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2014 (3) TMI 216 - AT - Income TaxAllowability of deduction u/s 80IA(4) of the Act Sales tax incentive Receipt not in proper form Held that - The assessee could not bring any distinguishing facts/decision The decision in Liberty India Vs CIT 2009 (8) TMI 63 - SUPREME COURT followed - sections 80IA and 80IB are a code by themselves and they provide for allowing of deduction in respect of profits and gains derived from the eligible business - the connotation of the words derived from is narrower as compared to that of the words attributable to and by using the expression derived from the Parliament intended to cover the sources not beyond the first degree - the incentive received as per the scheme of the Central Govt. had no first degree connection with the industrial undertaking of the assessee and the immediate source of the same being the relevant scheme of the Central Govt. thus, it could not be considered as profit eligible for deduction u/s. 80IA/80IB Decided in favour of Revenue. Admission of additional ground Held that - The CIT(A) has not admitted the additional ground on the pretext that the ratio of the decision of the Hon ble Supreme Court in the case of Goetze (India) Limited Versus Commissioner of Income-Tax 2006 (3) TMI 75 - SUPREME Court precluded him to do so but the decision of the Hon ble Supreme Court does not fetter on the powers of the CIT(A) to decide additional plea which was not taken before the AO - to this limited extent, the matter is remitted back to the CIT(A) for deciding the additional ground under Rule 27 of the Appellate Tribunal Rules , 1963 Decided in favour of Assessee.
Issues:
Appeal against CIT(A) orders for A.Y. 2007-08 and 2008-09 regarding deduction u/s. 80IA(4) on sales tax incentive. Analysis: 1. Common Grounds and AO's Observation: The Revenue appealed against CIT(A)'s decision directing the AO to allow deduction u/s. 80IA(4) to the assessee on sales tax incentive. The AO disallowed the claim as the receipt was not considered income derived from the business activity. 2. Assessee's Explanation: The assessee received Rs. 74,75,000 on sale of sales-tax benefit for its Wind Power Project under the State Government's policy. The AO disagreed, stating the income from sales tax incentive was not derived from the industrial undertaking. 3. CIT(A)'s Decision: The CIT(A) relied on the Mirc Electronics Ltd. case and held that the gain from the sales tax incentive is income derived from the industrial undertaking of electricity generation and distribution, eligible for deduction u/s. 80IA(4)(iv) of the Act. 4. Additional Ground on Capital Subsidy: The assessee argued that the sales tax incentive should be treated as a capital subsidy and not taxable. However, the CIT(A) dismissed this ground as not admitted, citing the Goetze India Ltd. case. 5. Tribunal's Decision: The Tribunal noted a previous ruling against the assessee in a similar case and upheld the Revenue's appeal. It referenced the Liberty India case and held that the incentive received did not have a first-degree connection with the industrial undertaking, thus not eligible for deduction u/s. 80IA/80IB. 6. Additional Ground Restoration: The Tribunal restored the additional ground on capital subsidy back to the CIT(A) for a decision in accordance with the law, disagreeing with the CIT(A)'s decision to not admit the plea based on the Goetze India case. 7. Final Decision: The appeals filed by the Revenue were allowed, and the additional plea raised by the assessee under Rule 27 of the Appellate Tribunal Rules, 1963, was allowed for statistical purposes. In conclusion, the Tribunal ruled in favor of the Revenue, disallowing the deduction u/s. 80IA(4) on the sales tax incentive, based on previous judicial decisions and the lack of a direct connection between the incentive and the industrial undertaking. The additional ground on considering the incentive as a capital subsidy was sent back for reconsideration by the CIT(A).
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