Income-tax Officer, Ward-1(2), Jalpaiguri v. Manoj Garg
[Citation -2016-LL-0921-141]

Citation 2016-LL-0921-141
Appellant Name Income-tax Officer, Ward-1(2), Jalpaiguri
Respondent Name Manoj Garg
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 21/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags industrial undertaking • cost of production • revenue receipt • central excise • sales tax
Bot Summary: The Ld. CIT(A), Jal paiguri in his order directing such allowance h as relied on the decision in the case of C IT Vs. Megh alaya St eels Ltd. 332 ITR 91 ignoring the fact that this order dat ed : 16/09/2010 has been recalled by the s ame Division Bench vide judgment dated : 08/04/2013 as mentio ned in Hon'ble Supreme Court judgment in the case of CIT, Guwah ati-1 -Vs - M/s Megh alaya Steels Ltd. 2015 60 Taxmann.com 260 making the relied upon decision devoid of merit as on date. Relying on a case l aw dealing with deduction u/s 80lB while deciding on a case where an ent irely different catego ry of undertaking is under review would lead to perversit y of judgment. If a subsidy goes to reduce the cost of production of an industrial undertaking, the resultant profits and gains are deductible under the provisions of section 80IB or section 80IC, as the case may be. In the case of a subsidy, the expression derived from , appearing in section 80IB, would, logically extended, mean that the subsidy provided by the State, directly affects the business activity of the industrial undertaking. The Supreme Court in Mepco Industires case held that in each case, the nature of subsidy needs to be examined by the Court. The principle deductible from the cases of Sahney Steel and Press Works Ltd. vs.- CIT 1997 228 ITR 253 ; CIT vs.- Rajaram Maize Products 2001 251 ITR 427 and CIT vs.- Eastern Electro Chemical Industries I. T. A. N o s. 1 4 4 2 - 1 4 4 6 / KO L. / 2 0 1 5 Assessment years: 2008-2009 2012-2013 Page 4 of 4 1999 9SCC 20 is that when a subsidy, granted by the 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 section 80IC, as the case may be. Since the ratio of the decision of the Hon ble Guwahati High Court in the case of Meghalaya Steels Limited is squarely applicable to the issue involved in the present case relating to the assessee s claim for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission, I respectfully follow the same and uphold the impugned order of the ld.


I . T. . N o s . 1 4 4 2 - 1 4 4 6 / KO L . / 2 0 1 5 Assessment years: 2008-2009 & 2012-2013 Page 1 of 4 IN INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA Before Shri P.M. Jagtap, Accountant Member I.T .A. Nos.1442, 1443, 1444, 1445 & 1446/KOL/2015 Assessment Years: 2008-09, 2009-10. 2010-11, 2011-12 & 2012-2013 Income Tax Officer,..................................................................Appellant Ward-1 (2), Jalpaigu ri, Room No. 103, Central Revenue Buildin g, Ground Floor, Race C ourse Para, Naya Basti, P.O. Jalpaiguri-7351 01, Dist. Jalpaiguri -Vs.- Shri Mano j Garg,...... ...............................................................Respondent P.O. Banarhat, Dis t. Jalpaiguri, West Bengal-735 202 [PAN :ADHPG 8039 P ] Appearances by: Shri Uday Kar Sardar, JCIT, D.R., for Department N o n e, fo r assessee Date of concluding th e hearing : Ju ly 26, 2016 Date of pronouncing order : September 21, 2016 O R D E R These five appeals filed by Revenue are directed against common order of ld. Commissioner of Income Tax (Appeals), Jalpaiguri dated 28.10.2015 for assessment years 2008-09 to 2012-13 and since solitary common issue is involved therein, same have been heard together and are being disposed of by single composite order. 2. solitary common issue involved in these appeals of Revenue is whether ld. CIT(Appeals) was justified in directing Assessing Officer to allow claim of assessee for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission and same is raised by Revenue by way of following identical grounds raised in these appeals:- (1) That o n facts and circumst ances o f case , Ld. CIT(A), Jal paiguri has erred in l aw as well as fact s in allowing I . T. . N o s . 1 4 4 2 - 1 4 4 6 / KO L . / 2 0 1 5 Assessment years: 2008-2009 & 2012-2013 Page 2 of 4 disallowances made by Assessing Officer in respect of Central Excise Refund and Sales T ax Remission. Ld. CIT(A), Jal paiguri in his order directing such allowance h as relied on decision in case of C IT Vs. Megh alaya St eels Ltd. (2011) 332 ITR 91 (Guwahat i) ignoring fact that this order dat ed : 16/09/2010 has been recalled by s ame Division Bench vide judgment dated : 08/04/2013 as mentio ned in Hon'ble Supreme Court judgment in case of CIT, Guwah ati-1 -Vs - M/s Megh alaya Steels Ltd. [2015] 60 Taxmann.com 260 (SC) making relied upon decision devoid of merit as on date. 2. That on facts and circumst ances of case, Ld. CIT(A), Jal paiguri has erred in l aw as well as fact s in allowing disallowances made by Assessing Officer in respect of Central Excise Refund and Sales T ax Remission as even case law relied upon by Ld. CIT (A), Jal paiguri dealt with deduct ions under sect ion 80lB of Act and not sectio n 80lC both of which are sections which allow for deductions to entirely different categories of undert ak ings. Relying on case l aw dealing with deduction u/s 80lB while deciding on case where ent irely different catego ry of undertaking is under review would lead to perversit y of judgment. 