Meghalaya Steels Ltd. [2013] 356 ITR 235 (Gauhati), allowed the claim of the assessee by observing in Para 4.2.3 as under: - "4.2.3. This issue is exactly same, as was in immediately preceding year and in assessee's own case for A.Y. 2010-11 which was adjudicated in favour of the assessee by my Ld. predecessor vide order dated 30.12.2013. The relevant pant of the same is reproduced here under:- As regards Ground no. 5 viz, interest subsidy, the appellant has relied upon Meghalaya Steels Ltd and Pride Coke P Ltd (supra) in which case the Gauhati HC has held that interest subsidy has direct nexus With the profits of the industrial undertaking and is to be taken into account in computing deduction u/s. 80IC. 4.2.4 S....
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....sue was considered and decided in favour of assessee vide para 6 to 9 as under: - "6. However, AO did not accept the submissions of the assessee and denied the benefit of deduction u/s-80-IC. In appeal before Ld. CIT(A), detailed submissions were made by assessee which have been accepted by Ld. CIT(A) in his order. Relevant part of these submissions is reproduced here under for ready reference: Regarding Ground No.5. which is against the disallowance made by the AO in respect of interest reimbursement amounting 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 int....
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.... said expenses and accordingly the said expenses may be, shown as net of such grants. The documents showing that the amount was towards the part reimbursement of interest already paid by the Assessee, with calculation of such claims were filed. It is a well settled law that government grants/ subsidy are reimbursement of actual cost 'and expenses incurred by the Assessee and the same do not tantamount to any income earned by the Assessee. As a matter of fact, the receipts of such subsidies are deduction in operational 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 23....
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....9. We have gone through the judgment of the Hon'ble Supreme Court. It has been held by the Hon'ble Supreme Court that if, cash assistance received or receivable against export schemes are included as being income under the head 'Profit & Gains of business or profession', it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head 'profit & gains of business or profession', and not under the head of income from other sources. The facts of the case before us are that the impugned amount was received back by the assessee from banks under the scheme of Ministry of Textile in respect of reimbursement out of the actual interest first paid ....