M/s Him Polymers, Mandi V. ITO, Mandi

ITA 268/CHANDI/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6677 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAWAN KUMAR SHARMA
• Assessee Lawyers: SHALABH SINGH
• Keywords: Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.268/CHD/2014 (ASSESSMENT YEAR : 2009-10) M/S HIM POLYMERS, VS. THE INCOME TAX OFFICER, SAULI KHAD, MANDI MANDI. PAN: AADFH8175L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHALABH SINGH RESPONDENT BY : SHRI PAWAN KUMAR SHARMA, DR DATE OF HEARING : 24.10.2017 DATE OF PRONOUNCEMENT : 30.10.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL FILED BY THE ASSESSEE HAS BEEN PREFERRE D AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS), SHIMLA (HEREINAFTER REFERRED TO AS (CIT(APPEALS) DATED 12.12.2012 RELATING TO ASSESSME NT YEAR 2009-10. 2. AT THE OUTSET IT MAY BE STATED THAT THE APPEAL F ILED WAS TIME BARRED BY 396 DAYS. AN APPLICATION FOR CONDON ATION OF DELAY WAS FILED BY THE ASSESSEE WHICH WAS REJECTED VIDE ORDER DATED 18.11.2015. SUBSEQUENTLY, A MISCELLANE OUS APPLICATION WAS FILED BY THE ASSESSEE AGAINST THE A FORESAID ORDER. IN PURSUANCE OF THE MISCELLANEOUS APPLICATI ON THE DELAY WAS CONDONED VIDE ORDER PASSED IN M.A. NO.24/CHD/2016 DATED 19.5.2017 AND THE CASE FIXED F OR HEARING ON MERITS. 2 2. GROUND NOS.1, 2 AND 3 RAISED BY THE ASSESSEE REL ATE TO THE ISSUE OF TREATING THE TRANSPORT SUBSIDY RECEIVE D BY THE ASSESSEE AMOUNTING TO RS.84,85,648/- AS INCOME OF T HE ASSESSEE AND FURTHER DENYING DEDUCTION U/S 80IC ON THE SAME. THE SAID GROUNDS READ AS UNDER: 1. THAT THE LEARNED LOWER COURT ERRED IN FACTS AND LEGAL ASPECTS OF THE CASE IN TREATING RS.84,85,648/- BEING TRANSPORT SUBSIDY AS INCOME OF THE APPELLANT. 2. THAT THE AMOUNT OF RS.84,85,648/- BEING TRANSPORT SUBSIDY HAD NOT ACCRUED TO APPELLANT AS APPELLANT D ID NOT HAD RIGHT TO RECEIVE BECAUSE CERTAIN CONDITIONS WERE NOT FULFILLED, HENCE SHOULD NOT HAVE BEEN TREAT ED AS INCOME. 3. THAT LEARNED LOWER COURT ERRED IN FACTS AND LEGA L ASPECTS OF THE CASE IN NOT ALLOWING DEDUCTION U/S 80IC. 3. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE MANUFACTURING OF THINNER. THE ASSESSEE HAD SHOWN NET PROFIT OF RS.18,57,611/- DURING THE YEAR UNDER CONSIDERATION AND HAD CLAIMED 100% DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF THE SAME. ON EXAMINATION O F THE BALANCE SHEET AND THE BANK STATEMENTS OF THE ASSESS EE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES SEE HAD RECEIVED TRANSPORT SUBSIDY OF RS.27,43,572/- AND HA D FURTHER SHOWN TRANSPORT SUBSIDY RECEIVABLE AT RS.57,42,076/- AS ON 31.03.2009. THE ASSESSEE HAD S HOWN THE ENTIRE AMOUNT OF TRANSPORT SUBSIDY UNDER RESERV E AND SURPLUS IN THE BALANCE SHEET INSTEAD OF SHOWING THE SAME AS INCOME. THEREFORE, THE ASSESSING OFFICER REQUIRE D THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID AMOUNT SHOUL D NOT BE TREATED AS ITS INCOME AND SHOULD ALSO NOT BE DIS ALLOWED 3 DEDUCTION U/S 80IC AS THE SAME WAS NOT DERIVED DIRE CTLY FROM THE INDUSTRIAL UNDERTAKING. AFTER CONSIDERING THE ASSESSEE'S REPLY, THE ASSESSING OFFICER CONCLUDED T HAT THE TRANSPORT SUBSIDY RECEIVED BY THE ASSESSEE