2011 (5) TMI 955 - AT - Income Tax

Summary

Issues involved: Appeal against order of Commissioner of Income-tax (A) u/s 80IA/80IB for assessment year 2004-05 regarding computation of disallowance on freight subsidy.

Summary:

1. Denial of deduction under section 80IA/80IB:
The assessee appealed against denial of deduction under section 80IA/80IB of the Income-tax Act related to freight subsidy. The Tribunal directed the Assessing Officer to recompute the deduction by excluding the freight subsidy after setting off directly linked expenses. The only question was the quantum of exclusion of freight subsidy amount.

2. Computation of income and expenses:
The Assessing Officer computed income by totaling net profit, freight paid, freight subsidy accrued minus freight paid. The income was calculated at Rs. 4,63,434/- and expenses were allowed at Rs. 27,500/-. The CIT(A) upheld the order, stating the assessee failed to prove any ambiguity in the calculation.

3. Tribunal's decision and re-computation:
The Tribunal set aside the issue of deduction under section 80IA/80IB on freight subsidy. The assessee's total expenditure on freight paid was Rs. 23,02,756/- with a subsidy of Rs. 12,33,836/- received. After setting off the subsidy against expenses, it resulted in a loss, thus no adjustment was required in the profits eligible for deduction.

4. Scheme of Government subsidy:
The scheme in Himachal Pradesh entitled the assessee to receive 75% of the amount on account of expenditure incurred on freight as freight subsidy. The Tribunal allowed the deduction under section 80IA/80IB only on the exclusion of the freight subsidy from the profits of the business.

Conclusion:
The appeal of the assessee was allowed, and no adjustment was required in the profits eligible for deduction under section 80IA/80IB of the Act. The Tribunal directed the exclusion of the freight subsidy from the profits, as the assessee had not pressed for the allowability of the deduction on the freight subsidy received.

Note: The judgment was pronounced on 31st May 2011 by Ms. Sushma Chowla, Judicial Member, Appellate Tribunal ITAT Chandigarh.