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TMI Blog2016 (6) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... an inquiry at this stage would be a futile exercise. The decision rendered by the Hon’ble Supreme Court has to be considered as law as it stood at all times and therefore the order of assessment in the present case passed by the AO that was sought to be revised by the CIT u/s.263 of the Act, cannot be considered as erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee - I.T.A No. 894/Kol/2013 - - - Dated:- 1-6-2016 - Shri P. M. Jagtap, AM And Sri N. V. Vasudevan, JM For the Appellant : Shri Subash Agarwal, Advocate For the Respondent : Shri S.Srivastava, CIT (DR) ORDER Per N. V. Vasudevan, JM This is an appeal by the Assessee against the order dated 28.03.2013 of CIT-I, Kolkata passed u/s 263 of the Income Tax Act, 1961 (Act). 2. The Assessee is a company. It is engaged in the business of manufacture of calcined petroleum coke. For A.Y.2008-09 the assessee filed return of income declaring total income at Rs. Nil. The assessee was entitled to claim deduction u/s 80IC(2)(a)(iii) of the Act. Sec.80-IC (1) of the Act provides that where the gross total income of an assessee includes any profits and gains derived by an und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses incurred by the company, has been adjusted against respective expenses head. 4. The AO passed order of assessment dated 15.11.2010 u/s 143(3) of the Act accepting the claim of deduction u/s 80IC(2)(a)(iii) of the Act. The claim of the assessee u/s 80IC (2) of the Act was ₹ 18,94,50,246/-. The claim for deduction was however restricted to the total income of the Assessee viz., ₹ 17,47,36,922/-. The assessee s computation of income was as follows :- COMPUTATION OF TAXABLE INCOME FOR THE ASSESSMENT YEAR 2008-2009 1. TAXABLE INCOME AMOUNT (RS.) Profit as per profit and Loss Account 18,94,50,246/- Add Depreciation as per P L Account (Considered separately) - 1,39,30,518/- 20,33,80,764/- Less : Depreciation as per I.T. Rules (Details given in Tax Audit Report) 2,86,43,842/- Total Income - 17,47,36,922/- Less Deduction U/s 80IC(2)(a)(iii) 17,47,36,922/- Taxable Income NIL 5. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Aggrieved by the order of CIT, the assessee has preferred the present appeal before the Tribunal. 8. At the time of hearing it was brought to our notice that the Hon ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd. (2013) 34 Taxman.com 34 had decided the issue in favour of the assessee holding that all the above subsidies have to be considered as profits and gains derived from the business of the assessee and therefore have to be considered for the purpose of allowing deduction u/s 80IC of the Act. It was also brought to our notice that the Hon ble Supreme Court has confirmed the order of Hon ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd. (2016) 67 taxmann.com 158(SC). 9. We have heard the rival submissions and perused the materials available on record. We find that this issue has been elaborately dealt with by the Hon ble Gauhati High Court in the case of CIT vs Meghalaya Steels Ltd vide order dated 29.05.2013 wherein their lordships had clearly distinguished the decision of the Hon ble Apex Court in the case of Liberty India case and it is pertinent to go into the operative portion of the Hon ble Gauhati High Court s decision in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks 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 the case of Pancharatna Cement (P) Ltd. (supra), wherein Amitava Roy, J., (as his Lordship, then, was ), has, upon consideration of the subsidy involved, took the view that the amount of subsidy, given by way of assistance or grants by the Government, serves as stimulus to the willing industrial establishments to cater to the growth of the region and, thus, reinforce the eventual income of the business of the undertaking. Though the case of Pancharatna Cement (P.) Ltd. (supra) is, as right pointed out by the learned ASG, arose out of a writ petition and not an appeal under the Act, the fact remains that the law, laid down therein, is relevant in determining the controversy, which is required to be dealt with in this set of appeals. The relevant observations, appearing at para 32, in Pancharatna Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, interest subsidy, and insurance subsidy are, as already indicated above, made available on the actual amount of the power bill, interest and insurance premium paid by the assesseerespondents concerned the inference, so drawn, gets reinforced from the fact that DEPB entitlement was freely transferable and saleable resulting in profit or loss. 125. That the case of Liberty India case (supra) is not applicable to the cases at hand is also evident from the fact that the object behind DEPB was to neutralize the incidence of customs duty payment on the import duty of the export product and, hence, the DEPB scheme was not aimed at neutralizing the cost of production; rather, as observed by the Supreme Court, it was an incentive for export and entitlement arose, when export was made and not otherwise. 127. Most importantly, pointed out the Supreme Court, in Libert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 provide refund of exemption from Central Excise Duty actually paid. 129. Thus, the relationship under the DEPB or Duty Drawback Scheme, on the one hand, and the manufacturing or production, on the other , was not proximate and direct. The entitlement was based on the artifice of average amount of duty paid. In the case of transport subsidy, power subsidy and insurance subsidy, the relation between subsidy received, on the one hand, and the profits earned or the gains made, by an industrial undertaking, stand, as already observed at paragraph 127, well established. 131. Liberty India case (supra), it may be noted, is, thus, an exposition of law on the schemes of DEPB and Duty Drawback Scheme, which relate to export of goods by an industrial undertaking; whereas the Scheme of transport subsidy, interest subsidy, power subsidy and insurance s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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