WAS A RE VENUE RECEIPT AS THE SAME WAS GRANTED ONLY FOR THE PURPOS E OF RECOUPING OR REIMBURSING A PORTION OF THE TRANSPORT COST INCURRED BY THE OWNER OF A MANUFACTURING UNIT SET U P IN A BACKWARD AREA, AND WAS NOT GRANTED BY WAY OF CAPITA L ASSET. THE ASSESSING OFFICER ALSO HELD THAT THE SAID INCO ME WAS NOT ENTITLED TO DEDUCTION U/S 80IC AS IT WAS NOT DE RIVED FROM THE UNDERTAKING AS ENVISAGED IN SECTION 80IC O F THE ACT. ACCORDINGLY, HE MADE AN ADDITION OF RS.84,85, 648/- TO THE TAXABLE INCOME OF THE ASSESSEE. 4. THE LD.CIT(APPEALS) UPHELD THE ORDER OF THE ASSE SSING OFFICER FOLLOWING THE JUDGMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF CAMBAY ELECTRICAL SUPPLY INDUSTRIAL CO. LTD. VS. CIT, 113 ITR 84, CIT VS. STERLING FOODS, 237 IT R 579 AND THE DECISION OF THE HON'BLE HIMACHAL PRADESH HI GH COURT IN THE CASE OF M/S SUPRIYA GILL VS. CIT (2010 ) 193 TAXMANN.COM 12. 5. BEFORE US THE LD. COUNSEL FOR ASSESSEE POINTED O UT THAT THE ISSUE OF ALLOWANCE OF DEDUCTION U/S 80IC OF THE ACT ON TRANSPORT SUBSIDY RECEIVED, TREATING IT AS OPERATIO NAL PROFIT OF THE ASSESSEE HAS BEEN SETTLED BY THE HON'BLE APE X COURT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. (2016) 284 CTR 321. THE LD. COUNSEL FOR ASSESSEE REFERRED TO THE FINDINGS OF THE HON'BLE APEX COURT ON THE ISSUE AT PARA 18 & 21-23 4 OF THE ORDER WHEREIN WHILE DEALING WITH THE NATURE OF FOUR SUBSIDIES I.E. TRANSPORT SUBSIDY, INTEREST SUBSIDY, POWER SUBSIDY AND INSURANCE SUBSIDY THE HON'BLE APEX COUR T HELD AS UNDER: 18. THE JUDGMENT IN STERLING FOODS LAYS DOWN A VERY IMPORTANT TEST IN ORDER TO DETERMINE WHETHER PROFITS AND GAINS ARE DERIVED FROM BUSINESS OR AN INDUSTRIAL UNDERTAKIN G. THIS COURT HAS STATED THAT THERE SHOULD BE A DIRECT NEXUS BETWEEN SUCH PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING OR BUSINESS. SUCH NEXUS CANNOT BE ONLY INCIDENTAL. IT THE REFORE FOUND, ON THE FACTS BEFORE IT, THAT BY REASON OF AN EXPORT PROMOTION SCHEME, AN ASSESSEE WAS ENTITLED TO IMPORT ENTITLEMENTS WHICH IT COULD THEREAFTER SELL. OBVIOUSLY, T HE SALE CONSIDERATION THEREFROM COULD NOT BE SAID TO BE DIREC TLY FROM PROFITS AND GAINS BY THE INDUSTRIAL UNDERTAKING BUT O NLY ATTRIBUTABLE TO SUCH INDUSTRIAL UNDERTAKING INASMUCH AS SUCH IMPORT ENTITLEMENTS DID NOT RELATE TO MANUFACTURE OR S ALE OF THE PRODUCTS OF THE UNDERTAKING, BUT RELATED ONLY TO AN E VENT WHICH WAS POST MANUFACTURE NAMELY, EXPORT. ON AN APPLICATION OF THE AFORESAID TEST TO THE FACTS OF T HE PRESENT CASE, IT CAN BE SAID THAT AS ALL THE FOUR SUBSIDIES IN T HE PRESENT CASE ARE REVENUE RECEIPTS WHICH ARE REIMBURS ED TO THE ASSESSEE FOR ELEMENTS OF COST RELATING TO MANUFACTUR E OR SALE OF THEIR PRODUCTS, THERE CAN CERTAINLY BE SAID TO BE A DIRECT NEXUS BETWEEN PROFITS AND GAINS OF THE INDUSTRIAL UND ERTAKING OR BUSINESS, AND REIMBURSEMENT OF SUCH SUBSIDIES. HOWEVER, SHRI RADHAKRISHNAN STRESSED THE FACT THAT THE IMMEDIA TE SOURCE OF THE SUBSIDIES WAS THE FACT THAT THE GOVERN MENT GAVE THEM AND THAT, THEREFORE, THE IMMEDIATE SOURCE NOT BEIN G FROM THE BUSINESS OF THE ASSESSEE, THE ELEMENT OF DIRECTNE SS IS MISSING. WE ARE AFRAID WE CANNOT AGREE. WHAT IS TO BE SEEN FOR THE