9911796707
TMI Blog2004 (7) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... As already pointed out, the grant of subsidy is linked with the incurring of the expenditure and, therefore, the receipt is not a separate source of income. The receipt is the business income of the undertaking and the same has rightly been taken into consideration as income of the undertaking under the said head of income. Our view is supported by the decision of Calcutta High Court in the case of Merinoply Chemicals Ltd.[ 1993 (8) TMI 29 - CALCUTTA HIGH COURT] . We accordingly see no infirmity in the order of the CIT(A) in having deleted the disallowance made by the AO. We, therefore, dismiss the appeal of the Revenue. Similar is the ground raised in Revenue's appeal for the asst. yr. 1997-98. The CIT(A) has allowed relief on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited by the assessee under the head 'freight subsidy' and deduction under s. 80-IA was calculated after taking into account the said subsidy. The AO relying upon the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC), held that the assessee was not entitled to deduction in respect of freight subsidy. The AO also referred to the decision of Supreme Court in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC), in support of the view. 4. Before the CIT(A), it was pointed out that the freight subsidy received by the assessee was to compensate the assessee for having set up an industrial unit in the backward area s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sterling Foods and that of the Madras High Court in the case of CIT vs. Viswanathan Co. (2003) 181 CTR (Mad) 335 : (2003) 261 ITR 737 (Mad). The decision of Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT has also been relied upon in support of the contention. 6. The learned counsel for the assessee, on the other hand, relied upon the order of the CIT(A). It has been contended that the Government reimburses the assessee 75 per cent of the cost of transport charges incurred for transportation of raw material, etc. As a result of the grant of subsidy granted by the Government, the expenditure on transportation is reduced and, therefore, the transport subsidy granted by the Government does not have any separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure, hilly terrain, long distance of raw material source and marketing centers resulting in substantive transport cost. As per the Scheme, 75 per cent of the cost incurred by the unit or the specified rates, whichever is lower, is reimbursed to the assessee. The assessee has received the transport subsidy to the extent of Rs. 10,55,869.69. The said amount has been taken into consideration in computing the profits and gains of the industrial undertaking. The AO has relied upon the decisions of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. vs. CIT and CIT vs. Sterling Foods in support of the finding that the subsidy received by the assessee does not fall within the ambit of profits and gains derived f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise referred to in sub-s. (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent of profits and gains derived from such business for the first five assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are operational subsidies and are of revenue character. Their Lordships accordingly held that the subsidy granted by the Government of the said nature is of revenue character and includible as income of the assessee. Thus, there is no doubt in our mind that the transport subsidy granted to the assessee was with a view to run the unit profitably and the nature of the subsidy is operational and cannot be segregated from the business of the industrial undertaking. Taking the totality of the facts and circumstances of this case into consideration, we are of the view that the transport subsidy granted to the assessee was rightly taken by the assessee into consideration in working out the profits and gains of business of the undertaking. As alr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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