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2017 (2) TMI 551 - ITAT MUMBAI

2017 (2) TMI 551 - ITAT MUMBAI - TMI - Availability of deduction of u/s 80 IA on the subsidy received - Held that:- The assessee’s claim of deduction u/s 80 IA (4) qua the amounts received towards Sales Tax incentive and subsidy has to be considered in the light of the ratio laid down by the honourable Supreme Court in case of CIT Vs. M/S Meghalaya Steels Ltd. (2016 (3) TMI 375 - SUPREME COURT) wherein held so long as profits and gains emanate directly from the business itself, the fact that the .....

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essing officer to consider assessee’s claim of deduction u/s 80 IA (4) in the light of the ratio laid down in the decision of the honourable Supreme Court referred to above. We may further observe, the assessing officer must also consider assessee’s claim on the quantum of subsidy actually received from the MSED - ITA no.204/Mum./2011, ITA no.6656/Mum./2011, ITA no.4977/Mum./2011 - Dated:- 10-2-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER For The Assessee : .....

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d the nature of subsidy, whether capital or revenue. 3. However, at the outset LD. AR under instruction of his client did not wish to press ground no. 2. Accordingly, ground no. 2 is dismissed as not pressed. 4. As far as ground no. 1 is concerned briefly the fact are, the assesse is an individual. He derives income from various sources including from the business of generation of power by wind mills. In course of assessment proceedings the assessing officer while verifying the return of income .....

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bsidy by MEDA were for encouraging installation of wind energy generation unit in Maharashtra. Referring to the provisions of Section 80 IA and 80 IB the assessing officer observed that the deduction under the said provisions is allowable on the profits derived from the industrial undertaking and it is not sufficient if a commercial connection is established between the profits earned and the industrial undertaking. According to him profits derived from the business of an industrial undertaking .....

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ve and MEDA subsidy. Being aggrieved of the disallowance made the assessee preferred appeal before the CIT (Appeal). Ld. CIT (Appeal) upheld the disallowance made by the assessing officer more or less on identical reasoning relying upon following decision. 1. Sterling Foods Vs. CIT 237 ITR 579. (SC) 2. Hindustan Liver Ltd Vs. CIT 239 ITR 297. 3. CIT Vs. Kiran Enterprises 228 CTR 101. (HP) 5. The Ld. AR submitted, income received by way of Sales Tax incentive and subsidy have a direct nexus to th .....

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assesse on account of subsidy has to be disallowed it is to be restricted to ₹ 10 lakh and not 20 lakh. 6. The Ld. DR on the other hand relied upon the reasoning of the assessing officer of CIT(Appeals). 7. We have heard the parties and perused the materials on record. Undisputedly, the assesee has set up wind mills for generation of power. As per Section 80 IA (4) (iv) an undertaking set up in any part of India for generation or generation and distribution of power within the specified da .....

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a subject of matter of dispute before us as the assesse has preferred not to press such issue as raised in ground no. 2. Therefore, we have to proceed on the footing that Sales Tax incentive and subsidy from MEDA are revenue in nature. That being the case now we have to decide whether the amounts received towards Sales Tax incentive and subsidy are eligible for deduction u/s 80 IA (4). The departmental authorities have rejected assessee s claim of deduction on the reasoning that such income is .....

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dies received are towards reimbursement of element of cost relating to manufacture and sale of their product, that can certainly be said to have a direct nexus between profit and gains of the industrial undertaking or business, and reimbursement of such subsidy. While dispelling the argument of the department that immediate source of subsidy is the Government and not the business of assesse, the honourable Supreme Court observed, while considering applicability of the provisions contained u/s 80 .....

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o mention here; in the aforesaid judgment the honorable Supreme Court was considering eligibility of deduction u/s 80 IB in relation to Sales Tax incentive as well as various subsidies. While concluding the honourable Supreme Court in paragraph 28 of the judgement observed as under:- 28. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the .....

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iled only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head "profits and gains of business or profession". If cash assistance received or receivable against exports schemes are included as being income under the head &qu .....

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d opinion the assessee s claim of deduction u/s 80 IA (4) qua the amounts received towards Sales Tax incentive and subsidy has to be considered in the light of the ratio laid down by the honourable Supreme Court in case of CIT Vs. M/S Meghalaya Steels Ltd. (supra). Since the aforesaid decision of the honourable Apex Court was not available before the AO and the CIT appeal, we deem it appropriate to set aside the impugned order of CIT (appeal) and restore the matter back to the file of the assess .....

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stical purpose. ITA no.6656/Mum./2011 Dempartment s Appeal for A.Y. 2006-07 9. The registry has pointed out delay of 60 days in filing the appeal by the department. However, in letter dt. 07-10-2011 of the assessing officer, which is placed on record, it is stated that, the date of communication of appeal order has been inadvertently shown as 06-06-2011 instead of 08-08-2011 in column no. 9 of form 36. In view of the aforesaid clarification of the assessing officer, ignoring the delay pointed ou .....

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