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TMI Blog2010 (9) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... er sources beyond the first degree it is keeping this distinction in mind that it must be held that transport subsidy and Interest subsidy cannot be said to be "derived from" the industrial undertaking of the assessee. At best, It can only be ancillary to the profits and gains relatable to or "attributable to" the business of the industrial undertaking and not in the category of profit and gains ''derived from" its industrial activity. The payment of central excise duty has a direct nexus with the manufacturing activity and similarly, the refund of the central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsidy on capital … Rs. 6, 855.00 iii) Central Excise Refund … Rs. 2, 66, 53, 834.00 While computing its net profit as well as taxable income, the assessee took into account the above items as income for claiming deductions coder Section 80IB of the Income Tax Act, 1961 (for short, hereinafter called as "the Act"). 4 The Assessing Officer held that since the three items mentioned above were not profits and gains derived from its business, they cannot be included in the expression "profits and pains derived from any business" occurring under Section 80IB(1) of the Act and so the deductions claimed by the assessee were not allowable. 5. reeling aggrieved, assessee preferred an appeal and that was allowed by the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tie railway station nearest to the location of the industrial unit and thereafter the oust of movement by rend to the location of the industrial unit. Similarly, the subsidy on the transport cost of finished goods would he given on the basis of the movement by road by road from the location of the industrial unit to the nearest railway station and thereafter the cost of movement by railway to Siliguri would be taken into account. 7.1 Interest subsidy: A Notification dated 19th February, 1999 was issued by the Government of India announcing a scheme of Interest Subsidy on the working capital loan for industrial units in the North Eastern Region comprising the States of Assam, Arunachal Pradesh Manipur, Meghalaya, Mizoram, Nagaland and T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other source, not falling within the first degree, could in a sense be described as ancillary to the business of the assessee. 9 How does one explain or describe a subsidy? In Sahney Steel Press Works Ltd. vs. CIT (1997) 228 ITR 253, the Supreme Court explained the concept of a subsidy (generally) as a "helping hands provided to industries in their early days to enable them to come to a competitive level with other established industries. (See paragraph 13 of the Report). Subsequently, in paragraph 31 of the Report the Supreme Court, while dealing with subsidies granted after setting up of new industries and after commencement of production, described such subsidies as "an assistance given for the purpose of carrying on the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial activity. This was so held long back in Cambay Electric Supply Industrial Co. v. CIT [1978] 113 IIR 84. Therefore, while "attributable to" as used In some other sections of the Act, may cover sources of income beyond the first degree, "derived from" as used in Section 80IB of the Act Is not intended to cover sources beyond the first degree it is keeping this distinction in mind that it must be held that transport subsidy and Interest subsidy cannot be said to be "derived from" the industrial undertaking of the assessee. At best, It can only be ancillary to the profits and gains relatable to or "attributable to" the business of the industrial undertaking and not in the category of profit and gains ''derived from" its industrial activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty element to its customers. 16. Even assuming the refund does amount to Income in the hands of the assessee, it is a profit or gain directly derived by the assessee form its industrial activity. The payment of central excise duty has a direct nexus with the manufacturing activity and similarly, the refund of the central excise duty also has a direct nexus with the manufacturing activity. The issue of payment of central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of central excise duty and its refund. In the circumstances, we are of the opinion that Question No. 2 must be answered in the affirmative in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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