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Principal Commissioner of Income Tax, Shillong Versus Shree Mahabir Foods Limited

2016 (10) TMI 396 - MEGHALAYA HIGH COURT

Entitlement to deduction under Section 80IC on Transport subsidy received - whether subsidies goes to reduce the expenditure actually incurred and hence they ought to be regarded as operational profits? - Held that:- It is not the case of Revenue that in the present case, the referred transport subsidy has no bearing on the cost of production of the industrial undertaking of the respondent assessee. In this view of the matter and for the law declared by the Hon’ble Supreme Court in Commissioner .....

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observe that in question No.(i) as formulated, only Section 80-IC has been mentioned, probably with reference to the question as formulated in the memo of appeal, whereas essentially the claim had been with reference to Section 80-IB (4) of the Act of 1961. With this clarification, answers to the questions involved in this matter are in the affirmative, that is to say that the Tribunal was legally justified in regarding the transport subsidy as part of operational profits; and was justified in .....

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ome Tax Appellate Tribunal, Guwahati Bench, Guwahati [ ITAT ] in the Appeal No.83/Gau/2012, was initially admitted on 27.08.2015 on the following substantial questions of law: (i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified and correct in law in holding that the assessee is entitled to deduction under Section 80IC of the IT Act, 1961 on Transport subsidy amounting to ₹ 35,04,657/- received by it? (ii) Whether the learned Income Tax Ap .....

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ssment Year 2009-2010, it had claimed deduction of a sum of ₹ 35,04,657/- under Section 80-IB of the Act of 1961 towards transport subsidy received from the Government. The learned Assessing Officer, however, did not accept the claim of the assessee and, while disallowing the deduction, considered the said amount as other taxable income. In appeal, the learned Commissioner of Income Tax, Shillong endorsed the views of the Assessing Officer. Being aggrieved, the assessee preferred the said .....

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ble for deduction under Section 80-IB or under Section 80-IC as the case may be. Thus, following the decision of the jurisdictional High Court, the ITAT allowed the appeal while holding that the assessee was entitled to claim deduction on the amount of transport subsidy. Upon taking up this matter for hearing, learned counsel for the appellant Revenue has frankly submitted that the decision of the Tribunal is essentially based on the ratio of the decision in Meghalaya Steels Ltd. case (supra); a .....

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ucible from the cases of Sahney Steel (supra), Rajaram Maize (supra) and Eastern Electro (supra), is that when a subsidy, granted by Government, is operational in nature, which helps in generation of profits for any industrial undertaking, such a profit is, indeed, covered by the provisions embodied in Section 80IB or 80IC, as the case may be. As regards transport subsidy, the Hon ble Gauhati High Court clearly held as under:- 79. What logically follows from the above discussion is that subsidy, .....

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rt subsidy, on the finished goods, too, held in reduction of the cost of manufacturing of the industrial unit concerned inasmuch as subsidy on transportation of 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. 80. When the transport subsidy, so received, both, on the transportation of the raw materials as well as transportation of the finished goods, does go .....

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n the one hand, and the resultant profits and gains, on the other. 82. Unless, therefore, the Revenue succeeds in showing that the transport subsidy has no bearing on the cost of production of the industrial undertakings, the claims for deductions, which have been made by the assessee-respondents as recipient of transport subsidy, cannot but have to be necessarily held to be covered by Section 80IB or 80IC. ……… ……… ……… …&helli .....

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d, and has rightly been treated, by the learned Tribunal, to be profits and gains derived from, or derived by, the industrial undertaking concerned. ……… ……… ……… …….. 94. Put shortly, there is an existence of direct nexus between transport subsidy, on the one hand, and the manufacturing/production activities of industrial undertaking, on the other, stands well established. Unless shown otherwise, the industrial undertaki .....

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ether the profits and gains are derived from the business. So long as profits and gains emanate directly from the business itself, the fact that the immediate source of the subsidies is the Government would make no difference, as it cannot be disputed that the said subsidies are only in order to reimburse, wholly or partially, costs actually incurred by the assessee in the manufacturing and selling of its products. The profits and gains spoken of by Sections 80-IB and 80-IC have reference to net .....

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