High Court
Case Details
ITA 14/2011 BEFORE THE HON’BLE MR.JUSTICE I.A. ANSARI THE HON’BLE MR. JUSTICE P.K. MUSAHARY Against the order, passed, by the CIT (Appeals), dated 17.03.2008, holding the a ssessee-appellant not entitled to claim, under Section 80IB of the Income Tax Ac t, 1961, (in short, the Act), deduction, on profits and gains of the assessee ma de as a result of transport subsidy received by the assessee, the assessee had preferred an appeal, which had given rise to ITA No.162/Gau/2008.
Facts
2. By its order, dated 13.01.2011, the learned Income Tax (Appellate) Tribu nal, Gauhati Bench, dismissed the said appeal by upholding the order, dated 17.0 3.2008, passed by the CIT(A). It is against the order, dated 13.01.2011, passed by the learned Tribunal that this appeal, under Section 260A of the Act, has bee n preferred by the assessee. FACTS OF THE CASE (i) The appellant is an assessee under the Income Tax Act, 1961 (in short, ’the Act’ ), the appellant is an industrial undertaking engaged in the bu siness of manufacture of Lime. (ii) The appellant submitted, on 30.10.2000, its return of income for the ass essment year 2000-2001 disclosing income as NIL after claiming deduction under S ection 80IB of the Act on the profits and gains of Rs.87,32,063/-. The aforesaid amount included transport subsidy of Rs.32,86,981/- and Bank interest of Rs.16, 083/-. The appellant’s case for the said year was re-opened under section 147 o (iii) f the Act and a notice, under Section 148 thereof, was issued, on 19-03-2007. Th e assessment was completed, on 03.12.2007, under Sections 143(3)/147 of the Act on a total income of Rs.33,03,060/-. During the previous year, relevant to the assessment year under consider (iv) ation, the appellant received the following amounts, on account of transport sub sidy and Interest:- Transport Subsidy: Bank Interest Total: Rs. Rs. 33,03,064/- Rs. 16,083/- 32,86,981/- The Assessing Officer, in his assessment order, dated 03-12-2007, held t (v) hat the said amounts were not a part of profits and gains derived from industria l undertaking. The Assessing Officer accordingly disallowed the appellant’s clai m of deduction u/s 80 IB of the Act in respect of the aforesaid amount of Rs.33, 03,064/-. (vi) Against the said assessment order, the appellant preferred appeal bef ore the Commissioner of the Income Tax (Appeals), Guwahati, (in short, ’the CIT (A)’, who, vide his order, dated 17-03-2008, passed for the assessment year 2000 -2001 and 2002-2003, dismissed the said appeal of the appellant taking the view that profits and gains in order to be eligible for deduction under sub-section ( 4) of Section 80-IB of the Act have to be derived from industrial undertaking. T he CIT(A) was of the view that there was no direct nexus between the transport s ubsidy and the manufacturing business of the undertaking. According to the CIT(A ), the source of transport subsidy was Industrial Promotional Scheme of the Govt . and therefore, it was only incidental to the business. The CIT(A), therefore, held that the transport subsidy could not be termed as profits and gains derived from manufacturing business of the undertaking eligible under Section 80-IB (4) of the Act. The CIT(A) also held that bank interest was not directly derived fr om business of industrial undertaking carried on by the appellant and could not be held to be eligible for deduction under sub-section (4) of Section 80-IB of t he Act. Aggrieved by the aforesaid order of the CIT(A), the appellant preferred (vii) appeal before the Income Tax Appellate Tribunal, Gauhati Bench, Guwahati (in sho rt, ’the Tribunal’). The said appeal was registered as ITA No.162 (Gau) / 2008.
Legal Reasoning
The tribunal, vide its common order, dated 13-01-2011, passed for the assessment year2001-2002, as well as for the assessment year 2002-2003, dismissed the app eal of the appellant by holding that deduction was rightly denied under Section 80-IB of the Act taking the view that that transport subsidy was not derived fro m the business of industrial undertaking and it was only incidental to the busin ess of manufacturing carried on by the appellant. The Tribunal also followed the decision of this Court in CIT v Meghalaya Steels Limited (332 ITR 91). The Tri bunal, therefore, upheld the order of the CIT(A) and dismissed the said appeal p referred by the appellant. 3. SUBSTANTIAL QUESTION OF LAW I. 1. SUBSTANTIAL QUESTION OF LAW FRAMED VIDE ORDER DATED 22.07.2011 (cid:28)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in holding that deduction was rightly denied u nder section 80-IB of the Income Tax Act, 1961 by taking the view that transport subsidy was not derived from the business of industrial undertaking and it was Against the order of the Tribunal the assessee is, in appeal, before us. only incidental to the business of manufacturing carried on by the appellant? (cid:29) II. 13 ADDITIONAL SUBSTANTIAL QUESTIONS OF LAW FRAMED VIDE ORDER DATED 10.04.20 1. Whether on the facts and circumstances of the case, the learned Tribunal was right in holding that the amount of transport subsidy would go on to reduce the expenses incurred under that particular head and the resultant profits and gains of the business of Industrial Undertaking would be eligible for deduction under Section 80 IB of the Income Tax Act, 1961? 2. If the answer to question No. 1 is in the negative, whether on the facts and in the circumstances of the case, the learned Tribunal was right in holding that the transport subsidy is inter linked, inter-laced and having a direct nex us with the manufacturing activities of the assessee, which is inseparable from the expenditure incurred by the assessee on account of transportation of purchas e as well as sales of the business of the assessee are allowable for deduction u nder Section 80 IB? III. 10.04.2013, the question no. 1 needs a slight correction in view of the fact the convenience 1 shall be as follows: - of the Hon’ble Court, the corrected question no. (cid:28)Whether on the facts and circumstances of the case, the learned Tribunal was ri ght in holding that the amount of transport subsidy would not go on to reduce th e expenses incurred under that particular head and the resultant profits and gai ns of the business of Industrial Undertaking would be eligible for deduction und er Section 80-IB of the Income Tax Act, 1961? (cid:29) 2. The question no. 2 has been inadvertently included in this appeal as it was framed alongwith questions in the batch of appeals preferred by the Revenue. The question no. 2, therefore, requires to be excluded as it does not arise in 1. Out of two substantial questions of law, framed vide order dated that this appeal has been preferred by the assessee. For
Decision
the appeal preferred by the assessee. 4. Since we have already held, by judgment and order, dated 29.05.2013, pas sed, in ITA Nos.7/2010 and 16/2011, that the learned Tribunal was right in arriv ing at the finding to the effect that there is proximate and direct nexus betwee n the subsidies, in question, on the one hand, and the profits and gains derived by, or derived from, the industrial undertakings concerned, on the other, and t hat profits and gains derived from, or derived by, the industrial undertakings c oncerned are, therefore, deductible in terms of the provisions of Section 80 IB or 80 IC, as the case may be, it logically follows that the learned Tribunal’s d ecision, impugned in the present appeal, which runs contrary to what we have hel d, as indicated above, cannot, but must be treated as illegal and not sustainabl e. In the result and for the foregoing reasons, this appeal needs to be all 5. owed and we accordingly allow this appeal. The impugned order, dated 13.01.2011, passed by the learned Tribunal, Guwahati, in ITA No.162/Gau/2008, is hereby set aside, the appeal of the assessee-appellant is hereby allowed, the order, dated 17.03.2008, passed by the CIT (Appeals) is hereby set aside and the claim for d eduction, made by the assessee-appellant, under Section 80IB of the Act, for the assessment year 2000-2001, is hereby allowed. 6. No order as to costs.