TMI Blog2004 (7) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... ng first with Revenue's appeal in ITA No. 152/Chd/2004 for the asst. yr. 2000-01, the relevant facts are that the assessee is a partnership concern having set up an industrial unit at Paonta Sahib for the manufacture of calcite powder and limestone powder. It has claimed deduction under s. 80-IA for the entire income. On scrutiny of accounts, the AO observed that a sum of Rs. 10,55,869 had been credited by the assessee under the head 'freight subsidy' and deduction under s. 80-IA was calculated after taking into account the said subsidy. The AO relying upon the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC), held that the assessee was not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), after considering the various judgments referred to in his order, held that the transport subsidy was directly linked with the income of the assessee from the industrial unit and that the assessee was entitled to deduction in respect of the said subsidy. 5. Revenue is aggrieved. The learned Departmental Representative contended that the issue in this case is covered by the decision of Supreme Court in the case of CIT vs. Sterling Foods and that of the Madras High Court in the case of CIT vs. Viswanathan Co. (2003) 181 CTR (Mad) 335 : (2003) 261 ITR 737 (Mad). The decision of Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT has also been relied upon in support of the contention. 6. The learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial development of the backward areas. The aim is to reduce the disparity in the development amongst the various States and also create employment opportunities. It has to be appreciated that the Transport Subsidy Scheme, 1971 aims to indemnify the loss incurred by the industrial unit for the very fact that it is located in the backward area and therefore, it has to incur extra cost to make up for the natural disadvantages of poor infrastructure, hilly terrain, long distance of raw material source and marketing centers resulting in substantive transport cost. As per the Scheme, 75 per cent of the cost incurred by the unit or the specified rates, whichever is lower, is reimbursed to the assessee. The assessee has received the transport su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the distinction drawn by the CIT(A) between ss. 80HH and 80-IA is appreciable if we compare the language of the two provisions. We, therefore, reproduce ss. 80HH and 80-IA as applicable to asst. yr. 2000-01 as under: "80HH. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof." "80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived from any busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be no recouping of the expenditure. The assessee is entitled to reimbursement of the expenses only when the expenditure is incurred. In other words, the cost incurred by the assessee on the freight outward and inward is reduced as part of it is borne by the Government of India by subsidising the cost. In Sahney Steel Press Works Ltd. vs. CIT, their Lordships of the Supreme Court have held that subsidies given to assist the unit to run profitably are operational subsidies and are of revenue character. Their Lordships accordingly held that the subsidy granted by the Government of the said nature is of revenue character and includible as income of the assessee. Thus, there is no doubt in our mind that the transport subsidy granted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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