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2015 (12) TMI 125 - ITAT KOLKATA

2015 (12) TMI 125 - ITAT KOLKATA - TMI - Deduction u/s. 80IC on transport subsidy and interest subsidy - Held that:- As decided in CIT Vs. Meghalaya Steels Ltd. & Pride Coke Pvt. Ltd. [2013 (7) TMI 175 - GAUHATI HIGH COURT] under this Scheme, the insurance premium paid by eligible industrial units (under such scheme), set up in the North Eastern Region, are reimbursed by the nodal insurance company - The insurance subsidy, thus, helps in reducing the running cost of the industrial unit concerned .....

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0/Kol/2012, CO No.104/Kol/2013 - Dated:- 17-9-2015 - Mahavir Singh, JM And M Balaganesh, AM For the Petitioner : Shri B Mukhopadhyay, JCIT, Sr. DR For the Respondent : Shri S Jhajharia, FCA ORDER Per Shri Mahavir Singh, JM This appeals by revenue is arising out order of CIT(A), Shillong in appeal No. Shill-80/2007-08 dated 01.11.2011. Assessment was framed by ACIT, Circle-Shilong u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for AY 2005-06 vide its orde .....

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rived from Industrial Undertaking or not. For this, revenue has raised following ground no. 1 and assessee has raised following ground no. 1: Revenue s ground: "1. That on the facts and in the circumstances in the case, the Ld. CIT(A) has erred in law in allowing deduction u/s. 80IC of the I T Act in respect of Insurance Claim of ₹ 9,52,000/- and receipts from sale of salvages from fire of ₹ 3,25,988/- by holding that these are income derived from industrial undertakings, withou .....

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rcumstances the appellant is fully eligible for deduction u/s. 80IC on the aforesaid sums and in view of the facts and in the circumstances it may kindly be held accordingly." 3. Briefly stated facts are that the assessee is engaged in the business of manufacturing of iron and steel products. The assessee Meghalaya Sova Ispat Alloys (P) Ltd. is a Public Limited Co. having its registered office and factory at EPIP, Byrnihat gate No. 6 in Ri-bhoi district, Meghalaya. That the Ministry of Indu .....

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l policy, 1997 assessee is registered and incorporated on 10.04.2001 under the Companies Act, 1956 in the State of Meghalaya. That the assessee set up manufacturing units for manufacturing Ferro Silicon and commenced its commercial production on 05.04.2003 as per the assurance given by the Ministry of Industries, Govt. of India and Govt. of Meghalaya duly issued Single Window Agency clearance bearing No. M/Dind/Genl.70/99/130 Dt. 21.03.2001. That the assessee is eligible under the N.E. Industria .....

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Sales Tax exemption and other subsidies allowed by the State Govt. and an Eligibility Certificate under Meghalaya Industrial Policy, 1997 is issued by the Govt. of Meghalaya through Meghalaya Industrial Development Corporation Ltd. Shillong through Eligibility Certificate bearing Ref. No. MIDC (Gen) 368/2001/Pt/III/Registration/3058 Dt. 04/11/2004. In view of the above, the assessee claimed deduction u/s. 80IC of the Act on the following items: "(i) Transport subsidy ₹ 95,50,289/- (ii .....

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s under: "6.4. I have considered assessee s submissions. It is seen that the insurance premia have been deducted by the assessee arrived at the profit of the Industrial Undertaking consistently and department has also accepted this treatment in the past. This would mean that the expenses towards insurance premia are relatable to the industrial unit. Therefore, it is only logical that any insurance claim received by the assessee is also treated as income relatable to the industrial unit. The .....

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cer s observation that the product is no longer usable in the production process has no relevance in deciding this issue. Therefore, in my view, the income received from the sale of by-product should be treated as income derived from the industrial undertaking and deduction u/s. 80IC should be allowed in respect of the same." But, he disallowed the claim of deduction u/s. 80IC of the Act, on transport subsidy and interest subsidy. Aggrieved against the allowance of deduction, revenue came i .....

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finding of the Tribunal that there was a direct nexus between the subsidies, on the one hand, and the profits and gains derived by, or derived from, the industrial undertakings concerned. This finding was not purely a finding of fact inasmuch as the finding had been reached on the interpretation of the schemes of subsidies. The assessee was entitled to claim deduction either under section 80-IB or under section 80-1C on the transport subsidy, interest subsidy, power subsidy and insurance subsidy .....

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rned and similarly, the transport subsidy, on the finished goods, too, help in reduction of the cost of manufacturing of the industrial unit concerned inasmuch as subsidy on transportation of the finished goods was promised to be given on the finished goods actually produced by the industrial unit in accordance with the manufacturing programme approved by the Government concerned. Thus, it was transparent that there was a direct nexus between the transport subsidy, on the one hand, and the profi .....

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able 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, .....

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the cost of manufacturing or production activities and establish thereby direct and the first degree nexus between the industrial activities of the assessee, on the one hand, and the interest subsidy on the other, received by the assessee and, in consequence thereof, since the interest subsidy results into profits and gains derived from or derived by, an industrial undertaking, there is no reason as to why such profits and gains, earned by an industrial undertaking on the strength of such a subs .....

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