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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Shri P.M. Jagtap
These five appeals filed by the Revenue are directed against a common order of ld. Commissioner of Income Tax (Appeals), Jalpaiguri dated 28.10.2015 for assessment years 2008-09 to 2012-13 and since a solitary common issue is involved therein, the same have been heard together and are being disposed of by a single composite order.
The solitary common issue involved in these appeals of the Revenue is whether the ld. CIT(Appeals) was justified in directing the Assessing Officer to allow the claim of the assessee for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission and the same is raised by the Revenue by way of the following identical grounds raised in these appeals:- (1) That on the facts and circumstances of the case, the Ld. CIT(A), Jalpaiguri has erred in law as well as facts in allowing -1446/KOL./2015 Assessment years: 2008-2009 & 2012-2013 Page 2 of 4
the disallowances made by the Assessing Officer in respect of Central Excise Refund and Sales Tax Remission. The Ld. CIT(A), Jalpaiguri in his order directing such allowance has relied on the decision in the case of CIT Vs. Meghalaya Steels Ltd. (2011) 332 ITR 91 (Guwahati) ignoring the fact that this order dated : 16/09/2010 has been recalled by the same Division Bench vide judgment dated : 08/04/2013 as mentioned in Hon'ble Supreme Court judgment in the case of CIT, Guwahati-1 -Vs - M/s Meghalaya Steels Ltd. [2015] 60 Taxmann.com 260 (SC) making the relied upon decision devoid of merit as on date.
2. That on the facts and circumstances of the case, the Ld. CIT(A), Jalpaiguri has erred in law as well as facts in allowing the disallowances made by the Assessing Officer in respect of Central Excise Refund and Sales Tax Remission as even the case law relied upon by the Ld. CIT(A), Jalpaiguri dealt with deductions under section 80lB of the Act and not section 80lC both of which are sections which allow for deductions to entirely different categories of undertakings. Relying on a case law dealing with deduction u/s 80lB while deciding on a case where an entirely different category of undertaking is under review would lead to perversity of judgment.
3. That on the facts and circumstances of the case, the Ld. CIT(A), Jalpaiguri has erred in law as well as facts in allowing the disallowances made by the Assessing Officer in respect of Central Excise Refund and Sales Tax Remission by relying on the decision in the case of Meghalaya Mineral Products Vs ACIT [2015] 59 ITR 197 (Guwahati) stating that it has been held that both Central Excise Refund and VAT permission are eligible for deduction u/s 80re. The Ld. CIT (A) has failed to appreciate that in this decision the substantial issues allowed by the Hon'ble ITAT related to various subsidies viz. transport, interest, power and insurance and the appeal of the revenue in respect of Central Excise Refund & Sales Tax Remission were dismissed only on the basis of earlier decision of the same Tribunal which have not yet reached their finality.
At the time of hearing, none has appeared on behalf of the assessee. The ld. D.R., however, has fairly and frankly admitted that the solitary common issue involved in these appeals of the Revenue is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon’ble Guwahati High Court in the case of CIT –vs.- Meghalaya Steels Limited [356 ITR 235]. In the said case, a similar issue relating to the assessee’s claim for deduction under section 80IC had -1446/KOL./2015 Assessment years: 2008-2009 & 2012-2013 Page 3 of 4 come up for consideration in respect of subsidies granted by the Government and the same was decided by the Hon’ble Guwahati High Court in favour of the assessee after recording the following observations/findings as contained in the header portion of the judgment:- “In order to claim deduction either under section 80IB or under section 80IC of the Income Tax Act, 1961, an assessee has to establish that there is a direct, intrinsic and first degree nexus between a subsidy, on the one hand, and the profits and gains, on the other, derived from, or derived by, the industrial undertaking concerned. 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. The expression ‘derived from’ has been used in section 80IB and it means that it is the business of the undertaking, which is the direct source from which the profits and gains are derived. 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. Consequently, without determining the nature of subsidy, including the object thereof, the impact of the subsidy on the operation of the industrial undertaking cannot be determined. The Supreme Court in Sahney Steel and Press Works Ltd. –vs.- CIT [1997] 228 ITR 253 (SC) lays down an immensely important aspect of a subsidy vis-a-vis liability to pay tax. What the Supreme Court clarifies is that when a subsidy is given for the purpose of setting up of an industry, such a subsidy is a capital receipt. When, however, the subsidy is given for the purpose of operation an industry more profitably, the subsidy would be revenue receipt and being revenue receipt, it has to be taxed in accordance with law meaning thereby that the profits and gains derived from, or derived by, an industrial undertaking in a case, where operational cost is reduced by providing subsidy, in any form, the profits and gains earned, because of such subsidy, would be eligible for deduction under section 80IB or section 80IC, as the case may be. The principle deductible from the 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 -1446/KOL./2015 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 (supra) 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. CIT(Appeals) allowing the claim of the assessee for deduction under section 80IC in respect of Central Excise Refund and Sales Tax Remission for all the five years under consideration.
In the result, all the five appeals of the Revenue are dismissed. Order pronounced in the open Court on September 21, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, the 21st day of September, 2016 Copies to : (1) Income Tax Officer, Ward-1(2), Jalpaiguri, Room No. 103, Central Revenue Building, Ground Floor, Race Course Para, Naya Basti, P.O. Jalpaiguri-735101, Dist. Jalpaiguri (2) Shri Manoj Garg, P.O. Banarhat, Dist. Jalpaiguri, West Bengal-735 202