TMI Blog2021 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... idy, power subsidy and insurance subsidy are revenue receipts which are reimbursed to the assessee for elements of cost relating to manufacture and sale of its products; there is certainly a direct nexus between the profits and gains of the industrial undertaking or business and such subsidies and therefore, the amount received by the assessee as subsidies qualify for deduction under Section 80IB and 80IC. The assessee succeeds and claim of the assessee in respect of deduction u/s 80IC of the Act in respect of subsidy (transport subsidy, power subsidy and interest subsidy) should be granted and the AO is directed to do so. - Decided in favour of assessee. - I.T.A. No. 114/Gau/2020 - - - Dated:- 5-3-2021 - Shri A. T. Varkey, JM F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (working capital) of ₹ 2,42,245/- and interest subsidy (term loan) of ₹ 2,20,000/-. The AO noted that the assessee has claimed this income as business income. According to AO, he asked the assessee to explain as to why this subsidy income should be allowed as deduction u/s 80IC of the Act. And section 80IC of the Act reads as under: (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction form such profits and gains, as specified in sub-section(3). 4. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the Hon ble High Court reiterated the decision of the Apex Court in Liberty India vs. CIT (2009) 317 ITR 218. According to AO, the Hon ble Supreme Court has observed that the Act broadly provides for two types of tax incentives namely investment-linked investments and profit linked incentives. Chapter-VIA of the Act provides for incentives in the form of tax deduction which belong to the category of profit linked incentives. According to AO, the Hon ble Court held that what attracts incentives under Section 80IB of the Act is the generation of operational profits. Section 80IB of the Act therefore provides for allowing of a deduction in respect of profits and gains derived from the business of the assessee and Parliament intended to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. 8. I have heard both the parties and perused the records. The facts stated by the AO is not repeated for the sake of brevity. The AO as well as the Ld. CIT(A) have decided the subsidy issue on the strength the decision of Hon ble Jurisdictional High Court (Guwahati High Court) in the case of CIT vs. Meghalaya Steel Ltd. reported in 332 ITR 91 (Gau). It was pointed out by the Ld. A.R of the assessee Shri Jay Prakash Gupta, CA that the Hon ble Guwahati High Court has reviewed this order and recalled it which order has been reported in 358 ITR 551 (Gau). According to Ld. A.R this decision of Hon ble Guwahati High Court was challenged by the Department before Hon ble Supreme Court which was rejected and this is reported in 377 ITR 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be liable to pay income tax on the increased profit. Conversely put, the subsidies serve no purpose if he has to pay increased tax on the profits, which he has made, because of the operational subsidies received by him. Situated thus, there can be no escape from the conclusion that the subsidies, in question, being operational in nature, help the assessee concerned earn profits and the profits, so earned, because of the subsidies, in question, are deductible in terms of the provisions of Section 80IB of the Act. 9. I note that the aforesaid decision of the Hon ble Guwahati High Court was confirmed by the Hon ble Apex Court [CIT vs. Meghalaya Steel Ltd. [2016] 383 ITR 217] in favour of the assessee by holding as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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