1982 (6) TMI 8 - HC - Income Tax

Summary

Issues:
Interpretation of Section 80E of the Income-tax Act, 1961 regarding the eligibility of cash subsidy received by the assessee on exports as attributable to a priority industry for relief.

Analysis:
The judgment of the High Court of Madras addressed the question of whether the cash subsidy received by the assessee on exports could be considered as attributable to a priority industry eligible for relief under Section 80E of the Income-tax Act, 1961. The assessee, a limited company engaged in the manufacture of specific items falling under a priority industry mentioned in Schedule V of the Act, claimed relief under Section 80E for profits related to cash subsidies granted by the Government to encourage exports. The Department initially denied this claim. The Tribunal, following a previous decision, held that the cash subsidy should be regarded as profits attributable to the priority industry. The Tribunal relied on the interpretation of the phrase "attributable to" as discussed in previous cases such as Shardlow India Ltd. v. CIT [1981] 128 ITR 571 and Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. The Supreme Court had clarified that the phrase "attributable to" is broader than "derived from," expanding the scope of what can be considered as profits related to a priority industry. The High Court agreed with the Tribunal's decision, emphasizing that the cash subsidy, being a profit substitute derived from the priority industry, should be treated as "profits attributable" to the industry under Section 80E. The Court concluded in favor of the assessee, stating that the cash subsidy was directly linked to the priority industry and thus eligible for relief under Section 80E. The Court's decision was based on the principles established in previous rulings and the specific circumstances of the case, where the cash subsidy was a direct result of the assessee's engagement in the priority industry.

This detailed analysis of the judgment provides a comprehensive overview of the legal interpretation and application of Section 80E of the Income-tax Act, 1961 in the context of cash subsidies received by an assessee engaged in a priority industry for exports.