APPLICABILITY OF SECTIONS 80-IB AND 80-IC IS WHETHER THE PROFITS AND GAINS ARE DERIVED FROM THE BUSINESS. SO LONG AS PROFITS AND GAINS EMANATE DIRECTLY FROM THE BUSINES S ITSELF, THE FACT THAT THE IMMEDIATE SOURCE OF THE SUBSIDIES I S THE GOVERNMENT WOULD MAKE NO DIFFERENCE, AS IT CANNOT BE DISPUTED THAT THE SAID SUBSIDIES ARE ONLY IN ORDER T O REIMBURSE, WHOLLY OR PARTIALLY, COSTS ACTUALLY INCURRED BY THE ASSESSEE IN THE MANUFACTURING AND SELLING OF ITS PRO DUCTS. THE PROFITS AND GAINS SPOKEN OF BY SECTIONS 80-IB AND 80-IC HAVE REFERENCE TO NET PROFIT. AND NET PROFIT CAN ON LY BE CALCULATED BY DEDUCTING FROM THE SALE PRICE OF AN ART ICLE ALL ELEMENTS OF COST WHICH GO INTO MANUFACTURING OR SELLI NG IT. THUS UNDERSTOOD, IT IS CLEAR THAT PROFITS AND GAINS ARE DERIVED FROM THE BUSINESS OF THE ASSESSEE, NAMELY PROFITS ARR IVED AT AFTER DEDUCTING MANUFACTURING COST AND SELLING COSTS REIMBURSED TO THE ASSESSEE BY THE GOVERNMENT CONCERNED. .. 5 . 21.THE CALCUTTA HIGH COURT IN MERINO PLY & CHEMICALS LTD. V. CIT, 209 ITR 508 [1994], HELD THAT TRANSPORT SUBSIDIES WERE INSEPARABLY CONNECTED WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. IN THAT CASE, THE DIVISION BENCH HELD:- WE DO NOT FIND ANY PERVERSITY IN THE TRIBUNALS FIND ING THAT THE SCHEME OF TRANSPORT SUBSIDIES IS INSEPARAB LY CONNECTED WITH THE BUSINESS CARRIED ON BY THE ASSESS EE. IT IS A FACT THAT THE ASSESSEE WAS A MANUFACTURER OF PLYWOOD, IT IS ALSO A FACT THAT THE ASSESSEE HAS ITS UNIT IN A BACKWARD AREA AND IS ENTITLED TO THE BENEFIT OF THE SCHEME. FURTHER IS THE FACT THAT TRANSPORT EXPENDITUR E IS AN INCIDENTAL EXPENDITURE OF THE ASSESSEES BUSINESS AND IT IS THAT EXPENDITURE WHICH THE SUBSIDY RECOUPS AND THAT THE PURPOSE OF THE RECOUPMENT IS TO MAKE UP POSSIBLE PROFIT DEFICIT FOR OPERATING IN A BACKWARD AREA. THE REFORE, IT IS BEYOND ALL MANNER OF DOUBT THAT THE SUBSIDIES WE RE INSEPARABLY CONNECTED WITH THE PROFITABLE CONDUCT OF THE BUSINESS AND IN ARRIVING AT SUCH A DECISION ON THE F ACTS THE TRIBUNAL COMMITTED NO ERROR. 22. HOWEVER, IN CIT V. ANDAMAN TIMBER INDUSTRIES LTD. , 242 ITR 204 [2000], THE SAME HIGH COURT ARRIVED AT A N OPPOSITE CONCLUSION IN CONSIDERING WHETHER A DEDUCTIO N WAS ALLOWABLE UNDER SECTION 80HH OF THE ACT IN RESPECT OF TRANSPORT SUBSIDY WITHOUT NOTICING THE AFORESAID EA RLIER JUDGMENT OF A DIVISION BENCH OF THAT VERY COURT. A D IVISION BENCH OF THE CALCUTTA HIGH COURT IN C.I.T. V. CEMENT MANUFACTURING COMPANY LIMITED , BY A JUDGMENT DATED 15.1.2015, DISTINGUISHED THE JUDGMENT IN CIT V. ANDAMAN TIMBER INDUSTRIES LTD . AND FOLLOWED THE IMPUGNED JUDGMENT OF THE GAUHATI HIGH COURT IN THE PRESENT CASE. IN A PITHY DISCUSSION OF THE LAW ON THE SUBJECT, THE CALCUTTA HI GH COURT HELD: MR. BANDHYOPADHYAY, LEARNED ADVOCATE APPEARING FOR THE APPELLANT, SUBMITTED THAT THE IMPUGNED JUDGMENT IS CONTRARY TO A JUDGMENT OF THIS COURT IN THE CASE OF CIT V. ANDAMAN TIMBER INDUSTRIES LTD. REPORTED IN (2000) 242 ITR, 204 WHEREIN THIS COURT HELD THAT TRANSPORT SUBSID Y IS NOT AN IMMEDIATE SOURCE AND DOES NOT HAVE DIRECT NEXUS WITH THE ACTIVITY OF AN INDUSTRIAL UNDERTAKING. THEREFORE, THE AMOUNT REPRESENTING SUCH SUBSIDY CANN