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TMI Blog2014 (3) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(2) was issued and the assessee filed their response and the assessment was completed by an order of assessment dated 31.01.2001. In this appeal, we are concerned only with two issues viz., regarding the power tariff concession given to the assessee is a revenue receipt and regarding scrap sales whether to be included in the total turnover for the purpose of deduction under Section 80HHC of the Act. 3. The Assessing Officer, while considering the issue relating to the power tariff concession, held that the assessee appended a note to the Memo of computation of income filed along with the return of income, wherein, the assessee stated that it received a sum of Rs.3,97,15,795/- and that industrial power tariff concession granted by the Tamil Nadu Government which was credited to the Profit & Loss account and offered to income-tax, although according to the assessee, it is a capital receipt; the assessee, by letter dated 29.01.2001 contended that this amount is a capital receipt and should be deducted from the Business income offered to tax; in making the claim, the assessee sought to distinguish the facts of its case from the facts in the case of Sahney Steel and Press Works Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the production is not a pre-condition cannot be accepted for the reason that the subsidy is granted for the period of three years making it purely a production incentive and therefore it has to be considered operational and production subsidy rather than capital subsidy. The First Appellate Authority rejected the plea raised by the assessee by placing reliance on the Madhya Pradesh High Court decision in the case of CIT Vs. Rajaram Maize Products reported in (1998) 234 ITR 667 and submitted that the decision rendered will hold the field and rejected the contention of the assessee. 6. Insofar as the claim regarding the deduction under Section 80HHC of the Act in respect of sale of scrap, the First Appellate Authority confirmed the order of the Assessing Officer and dismissed the appeal filed by the assessee by order dated 28.03.2001. Aggrieved by the orders passed in ITA.No.916/Mds/2002 for the assessment year 1998-99 and I.T.A.No.968/Mds/2001 for the assessment year 1998-99, the assessee preferred appeals before the Tribunal, reiterating the contentions raised before the First Appellate Authority and placing heavy reliance on the decision of the Madhya Pradesh High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Honourable Supreme Court in the case of Sahney Steel (supra) as the said decision is not applicable to the facts of the case. Therefore, it is the endeavour of the learned counsel to impress upon this Court that it is the concession tariff extended by the Government by G.O.Ms.No.29 Energy (A2) 31st January 1995 is for setting up of new High Tension industry in area other than Metropolitan Area. 11. The learned counsel for the assessee further submitted that the scrap sales does not represent the turnover manufactured by the appellant and the said amount would reduce the cost of raw materials consumed. In support of such contention, learned counsel relied on the decision in the case of Commissioner of Income Tax Vs. Lucas TVS Ltd., reported in (2009) 308 ITR 377 (Mad), CIT Vs. Shiva Distilleries Ltd., reported in (2007) 293 ITR 108(Mad) in the case of Commissioner of Income-tax Vs. Ashok Leyland Ltd., reported in (2008) 297 ITR 107(Mad). 12. Mr. Arun Kurian Joseph, learned Standing counsel appearing for the Revenue sought to sustain the order passed by the Tribunal and submitted that the issue is squarely covered by the decision of the Honourable Supreme Court in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Sahney Steel (Supra), wherein, the Honourable Supreme Court laid down the basic test to be applied in judging the character of the subsidy. It was pointed out that the character of the receipt in the hands of the assessee whether Revenue or capital has to be determined with respect to the purpose for which the subsidy was given and that the point of time at which it is paid, its source or its form were irrelevant; if the object of the subsidy was to enable the assessee to run the business more profitably then the receipt is on revenue account; on the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit, then the receipt of the subsidy was on capital account. 16. In the preceding paragraphs, we have noted the object and purpose and intent of the Tariff Concession. A cumulative reading of the conditions makes it manifestly clear that the condition is not contingent upon establishment of the unit, but, for the purpose of assisting the assessee in carrying out the business operation and the subsidy is given subject to strict compliance of the conditions given in Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (2001) 251 ITR 427, we hold that the decision relied on by the learned counsel for the assessee in the case of Commissioner of Income Tax Vs. Ponni Sugars and Chemicals Ltd., reported in (2008) 306 ITR 392(SC) does not apply to the facts of the case and clearly distinguishable. Thus, we answer the question with regards to power tariff concession against the assessee and in favour of the Revenue. 20. As far as deduction under Section 80HHC of the Act is concerned, both sides agree that scrap sales is not to be included in the total turnover for the purpose of computing the deduction under Section 80HHC of the Act. The said contention is based on the decision in the case of Commissioner of Income-tax Vs. Ashok Leyland Ltd., reported in (2008) 297 ITR 107 (Mad). 21. Following the said decision, with regard to the order of the Income Tax Appellate Tribunal on the scrap sales inclusion for the purpose of deduction under Section 80HHC of the Act, we accept the assessee's plea and accordingly, we set aside the order of the Income Tax Appellate Tribunal in this regard. Accordingly, we answer this question in favour of the assessee and against the Revenue. 22. In the result, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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