3. That on facts and circumst ances of case, Ld. CIT(A), Jal paiguri has erred in l aw as well as fact s in allowing disallowances made by Assessing Officer in respect of Central Excise Refund and Sales T ax Remission by rel ying on decision in case of Meghalaya Mineral Products Vs ACIT [2015] 59 ITR 197 (Guwahati) stat ing that it h as been held that both Cent ral Excise Refund and VAT permis sion are eligible for deduction u/s 80re. Ld. CIT (A) has failed to appreciat e that in this decision subst antial issues allowed by Hon'ble IT AT rel ated to various subsidies vi z. transport , interest , power and insurance and appeal of revenue in respect of Central Excise Refund & Sales Tax Remission were dismissed onl y on basis of earlier decision of same T ribunal which have not yet reach ed their finalit y. 3. At time of hearing, none has appeared on behalf of assessee. ld. D.R., however, has fairly and frankly admitted that solitary common issue involved in these appeals of Revenue is squarely covered in favour of assessee and against Revenue by decision of Hon ble Guwahati High Court in case of CIT vs.- Meghalaya Steels Limited [356 ITR 235]. In said case, similar issue relating to assessee s claim for deduction under section 80IC had I . T. . N o s . 1 4 4 2 - 1 4 4 6 / KO L . / 2 0 1 5 Assessment years: 2008-2009 & 2012-2013 Page 3 of 4 come up for consideration in respect of subsidies granted by Government and same was decided by Hon ble Guwahati High Court in favour of assessee after recording following observations/findings as contained in header portion of judgment:- In order to claim deduction either under section 80IB or under section 80IC of Income Tax Act, 1961, assessee has to establish that there is direct, intrinsic and first degree nexus between subsidy, on one hand, and profits and gains, on other, derived from, or derived by, industrial undertaking concerned. If subsidy goes to reduce cost of production of industrial undertaking, resultant profits and gains are deductible under provisions of section 80IB or section 80IC, as case may be. expression derived from has been used in section 80IB and it means that it is business of undertaking, which is direct source from which profits and gains are derived. In case of subsidy, expression derived from , appearing in section 80IB, would, logically extended, mean that subsidy provided by State, directly affects business activity of industrial undertaking. Supreme Court in Mepco Industires case held that in each case, nature of subsidy needs to be examined by Court. Consequently, without determining nature of subsidy, including object thereof, impact of subsidy on operation of industrial undertaking cannot be determined. Supreme Court in Sahney Steel and Press Works Ltd. vs.- CIT [1997] 228 ITR 253 (SC) lays down immensely important aspect of subsidy vis-a-vis liability to pay tax. What Supreme Court clarifies is that when subsidy is given for purpose of setting up of industry, such subsidy is capital receipt. When, however, subsidy is given for purpose of operation industry more profitably, subsidy would be revenue receipt and being revenue receipt, it has to be taxed in accordance with law meaning thereby that profits and gains derived from, or derived by, industrial undertaking in case, where operational cost is reduced by providing subsidy, in any form, profits and gains earned, because of such subsidy, would be eligible for deduction under section 80IB or section 80IC, as case may be. principle deductible from cases of Sahney Steel and Press Works Ltd. vs.- CIT [1997] 228 ITR 253 (SC); CIT vs.- Rajaram Maize Products [2001] 251 ITR 427 (SC) and CIT vs.- Eastern Electro Chemical Industries I . T. . N o s . 1 4 4 2 - 1 4 4 6 / KO L . / 2 0 1 5 Assessment years: 2008-2009 & 2012-2013 Page 4 of 4 [1999] 9SCC 20 is that when subsidy, granted by Government, is operational in nature, which helps in generation of profits for any industrial undertaking, such profit is indeed, covered by provisions embodied in section 80IB or section 80IC, as case may be . Since ratio of decision of Hon ble Guwahati High Court in case of Meghalaya Steels Limited (supra) is squarely applicable to issue involved in present case relating to assessee s claim for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission, I respectfully follow same and uphold impugned order of ld. CIT(Appeals) allowing claim of assessee for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission for all five years under consideration. 4. In result, all five appeals of Revenue are dismissed. Order pronounced in open Court on September 21, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, 21 s t day of September, 2016 Copies to : (1) Income Tax Officer, Ward-1 (2), Jalpaigu ri, Room No. 103, Central Revenue Buildin g, Ground Floor, Race C ourse Para, Naya Basti, P.O. Jalpaiguri-7351 01, Dist. Jalpaiguri (2 ) Shri Mano j Garg, P.O. Banarhat, Dis t. Jalpaiguri, West Bengal-735 202 (3) Commissioner of Income Tax (Appeals), Jalpaiguri; (4) Commissio ner of Income Tax- , (5) Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. Income-tax Officer, Ward-1(2), Jalpaiguri v. Manoj Garg
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