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TMI Blog2016 (10) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... s approved by the Appellate Commissioner to the effect that the transport subsidy cannot be said to be derived from industrial undertaking and would not fall in the category of profits and gains derived from industrial activities could only be disapproved. In view of above, the answers to the basic questions involved in the matter are required to be in the affirmative. We may observe that in question No.(i) as formulated, only Section 80-IC has been mentioned, probably with reference to the question as formulated in the memo of appeal, whereas essentially the claim had been with reference to Section 80-IB (4) of the Act of 1961. With this clarification, answers to the questions involved in this matter are in the affirmative, that is to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try and has setup an industrial undertaking at Byrnihat, Ri Bhoi District, Meghalaya for commercial production of Roller Flour Mills. During the assessment proceeding for the Assessment Year 2009-2010, it had claimed deduction of a sum of ₹ 35,04,657/- under Section 80-IB of the Act of 1961 towards transport subsidy received from the Government. The learned Assessing Officer, however, did not accept the claim of the assessee and, while disallowing the deduction, considered the said amount as other taxable income. In appeal, the learned Commissioner of Income Tax, Shillong endorsed the views of the Assessing Officer. Being aggrieved, the assessee preferred the said appeal bearing No.83/Gau/2012 before ITAT, while contending that disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize (supra) and Eastern Electro (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. As regards transport subsidy, the Hon ble Gauhati High Court clearly held as under:- 79. What logically follows from the above discussion is that subsidy, on transportation of raw materials as well as finished goods, was promised to be made available to the industrial units concerned in a manner which would directly affect the cost of production inasmuch as transportation subsidy, on the raw materials, was not meant to cover all the raw materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee-respondents as recipient of transport subsidy, cannot but have to be necessarily held to be covered by Section 80IB or 80IC. .. 88. In the light of what have been discussed above, there can be no escape from the conclusion that transport subsidy was aimed at reducing the cost of production of the industrial undertakings covered by transport subsidy Scheme. Thus, there was a first degree nexus between the transport subsidy, on the one hand, and cost of production, on the other. When cost is reduced, it naturally helps in earning of profit and, at times, higher profits. Such profits and gains ought to have been treated, and has rightly been treated, by the learned Tribunal, to be profits and gains derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus understood, it is clear that profits and gains are derived from the business of the assessee, namely, profits arrived at after deducting manufacturing cost and selling costs reimbursed to the assessee by the Government concerned It is not the case of Revenue that in the present case, the referred transport subsidy has no bearing on the cost of production of the industrial undertaking of the respondent assessee. In this view of the matter and for the law declared by the Hon ble Supreme Court, the decision by the Assessing Officer as approved by the Appellate Commissioner to the effect that the transport subsidy cannot be said to be derived from industrial undertaking and would not fall in the category of profits and gains derived fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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