TMI Blog2011 (12) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of earning sales-tax benefit which has been received by the assessee under the scheme of the State Govt. We, therefore, find no merit in ground No.2 raised by the assessee and dismiss the same. - I.T.A. No. 4287/Mum/2010 - - - Dated:- 23-12-2011 - Shri P.M. Jagtap, Accountant Member and Shri R.S. Padvekar, Judicial Member Shri Jayesh Dadia : FOR THE APPELLANT Shri Shantam Bose : FOR THE RESPONDENT JUDGMENT: Per P.M. Jagtap, A.M. : This appeal filed by the assessee is directed against the order of learned CIT(Appeals)-12, Mumbai dated 27-03-2010 and the solitary issue arising out of the same relates to the disallowance made by the AO and confirmed by the learned CIT(Appeals) on account of assessee s claim for deduction u/s 80IA in respect of sales-tax benefit of ₹ 74,75,000/-. 2. The assessee in the present case is an individual who is engaged inter alia, in the business of power generation with the help of Wind Power Convertor in the name and style of his proprietary concern M/s Kohinoor Power Company. In the return of income filed for the year under consideration, deduction u/s 80IA(4) was claimed by the assessee to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Sterling Food vs. CIT 237 ITR 579 and that of Hon ble Madras High Court in the case of Pandian Chemicals 233 ITR 497, the AO held that the sales-tax incentive received by the assessee could not be considered as the profit derived from the eligible undertaking of the assessee and the amount of sales-tax incentive was excluded by him from the eligible profit of the said undertaking entitled for deduction u/s 80IA(4). The claim of the assessee for deduction u/s 80IA(4) thus was restricted by him to ₹ 3,11,604/- in the assessment completed u/s 143(3) vide an order dated 24-12-2008. 3. Against the order passed by the AO u/s 143(3), an appeal was preferred by the assessee to the learned CIT(Appeals) and the elaborate submissions were made on his behalf before the learned CIT(Appeals) in support of its claim that the sales-tax incentive being in the nature of profit derived from the eligible undertaking, was eligible for deduction u/s 80IA(4). It was also contended on behalf of the assessee as an alternative that if at all the sales tax incentive was to be excluded from the profits of the industrial undertaking eligible for deduction u/s 80IA, the same shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure which may be said to have been incurred in earning profits from sale of sales tax entitlement. The appellant s P L A/c. shows that the expenditure incurred is a under : Bank Interest 53,35,148/- Operation maintenance charges 31,27,950/- Administrative expenses 10,57,945/- This administrative expenses can at best be treated as incurred also for other sources of income by way of sale of sales tax benefits. The expenditure is apportioned in the ratio of income from sales tax benefits to the total income from the windmill division which is 43%. The total amount works out to ₹ 4,54,916/-. 12. In view of the above discussion it is held that the amount be reduced on account of income from sales tax benefit should be 74,75,000/- reduced by ₹ 4,54,916/- which works out to ₹ 70,20,084/-. The A.O. is directed accordingly. Still aggrieved by the order of the learned CIT(Appeals), the assessee has preferred this appeal before the Tribunal. 4. The learned counsel for the assessee submitted that for the purpose of claiming sales-tax incentive under the relevant scheme, the carrying on of manufacturing activity was a condition precedent. He contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains derived from the eligible business. It was held that the connotation of the words derived from is narrower as compared to that of the words attributable to and by using the expression derived from the Parliament intended to cover the sources not beyond the fist degree. It was held that DEPB/duty draw back are incentives which flow from the relevant schemes framed by the Central Govt. and they are not profits derived from eligible business but belong to the category of ancillary profits of such undertaking. It was held that the incentive received as per the scheme of the Central Govt., therefore, had no first degree connection with the industrial undertaking of the assessee and the immediate source of the same being the relevant scheme of the Central Govt., it could not be considered as profit eligible for deduction u/s 80IA/80IB. 7. Before us, the learned counsel for the assessee has relied on the decision of Mumbai Special Bench of ITAT in the case of MIRC Electronics Ltd. (supra) in support of the assessee s case. It is, however, observed that the said decision was rendered by the Tribunal on 22nd August, 2008 before the judgment in the case of Liberty India (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon ble Gauhati High Court and decided the issue in favour of the assessee. In the present case, the issue involved relating to sales-tax benefit or incentive under the relevant scheme of the Govt,. on the other hand, is similar to the one involved in question No.1 raised before the Hon ble Gauhati High Court in the case of Meghalaya Steel Ltd. (supra) relating to eligibility of transport subsidy and interest subsidy for deduction u/s 80IB which has been decided by the Hon ble Gauhati High Court against the assessee relying inter alia, on the decision of Hon ble Supreme Court in the case of Liberty India (supra). The decision of the Hon ble Supreme Court in the case of Meghalaya Steel Ltd. thus is also against the assessee in so far as the issue involved in the present case is concerned and respectfully following the same as well as the decision of Hon ble Supreme Court in the case of Liberty India (supra), we uphold the impugned order of the learned CIT(Appeals) confirming the action of the AO in disallowing the assessee s claim for deduction u/s 80IA(4) in respect of sales-tax benefit, the immediate source of which is the relevant scheme of State Govt. and not the elig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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