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TMI Blog2014 (3) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... tingent upon establishment of the unit, but, for the purpose of assisting the assessee in carrying out the business operation and the subsidy is given subject to strict compliance of the conditions given in Notification No.G.O.Ms.No.29, Energy (A2), 31.01.1995 – Thus, the receipt has to be treated as Revenue receipt, as it is contingent upon the commencement of the production and to enable the assessee to run the business more profitably – Decided against Assessee. Deduction u/s 80HHC of the Act - Scrap sales - Whether scrap sales to be included in the total turnover for the purpose of deduction u/s 80HHC of the Act – Held that:- The decision in Commissioner of Income-tax Vs. Ashok Leyland Ltd. 2007 (2) TMI 151 - HIGH COURT, MADRAS] followed - both sides agree that scrap sales is not to be included in the total turnover for the purpose of computing the deduction under Section 80HHC of the Act – thus, the order of the Tribunal set aside – Decided in favour of Assessee. - Tax Case (Appeal) No.953 of 2007 - - - Dated:- 14-2-2014 - MRS. CHITRA VENKATARAMAN AND MR. T.S.SIVAGNANAM, JJ. For the Appellant : Mr. C.V. Rajan, Mr.Venkata Narayanan, M/s.Subbaraya Aiyar For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that subsidy had not been granted for the very setting up of the business; the Supreme Court held that the subsidy received for power consumption was of revenue in nature. The Assessing Officer, after considering the nature of subsidy granted to the assessee held that their case is also similar to that of the case of Sahney Steel (cited supra) and the purpose of power tariff concession is to enable those who set up high tension industries in the notified area to carry on their business profitably and the subsidy provided by the Government is not for meeting any capital costs of setting up of a business and therefore, the power tariff concession received by the assessee is clearly a revenue receipt and correctly offered to tax and no deduction is called for. 4. As regards the deduction under Section 80HHC of the Act, in respect of scrap sales, the Assessing Officer has followed the earlier year's order and included the same in the total turnover of the assessee for computing deduction under Section 80HHC of the Act. 5. The assessee, being aggrieved by such order dated 31.01.2001 preferred appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity bills and rejected the case of the assessee. 8. With regard to the scrap sales, the Tribunal following the decision in the case of JCIT Vs. Virudhunagar Textiles Mills Ltd., reported in 97 ITD 306, held that it has to be included in the total turnover in the denominator. 9. Accordingly, the Tribunal, by common order dated 10.11.2006 rejected the appeals. Aggrieved by this, the assessee has preferred this Tax Case (Appeal) raising the following questions of law:- 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Power Tariff Incentive received by the appellant from the Government is a revenue receipt liable to tax ? 2. Whether on the facts and circumstances of the case, the Tribunal was justified in not appreciating that the subsidy was received by the appellant prior to commencement of production and hence it is a capital receipt ? 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that scrap sales should be included in the total turnover for the purpose of computing deduction under Section 80HHC? 10. Mr. C.V. Rajan, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is pursuant to the industrial policy announced by the Government of Tamil Nadu under which number of concessions were extended as incentive to carry on the industrial development. One such concession/subsidy is the power tariff concession. The tariff rates were fixed pursuant to the statutory notification. In terms of Section 4 of the Tamil Nadu Revision of Tariff Rates on Supply of Electrical Energy Act, 1978 (Tamil Nadu Act 1 of 1979), the State Government may after taking into account the cost of production of energy, and such other matters as may be prescribed, by notification, amend the provisions of the Schedule to the Act. The Schedule to the Act consists of several Parts. Part-A deals with High Tension Supply . The Notification under which the assessee claims power tariff concession in G.O.Ms.No.29 Energy (A2) 31st January 1995, has been issued in exercise of the powers conferred under Section 4 of the Tamil Nadu Revision of Tariff Rates on Supply of Electrical Energy Act, 1978 and the said notification amended the earlier notification and came into force on 01.02.1995. 15. On a careful reading of the Notification, it is evidently clear that the notification impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision has been reversed by the Honourable Supreme Court in the case of Commissioner of Income Tax Vs. Rajaram Maize Products reported in (2001) 251 ITR 427, wherein, the Honourable Supreme Court, following the decision of Sahney Steel case (supra), held that power subsidies are of revenue nature and have to be taxed accordingly. We also find that the terms under which the subsidy was given in the present cases clearly suggest that the subsidy was of a revenue nature inasmuch as it went towards reduction of the electricity bills. 18. Further, the assessee has recorded in the books of account during the relevant previous year that the power tariff concession to the tune of Rs.3,97,15,795/- has been received as incentive in the form of tariff concession vide G.O.Ms.No.29, Energy (A2) 31st January 1995 to encourage setting up of new high tension industries in area other than Madras Metropolitan areas, wherein, the assessee setup 2 units one at Sholinghur and another one at Polambakkam and the assessee treated the receipt of incentive as revenue and credited the same to Power and Fuel Account , whereas, for income tax purpose, it claimed as capital in nature relying upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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