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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
ORDER Per Shri A.T.Varkey, JM Both these appeals filed by the revenue against the separate orders of Ld. CIT(A)-I, Kolkata dated 13.11.2014 for AY 2007-08 and 2010-11.
The only issue to decide in this appeal is as to whether the Ld. CIT(A) was justified in directing the AO to grant deduction u/s. 80IC of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) towards transport charges receipt of Rs.7,20,57,895/- and Rs.1,55,48,472/- and transport subsidy receipt of Rs.5,08,90,485/- and Rs.7,52,731/- for AYs 2007-08 and 2010-11 respectively. Since grounds are common and facts are identical, we dispose of both these appeals by this consolidated order by taking the appeal for AY 2007-08 as lead case and the result for AY 2007-08 will also apply for AY 2010-11.
Brief facts of the case are that the assessee is a Limited Company engaged in the manufacture of Lam Coke and Breeze Coke. It is not in dispute that the assessee is entitled to claim deduction u/s. 80IC of the Act. U/s. 80IC of the Act where the gross income of the assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as is specified in sub- section (3) of sec. 80IC of the Act. The assessee claimed deduction u/s. 80IC of the Act on the entire gross profit of Rs.14,91,79,470/-. But the AO computed the total income of the assessee as under:
“Net Profit as per P&L A/c Rs.14,91,79,470/- Less: Allowable Deduction u/s. 80IC (14,91,79,470 - (7,20,57,895+5,08,90,485) Rs. 2,62,31,090/- Assessed Income Rs.12,29,48,380/-”
The AO observed that the assessee received towards reimbursement of outward expenses amounting to Rs.7,20,57,895/- and further received transport subsidy of Rs.10,88,21,893/-. Thus, the total receipts of the assessee comes to Rs.18,08,79,788/- (Rs.10,88,21,893 + Rs.7,20,57,895/-). On the contrary, assessee’s expenditure towards Transportation in the form of Carriage Inward and Carriage Outward amounts to Rs.13,06,89,303/-. As a result, there was excess receipt of Rs.5,08,90,485/- (Rs.18,08,79,788 – Rs.13,06,89,303). Accordingly, assessee was asked to explain why such excess receipt will not be treated as its income from other sources. In compliance, the assessee filed written submission dated 22.02.2013. After considering the written submission and assessee’s contention the AO treated the excess receipt of Rs.5,08,90,485/- as assessee’s income from other sources, which is not eligible for deduction u/s. 80IC of the Act.
The Ld. CIT(A) by placing reliance on the decision of this Tribunal in the assessee’s own case in AY 2003-04 and 2004-05 in & 668/Kol/2006 dated 14.07.2006, which having been upheld by the Hon’ble Calcutta High Court in ITA No. 122 of 2007 dated 14.05.2007 held that the issue of transport charges were part of the turnover of the assessee and, therefore, eligible for deduction u/s. 80IC of the Act. In view of the above, the Ld. CIT(A) held that the disallowance made by the AO towards transport charges and the alleged excess of receipt of transport charges taken by the AO at Rs.5,08,90,485/- is held to be not justified and the same was deleted. Aggrieved revenue is in appeals before us.
We have heard rival submissions and have gone through the case records carefully. We find that similar issue had arisen in the case of assessee for the AYs 2003-04 and 2004- 05, which was subsequently upheld by the Hon’ble Calcutta High Court, cited supra. The operative part of the Tribunal’s order is reproduced as under: “"Apart from this, the Hon'ble Supreme Court in its landmark decision of Sahney Steel & Press Works Ltd. (supra) has also held that the subsidies were production incentive and therefore were operational subsidies and not capital subsidies and were revenue in nature. We therefore, considering the above facts and circumstances and respectfully following the decision of the Hon'ble Supreme Court in case of Sahney Steel & Press Works Ltd.(supra) and Ponni Sugar(supra) do not find any infirmity in the order of the Ld. 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 account by the assessee. We, therefore, do not see any reason to interfere with such order of Ld. CIT(A) on the issue of transport subsidy and accordingly reject the ground raised by the revenue in this regard."
Since the Ld. DR could not point out any change in facts and law, we note that the ratio laid down in assessee’s own case for AY 2003-04 and 2004-05, supra is squarely applicable for the year under appeal also. We also note that the aforesaid view of the Tribunal has been endorsed by the Hon’ble Calcutta High Court in of 2007 in assessee’s own case dated 02.04.2007 wherein the Hon’ble High Court dismissed the revenue’s appeal. Respectfully following the aforesaid judicial precedents, we dismiss the appeals of the revenue.
In the result, appeals of revenue are dismissed.
Order is pronounced in the open court on 11.08.2017