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TMI Blog2010 (9) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 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 central excise duty refund received by it ?" 3. The assessee filed its return of income relevant for the assessment year 2006-07. It had shown, inter alia, the following income in its profit and loss account : Rs. (i) Transport subsidy 1,58,44,889 (ii) Interest subsidy on capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to promoting growth of industries in those areas. One of the areas so selected included the North Eastern Region comprising the States of Assam, Meghalaya, Manipur, Nagaland and Tripura. 9. Clause 6 of the scheme deals with the details thereof and provides that a transport subsidy would be given to industrial units located in the selected areas in respect of raw materials, which are brought into and finished goods, which are taken out such areas. The subsidy on the transport cost of raw materials would be given on the basis of the cost of transport between Siliguri and the location of the industrial unit in these States and the calculation would be based on the cost of movement by railway from Siliguri to the railway station nearest to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Chapter VI-A provides for incentives in the form of tax deduction which belong to the category of profit-linked incentives. In other words, what attracts incentives under section 80-IB of the Act is the generation of operational profits. The Supreme Court noted that section 80-IB of the Act provides for allowing of a deduction in respect of profits and gains derived from the business of the assessee and thereby Parliament intended to cover sources of profits and gains not beyond the first degree. In other words, there must be a direct nexus between the generation of profits and gains and the source of profits and gains, the latter being directly relatable to the business of the assessee. Any other source, not falling within the first degr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree contemplated by the Act and as explained by the Supreme Court in Liberty India's case (supra). 15. Learned counsel for the assessee referred to CIT v. Rajaram Maize Products [2001] 251 ITR 427/119 Taxman 492 (SC). However, we cannot see how the assessee can derive any support from this decision. In that case, the question was whether the power subsidy received was of a revenue nature or not. That is not the issue before us because admittedly the subsidies in this case are of a revenue nature. 16. The expression "derived from" occurring in section 80-IB of the Act in relation to the business of an industrial undertaking is narrower in connotation than the expression "attributable to" the business of an industrial activity. This was so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, there is no dispute that the assessee was entitled to the Central excise duty refund. 19. The Central Board of Excise and Customs in its circular dated 19-12-2002 clarified that the refund is not on account of excess payment of excise duty but is basically designed to give effect to the exemption and to operationalise the exemption given by the notifications. In that sense, the Central excise duty refund does not appear to bear the character of income since what is refunded to the assessee is the amount paid under the modalities provided by the Department of revenue for giving effect to the exemption notifications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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