2013 (11) TMI 1524 - AT - Income Tax

Benefit of deduction under section 80-IC denied - transport subsidy interest subsidy and power subsidy - Held that - Respectfully following the decision of Commissioner of Income-tax Versus Meghalaya Steels Ltd. and M/s Pride Coke Pvt. Ltd. 2013 (7) TMI 175 - GAUHATI HIGH COURT we allow the appeals of the assessee and direct the Assessing Officer to allow the deduction to the assessee under section 80-IC treating all the aforesaid subsidies received to be part of the business profit and gains from the industrial undertaking in accordance with law. Thus the grounds taken by the assessee are allowed. - Decided in favour of assesse.

Summary

Issues Involved:
1. Eligibility of deduction under section 80-IC of the Income-tax Act, 1961, for various subsidies/incomes.
2. Eligibility of deduction under section 80-IC for value added tax (VAT) remission.
3. Eligibility of deduction under section 80-IC for central excise duty refund.

Detailed Analysis:

1. Eligibility of deduction under section 80-IC for various subsidies/incomes:

The appeals for the assessment years 2008-09 and 2009-10 involve the issue of whether the assessee is entitled to claim deductions under section 80-IC for transport subsidy, interest subsidy, power subsidy, and insurance subsidy. The Tribunal noted that these issues had been previously decided in favor of the assessee by the jurisdictional High Court in the case of CIT v. Meghalaya Steels Ltd. and CIT v. Pride Coke P. Ltd. The High Court held that subsidies reducing the cost of production have a direct nexus with the profits and gains derived from the industrial undertaking, making them eligible for deduction under section 80-IC. The Tribunal followed this precedent and directed the Assessing Officer to allow the deductions for the subsidies as part of the business profits and gains from the industrial undertaking.

2. Eligibility of deduction under section 80-IC for value added tax (VAT) remission:

For the assessment years 2008-09 and 2009-10, the Revenue contested the deduction claims under section 80-IC for VAT remission. The Tribunal referred to its previous decisions, including the case of ACIT v. Plast India Enterprises Pvt. Ltd., where it was held that VAT remission has a direct nexus with the manufacturing business of the assessee and is eligible for deduction under section 80-IC. The Tribunal noted that the Revenue had not filed any appeals against these decisions, and thus, the issue was considered settled in favor of the assessee. Consequently, the Tribunal dismissed the Revenue's appeals on this ground.

3. Eligibility of deduction under section 80-IC for central excise duty refund:

The Revenue also appealed against the deduction claims under section 80-IC for central excise duty refunds for the assessment years 2008-09 and 2009-10. The Tribunal referred to its earlier rulings, including the case of ACIT v. Meghalaya Steels Ltd., where it was established that central excise duty refunds have a direct nexus with the manufacturing activity of the assessee and are eligible for deduction under section 80-IC. The Tribunal found that the issue was consistently decided in favor of the assessee in multiple cases and therefore dismissed the Revenue's appeals on this matter as well.

Conclusion:

The Tribunal allowed the appeals filed by the assessee for both assessment years, granting deductions under section 80-IC for transport subsidy, interest subsidy, power subsidy, insurance subsidy, VAT remission, and central excise duty refund. The Revenue's appeals were dismissed, upholding the Tribunal's and High Court's previous decisions that these subsidies and refunds directly affect the cost of production and are integral to the profits and gains of the industrial undertaking, making them eligible for deductions under section 80-IC. The order was pronounced on November 11, 2013.