2018 (9) TMI 1011 - AT - Income Tax

Deduction of interest subsidy under section 80IC - Hed that - This issue is squarely covered by the decision in the case of CIT vs. Meghalaya Steels Ltd 2016 (3) TMI 375 - SUPREME COURT which was also considered by Tribunal in assessee s own case for AY 2010-11 2017 (3) TMI 951 - ITAT MUMBAI , wherein exactly identical issue was considered that the impugned amount was received back by the assessee from banks under the scheme of Ministry of Textile in respect of reimbursement out of the actual interest first paid to the assessee to the banks. These facts have not been disputed by the Ld. DR before us. Under these circumstances, we find that judgment of Hon ble Supreme Court in the case of Meghalaya Steels Ltd. (supra) squarely covers the issues involved. Thus, we find no need for making interference in the order passed by Ld. CIT(A) wherein claim made by the assessee was allowed by Ld. CIT(A) - Decided against revenue

Summary

Issues:
- Appeal against the order of CIT(A) directing AO to allow deduction of interest subsidy under section 80IC of the Income Tax Act, 1961.

Analysis:
1. The Revenue appealed against the CIT(A)'s order directing the AO to include interest subsidy for computing deduction under section 80IC of the Act. The Revenue contended that the source of the subsidy is the government scheme, not the eligible undertaking, and therefore should not be considered for deduction under section 80IC.

2. The CIT(A) allowed the deduction based on the decision of the Hon'ble Guwahati High Court in the case of CIT vs. Meghalaya Steels Ltd. The CIT(A) noted that the interest subsidy received by the assessee was a refund/reimbursement of actual interest paid to banks, not income, and hence should be excluded while allowing the deduction under section 80IC. The CIT(A) relied on accounting standards and previous decisions to support the allowance of the claim.

3. The Tribunal found the issue to be squarely covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd. The Tribunal referred to a previous decision in the assessee's case for AY 2010-11 where a similar issue was decided in favor of the assessee. The Tribunal upheld the CIT(A)'s order based on the Supreme Court's judgment, affirming that the interest subsidy should be considered as reducing operational costs, not as income, and therefore allowed the deduction under section 80IC.

4. The Tribunal dismissed the Revenue's appeal as the facts were identical to the previous case and the issue was already settled by the Supreme Court's decision. The Tribunal upheld the CIT(A)'s order, emphasizing that the interest subsidy was reimbursement of costs and should not be treated as income for the purpose of deduction under section 80IC.

5. Ultimately, the Tribunal concluded that the appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld based on the legal principles established by the Supreme Court and previous decisions. The judgment was pronounced in open court on 04-09-2018.