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TMI Blog2008 (1) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 80-IB of the Act without discussing the case laws cited by the AO. (4) That on the facts and circumstances of the case, learned CIT(A) admitted new material in the form of office memorandum dt. 28th Feb., 2002 of the Director of Industries Commerce in contravention of the provision of r. 46A of the IT Act (sic-Rules). (5) That on the facts and circumstances of the case, learned CIT(A) totally ignored the fact that numerous opportunities were provided to the assessee to explain the basis of unit price of closing stock of each commodity through purchase bills, etc., which it failed to avail. Clearly, the assessee had no specific method of valuation to justify lower rates adopted by it valuing the closing stock. (6) That on the facts and circumstances of the case, the order of the CIT(A) also failed to take notice of the fact that the AO had made addition on account, of shortfall in valuation of closing stock and in absence of any explanation from the assessee in this regard, the AO as a mere presumption apprehended lack of actual physical stock. Hence, basing the appeal order on such apprehension to delete additions made on account of undervaluation of closing stock is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Departmental Representative for the Revenue has relied heavily on the order of AO and has submitted that since the assessee was getting transport subsidy by virtue of its industrial undertaking in Meghalaya and such subsidy was available to all parts of industries, it cannot be said that it had direct nexus with the business activity of the assessee and in these circumstances, the claim of assessee for deduction under s. 80-IB on such subsidy was rightly denied by the AO. He has, therefore, pleaded that the order of AO be restored by setting aside the order of learned CIT(A). 6. In his rival submission, the learned counsel for the assessee has heavily placed reliance on the order of learned CIT(A) and has submitted that the AO in this case has proceeded on erroneous belief and misconception about the nature of receipts of subsidy by the assessee. The learned counsel has stated that the transport and other subsidies of Rs. 1,60,29,523 were only received by the assessee during the course of its business activities and these subsidies received from the Government are integral part of the business receipts as these are directly related to the business activity of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee, the same cannot be detached from the normal business activity of the assessee and, therefore, in our considered opinion, the action of AO in treating such receipts of transport subsidies in the nature of other sources is also not correct. 9. The AO has relied on the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. and the decision of the Hon'ble Calcutta High Court in the case of Andaman Timber Industries Ltd., but the facts of the decisions of the above two cases are not applicable to the facts of the present case as in case of Pandian Chemicals Ltd., the Hon'ble Supreme Court had denied the claim of assessee for deduction of interest on deposit under s. 80HH holding that the same was not derived from business of industrial undertaking. In that case, the assessee has earned income from interest ort the deposit made with Tamil Nadu Electricity Board for supply of electricity in running industrial undertaking and such interest income was not directly related to the business activity of the assessee. Whereas in the present case, transport subsidy is linked with the reimbursement of transport charges incurred by the assessee on purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very scheme of duty drawback is framed and embodied in the aforesaid statutory provisions in order to relieve the goods to be exported of the burden of customs duties and excise duties as indicated above. The object of the duty drawback is to reimburse customs duties and excise duties paid by the assessee. As customs duties and excise duties are admittedly an integral part of the cost of production any receipts by way of reimbursement of such duties are inextricably linked with the cost of production, which has to be reflected in the P L a/c of the assessee and, therefore, the Revenue's argument cannot be accepted." From the ratio of the decision in the above case, it is apparent that when scheme of reimbursement is framed in order to reduce the cost of sales then the same becomes integral part of the cost of production and, therefore, is directly linked with the business activity of the assessee. The same is true to the fact of the present case, wherein transport and other subsidies given to the assessee by the Government is reimbursement of transport charges and other charges paid by the assessee. Since transport charges and other charges paid by the assessee are admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and having regard to the object and purpose of the scheme, we are of the view that the payment or refund, as the case may be, is closely and inseparably connected with the business carried on by the assessee. Benefits are available only from the date of the new industrial undertaking commencing production. As rightly observed by the Andhra Pradesh High Court in CIT vs. Sahney Steel Press Works Ltd. (1985) 44 CTR (AP) 243 : (1985) 152 ITR 39 (AP) the amount in question was refunded to the assessee because he had set up a new industrial undertaking and had commenced producing goods and continued in production. It is not possible to divorce the said payment from the character of the business carried on by the assessee." 13. It is also important to mention here that the issue relating to transport subsidy came before this Tribunal in case of ITO vs. SKJ Coke Industries Ltd. in ITA Nos. 667 and 668/Kol/2006. wherein this Tribunal vide order dt. 14th July, 2006 had held that transport subsidy received by the assessee was a part and parcel of business and manufacturing activity of the assessee and were rightly included in the P L a/c by the assessee on which deduction under s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of Sahney Steel Press Works Ltd. and Ponni Sugar, do not find any infirmity in the order of the learned CIT(A) in holding that transport subsidy received by the assessee was a part and parcel of business and manufacturing activity of the assessee and were rightly included in the P L a/c by the assessee. We, therefore, do not see any reason to interfere with such order of learned CIT(A) on the issue of transport subsidy and accordingly reject the ground raised by the Revenue in this regard." It has also been brought to our notice that the Hon'ble Calcutta High Court has disposed of the appeal filed by the Reven11e against such order of Tribunal while disposing IT Appeal No. 122 of 2007 holding that there is no substantial question of law involved in this matter and has accordingly dismissed the application against the above two appeals filed before this Tribunal vide order dt. 2nd April, 2007. 14. Apart from the above decisions of Courts, we also find that the Hon'ble Supreme Court in its landmark judgment in case of Bajaj Tempo Ltd. vs. CIT (1992) 104 CTR (SC) 116 : (1992) 62 Taxman 480 (SC) has held that a provision intended for promoting economic growth requires to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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