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TMI Blog2015 (9) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the weighted average price for valuation of closing stock of raw materials and similar addition made for A.Y.2004-05 in the hands of the assessee had been deleted by this Tribunal in assessee’s own case reported in [2008 (1) TMI 424 - ITAT CALCUTTA-A] - Decided in favour of assessee. - ITA No.1327/Kol/2011 - - - Dated:- 26-8-2015 - Shri Mahavir Singh and Shri M.Balaganesh, JJ. For the Appellant : Shri Amitava Bhattacharjee,JCIT,Sr.DR For the Respondent : Shri Manish Tiwari, FCA ORDER Per Shri M.Balaganesh, AM This appeal of revenue arises out of order of ld.CIT(A)-I, Kolkata in Appeal No.606/CIT(A)-I/Cir-3/07-08 dated 15.07.2011 for A.Y.2005-06 2. The first issue to be decided is as to whether the ld. CIT(A) is correct in directing the ld. AO to grant deduction u/s 80IB of the Act on account of transport and other subsidies amounting to ₹ 52,22,555/-. 3. The brief facts of the case are that the assessee company started its factory unit at Export Promotional Industrial Park, Byrnihat, Meghalaya for manufacture of ferro alloys and in order to avail incentive declared by Government of Meghalaya in its industrial policy formulated in 1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidy and interest subsidy were not derived from the industrial undertaking of the assessee. 4. Shri Amitava Bhattacharjee, JCIT, Sr.DR, the ld. DR appeared on behalf of the revenue and Shri Manish Tiwari, FCA, ld. AR appeared on behalf of the assessee. 5. The ld. DR argued that the issues before the Tribunal have been decided against the assessee by the Hon ble Apex Court on similar issue in the case of Liberty India vs CIT (2009) 317 ITR 218 and accordingly prayed for setting aside the ld. CIT(A) s order and restore the order of the ld. AO. 6. In response to this, the ld. AR argued that the subsidies provided by the Government form an integral part of business receipts of the assessee and they are directly related to the cost of production and sales and administration incurred by the industrial units. He further argued that the selling price of the products are fixed after determining the cost which is reduced by the amount of subsidy expected to be received from the Government and hence subsidy received by the industrial unit have direct and immediate nexus with the business operations of the assessee. He also pleaded that this issue raised by the revenue is directly c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections of the learned Tribunal. 2. Power Subsidy : 105. From a combined reading of the two decisions, rendered in Rajaram Maize Products (supra) and Eastern Electro Chemical Industries case (supra), what becomes transparent is that power subsidy is meant to enable a person meet a certain percentage of expenditure on power and is, therefore, revenue in nature. However, though revenue in nature, the fact remains that it helps in not only growth of the industrial undertaking, but also help an industrial undertaking to earn profits and make gains. Such a subsidy, though revenue in nature and taxable accordingly, is nonetheless covered by the provisions embodied in Section 80IB or 80IC, as the case may be. 106. Situated thus, the principle, deducible from the cases of Sahney Steel Press Works Ltd s . case (supra), Rajaram Maize Products case (supra) and Eastern Electro Chemical Industries case (supra), is that when a subsidy, granted by Government, is operational in nature, which helps in generation of profits for any industrial undertaking, such a profit is, indeed, covered by the provisions embodied in Section 80IB or 80IC, as the case may be. 109. We, now, turn to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents and, in consequence thereof, since interest subsidy results into profits and gains derived from, or derived by, an industrial undertaking, there is no reason as to why such profits and gains, earned by an industrial undertaking on the strength of such a subsidy, namely, interest subsidy, be not allowed to be deducted from the taxable income of the industrial undertaking concerned. Now it is relevant to understand how the Hon ble Gauhati High Court had distinguished the decision of the Hon ble Apex Court in Liberty India case. The Hon ble Gauhati High Court has held as under :- 124. Logically extended, this would mean that there was no relationship or nexus between the export incentive, on the one hand, and manufacturing/production, on the other. DEPB entitlement was based on the artifice of deemed import content of export product and was not even based on actual import content of the export product; whereas, in the cases at hand, the transport subsidy was made available on the raw material actually consumed in the manufacturing process and finished goods, which were actually produced and taken to the existing market for sale and, similarly, power subsidy, interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cum-manufacturer. Sub-section (2) of Section 75 of the Customs Act requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of duty drawback receipt lies in Section 75 of the Customs Act and Section 37 of the Central Excise Act (Emphasis supplied) 128. In short, thus, the DEPB and Duty Drawback Scheme were not, as already indicated above, related to the business of industrial undertaking per se for its manufacturing or production. Entitlement for DEPB or Duty Drawback Scheme arose, when the undertaking decided to export after manufacturing or production and this incentive was restricted only to the export of goods of a specified class. Consequently, if there was no export, there was no incentive from DEPB or Duty Drawback. This apart, DEPB or Duty Drawback Scheme did not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Respectfully following the aforesaid decisions, we hold that the interest subsidy, transport subsidy and power subsidy received by the assessee are eligible for deduction u/s 80IB of the Act and accordingly, grounds 1 to 3 raised by the revenue are dismissed. 8. The next issue to be decided in this appeal of the revenue is as to whether the ld. CIT(A) is correct in deleting the addition made in the sum of ₹ 84,75,159/- on account of closing stock valuation of raw materials. 9. The brief facts of the case are that the assessee is engaged in the manufacture of ferro alloys and for which purpose manganese ore is the main raw material. The assessee had purchased the same on different dates during the year and had furnished month-wise quantitative details together with its respective values and consumption details thereon before the ld. AO and the ld. CIT(A). The assessee had adopted weighted average rate for valuing its closing stock of raw materials in consonance with the method of accounting regularly employed by him in this regard over the years. Accordingly, the weighted average rate of raw materials worked out to ₹ 5109/- per MT. On the contrary, the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. It is also seen that the assessee has been consistently following the weighted average price for valuation of closing stock of raw materials and similar addition made for A.Y.2004-05 in the hands of the assessee had been deleted by this Tribunal in assessee s own case reported in (2009) 118 ITD 273 (Kol). The relevant operative portion is reproduced herein for the sake of convenience :- 17. The ld. CIT(A) has deleted the above two additions made by the Assessing Officer considering the valuation shown by the assessee as under-valued. The ld. CIT(A) has deleted such addition observing that the assessee had furnished quantitative invoices of the stock showing the opening balance, production, sales and closing stock and the Assessing Officer has not made any adverse comments on such stock statement submitted by the assessee. The ld. CIT(A) has further observed that the books of account of the assessee are audited and no defect has been pointed out by the Assessing Officer on such audited sets of accounts and the action of Assessing Officer in considering the stock of finished goods and raw materials as undervalued is based on mere presumption and without any material evid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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