TMI Blog2011 (11) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal by the revenue is directed against the order dated 16.7.2009 of the CIT(A) for the Assessment Year 2006-07. 2. The only effective raised by the revenue in this appeal is as under: On the facts and circumstances of the case, the ld. CIT(A) erred in law to hold that income from MODVAT credit is derived from industrial undertaking as contemplated in Sec. 80IB(1) ignoring the vital fact that the very source of such income was government policy imposing excise duty at differential rate, say 16% on the purchases of raw materials for the earlier assessment year and 8% on finished goods sold during the current financial year, which can be attributed to industrial undertaking but not derived from industrial undertaking. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty paid on purchases. Vide Finance Act 2006, the government has amended the structure of excise duty and reduced the excise duty from 16% to 8% on raw material used by the assessee. Due to the change in the rate of excise duty vide Finance Act 2006; the assessee was able to recover the excise duty paid in the earlier years by setting off of the excise duty paid on the purchases in the earlier years against the excise duty payable on sale during the year. Thus, the ld AR of the assessee has submitted that the income, in fact, arisen only during the year under consideration when the assessee availed the setting off of credit of the excise duty. He has further submitted that the issue on merit is covered in favour of the assessee by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his amount has been rightly taken into account as income for the year under consideration. Even otherwise, the Assessing Officer has not treated this amount as the income of the earlier years but denied the deduction on the ground that this is not the income derived from the industrial undertaking. 6.In view of the above discussion, we do not find any merit or substance in the contention of the ld DR. 6.1 On the issue whether this benefit of Mod vat credit is the income derived from the industrial undertaking or not, the Hon ble Guwahati High Court in the case of Meghalaya Steels Ltd. (supra), has held as under: In so far as the second question is concerned, the Central excise duty refund claimed by the assessee is on the basis of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect nexus with the manufacturing activity and similarly, the refund of the Central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of Central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of Central excise duty and its refund. In the circumstances, we are of the opinion that question No. 2 must be answered in the affirmative in favour of the assessee and against the Revenue. 6.2 The Hon ble High Court has decided the issue in favour of the assessee after considering the decision of the Hon ble Supreme Court in the case of Liberty India vs CIT reported in 317 ITR 218. Accordingly, fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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