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TMI Blog2021 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... went wrong in disallowing the deduction under section 80IC of the Act on the aforesaid subsidies. 2. That the appellant craves leave to submit any other ground/s on or before the hearing of the appeal. 3. Brief facts of the case as noted by the AO is that the assessee is a private limited company which is engaged in the manufacturing of M. S. Ingots and Ferro Silicon. The AO notes that it is a notified industry covered u/s 80IC of the Income Tax Act, 1961 (hereinafter referred to as the Act) eligible for deduction for a period of ten assessment years with initial assessment year 2003-04. During the year under consideration the AO noted that the assessee company had received transport subsidy amounting to Rs. 28,65,412/- which was adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se has been set up in the backward areas. And according to assessee, the source from which the subsidy has been paid is not a determining factor to find out the origin from which the subsidies were flowing/obtained. It was pointed out by the assessee that it is the business of the assessee which prompted the Government to grant subsidy. According to assessee, even to treat whether a particular subsidy is capital or revenue, source from which payment is made is not relevant. However the AO repelled the contention of assessee company and was of the opinion that the expression 'derived from' has a narrow meaning and it cannot be subject to a flexible or wider interpretation. According to AO, any indirect or incidental profit cannot be regarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s derived by the assessee from its industrial activity as the benefit to the assessee was only ancillary to its industrial activity. 5. Thus according to AO, the derivation of the income must be directly connected with the business in the sense that the income is generated by the undertaking from the business. Therefore, transport subsidy of Rs. 28,65,412/-, power subsidy of Rs. 7,00,000/- interest subsidy (working capital) of Rs. 2,42,245/- and interest subsidy (term loan) of Rs. 220,000/- was treated as "other income" not eligible for deduction under section 80IC of the Act and thus disallowed the claim of assessee company. 6. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who confirmed the same by citing the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly covered in assessee's favour. In the light of the aforesaid submission we note that the Hon'ble jurisdictional High Court (Guwahati High Court) while dealing with the nature of the above referred subsidy (transport subsidy, power subsidy and interest subsidy) held in 356 ITR 235 as follows: "What crystallizes from the above discussion is that the assessee's income, with the cost of production being reduced, because of the subsidies received, would obviously rise and in consequence thereof, the profits earned, and the gains made, by the industrial undertaking concerned would also increase. The profits, so increased, would be part of the gross total income of the assessee as defined under section 80B of the Act subject to deductions, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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