TMI Blog2013 (11) TMI 1524X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax (Appeals) dated January 19, 2011, while the cross-appeals for the assessment year 2009-10 have arisen against the order of the Commissioner of Income-tax (Appeals) dated December 2, 2012. Since the issues in both years are common, therefore, all the appeals are being disposed of by this common order. 2. In the assessment year 2008-09, the Revenue has taken the following effective ground of appeal : 1. On the facts and circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in law as well as fact in allowing the disallowances made by the Assessing Officer in respect of value added tax remission of ₹ 46,67,034 under section 80-IC of the Income-tax Act, 1961, from the total income of the assessee. The Commissioner of Income- tax (Appeals) in his order has cited the hon'ble jurisdictional Income-tax Appellate Tribunal verdict in the case of Plast India Enterprises (P.) Ltd. in I. T. A. No. 50/Gau/2009 in which value added tax remission was treated akin to central excise duty refund and that the hon'ble Gauhati High Court had already given relief in the latter in the case of Meghalaya Steels Ltd. The Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) (a) Transport subsidy 73,81,541 (b) Interest subsidy 2,65,007 (c) Power subsidy 7,00,000 2. That both Assessing Officer as well as the Commissioner of Income-tax (Appeals) ought to have held that the amounts of various subsidies received by the appellant as mentioned in ground No. 1 above, would go on to reduce the corresponding expenses incurred under those heads, (irrespective of accounting treatment given by the appellant) for the purpose of computation of the appellant's profits and gains from the business of industrial undertaking under section 80-IC of the Income-tax Act, 1961. 3. That both Assessing Officer as well as the Commissioner of Income-tax (Appeals) ought to have held that the various types of subsidies mentioned in ground No. 1 above were integral and inseparable part of the appellant's income from business of industrial undertaking and, therefore, the appellant was eligible for deduction under section 80-IC of the Income-tax Act, 1961 on such subsidies/incomes. 5. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2008-09 relate to claim of deduction by the assessee under section 80-IC in respect of value added tax remission and in the assessment year 2009-10 in the Revenue's appeal, the issues relate to the claim of deduction by the assessee under section 80IC in respect of value added tax remission and central excise duty refund. It was pointed out that all the issues were decided by this Tribunal so far which relates to transport subsidy, interest subsidy and central excise refund by the decision of this Bench in favour of the assessee in I. T. A. No.46/Gau/2009 vide order dated March 19, 2010, in the case of ACIT v. Meghalaya Steels Ltd. The issue relating to value added tax/CST remission had also been decided by this Tribunal in favour of the assessee in I. T. A. No. 43 of 2009 in the case of ACIT v. G. L. Coke Pvt. Ltd. vide order dated April 5, 2010. This Tribunal has already decided the issue in I. T. A. No. 50/ Gau/2009 in the case of ACIT v. Plast India Enterprises vide order dated April 5, 2010. In this decision, the hon'ble Tribunal held that the amount of transport subsidy, power subsidy, interest subsidy and insurance subsidy would go to reduce the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated May 29, 2013, reported in CIT v. Meghalaya Steels Ltd. [2013] 356 ITR 235 (Gauhati). Vide its order at page 281, the hon'ble High Court took the view that the cost of production got reduced by the subsidy received and therefore, the major profit of the assessee of the eligible unit will get increased and the assessee will be entitled on the increased profit for deduction under section 80-IC. Thus, it was contended that the issue relating to the eligibility of the deduction under section 80-IB/80-IC of the Income-tax Act, 1961, in respect of transport subsidy/power subsidy/interest subsidy/ insurance subsidy is covered by the judgment of the hon'ble jurisdictional High Court in the case of CIT v. Meghalaya Steels Ltd. and Pride Coke Pvt. Ltd. and for this our attention was drawn towards pages 66, 68, 104 and 135 of the paper book which contain the decision of the hon'ble jurisdictional High Court reported in CIT v. Meghalaya Steels Ltd. [2013] 356 ITR 235 (Gauhati). It was further submitted that the issue relating to the allowability of the deduction under section 80-IB/80-IC of the Income-tax Act in respect of central excise duty refund/value added tax remission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;derived from' has been used in section 80-IB, and it means that it is the business of the undertaking, which is the direct source from which the profits and gains are derived. In the case of a subsidy, the expression 'derived from', appearing in section 80-IB, would, logically extended, mean that the subsidy provided by the State, directly affects the business activity of the industrial undertaking. The Supreme Court in Mepco Industries Ltd.'s case [2009] 319 ITR 208 (SC) held that in each case, the nature of subsidy needs to be examined by the court. Consequently, without determining the nature of subsidy, including the object thereof, the impact of the subsidy on the operation of the industrial undertaking cannot be determined. The Supreme Court in Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC) lays down an immensely important aspect of a subsidy, vis-a-vis, liability to pay tax. What the Supreme Court clarifies is that when a subsidy is given for the purpose of setting up of an industry, such a subsidy is a capital receipt. When, however, the subsidy is given for the purpose of operating an industry more profitably, the subsidy would be revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he one hand, and the profits earned and gains made, by the industrial undertakings, on the other. Such a direct nexus could not but be termed as the first degree nexus between the two, namely, the transport subsidy, on the one hand, and the resultant profits and gains on the other. (b) The Industrial Policy, 1997, as extended by the Industrial Policy of Assam, 2003, provided for power subsidy to be given to eligible industrial units for a period of 5 years from the date of commercial production, the power subsidy being available in the form of reimbursement of fully paid power bills with certain ceiling. When the cost of production is reduced by granting subsidy on electricity charges, it necessarily helps the industry to run more profitably. Here again, a direct nexus between the power subsidy, on the one hand, and the cost of production, on the other stood well established. Consequently, the profits earned and the gains made from the industrial undertakings concerned will amount to profits and gains derived from, or derived by, the industrial undertakings concerned entitling the assessees to claim deduction under section 80-IB or section 80-IC, as the case may be. (c) The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee dated March 19, 2010 and April 5, 2010, through which we have gone into. The issue relating to the central excise duty refund is duly covered by the decision of this Tribunal in the case of CIT v. Meghalaya Steels Ltd. while the decision on the issue of value added tax/sales tax remission is duly covered by the following decisions : S. No. I. T. A. No. Date of order Issue Name of the assessee i. 46/Gau/2009 19-03-2010 Central excise refund Meghalaya Steels Ltd. ii. 202/Gau/2008 19-03-2010 Central excise refund Satyam Ispat Ltd. iii. 50/Gau/2009 05-04-2010 Central excise refund and VAT remission Plast India Enterprises Pvt. Ltd. iv. 43/Gau/2009 05-04-2010 VAT remission G. L. Coke Pvt. Ltd. v. 58/Gau/2009 05-04-2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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