OT BE TREATED AS PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. MR. BANDHYPADHYAY SUBMITTED THAT IT IS NOT A PROFIT DERIVED FROM THE UNDERTAKING. THE BENEFIT U NDER SECTION 80IC COULD NOT THEREFORE HAVE BEEN GRANTED. HE ALSO RELIED ON A JUDGMENT OF THE SUPREME COURT IN THE CASE OF LIBERTY INDIA V. COMMISSIONER OF INCOME TAX, REPORT ED IN (2009) 317 ITR 218 (SC) WHEREIN IT WAS HELD THAT SUBS IDY BY WAY OF CUSTOMS DUTY DRAW BACK COULD NOT BE TREATED A S A PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. 6 WE HAVE NOT BEEN IMPRESSED BY THE SUBMISSIONS ADVANC ED BY MR. BANDHYOPADHYAY. THE JUDGMENT OF THE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WAS IN RELATION TO THE SUBSIDY ARISING OUT OF CUSTOMS DRAW BACK AND DUTY ENTITLEMENT PASS- BOOK SCHEME (DEPB). BOTH THE INCENTIVES CONSIDERED BY THE APEX COURT IN THE CASE OF LIBERTY INDIA COULD BE AVAI LED AFTER THE MANUFACTURING ACTIVITY WAS OVER AND EXPORTS WERE MADE. BUT, WE ARE CONCERNED IN THIS CASE WITH THE TRANSPOR T AND INTEREST SUBSIDY WHICH HAS A DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY INASMUCH AS THESE SUBSIDIES G O TO REDUCE THE COST OF PRODUCTION. THEREFORE, THE JUDGME NT IN THE CASE OF LIBERTY INDIA V. COMMISSIONER OF INCOME TAX H AS NO MANNER OF APPLICATION. THE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. & OTHERS VERSUS COMMISSIONER OF INCOME TAX, REPORTED IN [1997] 228 IT R AT PAGE 257 EXPRESSED THE FOLLOWING VIEWS:- . SIMILARLY, SUBSIDY ON POWER WAS CONFINED TO POWER CONSUMED FOR PRODUCTION. IN OTHER WORDS, IF POWER IS CONSUMED FOR ANY OTHER PURPOSE LIKE SETTING UP THE P LANT AND MACHINERY, THE INCENTIVES WILL NOT BE GIVEN. REFUN D OF SALES TAX WILL ALSO BE IN RESPECT OF TAXES LEVIED A FTER COMMENCEMENT OF PRODUCTION AND UP TO A PERIOD OF FI VE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION. IT IS DIFFICULT TO HOLD THESE SUBSIDIES AS ANYTHING BUT OPERATI ON SUBSIDIES. THESE SUBSIDIES WERE GIVEN TO ENCOURAGE SETTING UP OF INDUSTRIES IN THE STATE OF ANDHRA PRA DESH BY MAKING THE BUSINESS OF PRODUCTION AND SALE OF GOO DS IN THE STATE MORE PROFITABLE. 23. WE ARE OF THE VIEW THAT THE JUDGMENT IN MERINO PLY & CHEMICALS LTD. AND THE RECENT JUDGMENT OF THE CALCUTTA HIGH COURT HAVE CORRECTLY APPRECIATED THE LEGAL POSITION. 6. THE LD. COUNSEL FOR ASSESSEE ALSO DREW OUR ATTEN TION TO THE FACT THAT THE DECISION OF THE HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF M/S SUPRIYA GILL (SUPRA) WAS ALSO CONSIDERED BY THE HON'BLE APEX COURT IN THE SAID OR DER AND IT WAS HELD THAT THE SAID DECISION HAD WRONGLY INTE RPRETED THE JUDGMENTS IN STERLING FOODS (SUPRA) AND LIBERTY INDIA 317 ITR 218(SC) TO ARRIVE AT AN OPPOSITE CONCLUSION . THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE RELEVANT FINDINGS OF THE HON'BLE APEX COURT AT PARA 29 OF TH E ORDER AS UNDER: 7 FOR THE REASONS GIVEN BY US, WE ARE OF THE VIEW THAT THE GAUHATI, CALCUTTA AND DELHI HIGH COURTS HAVE CORRECTLY CONSTRUED SECTIONS 80-IB AND 80-IC. THE HIMACHAL PRADE SH HIGH COURT, HAVING WRONGLY INTERPRETED THE JUDGMENTS IN STERLING FOODS AND LIBERTY INDIA TO ARRIVE AT THE OPPOSITE CONCLUSION, IS HELD TO BE WRONGLY DECIDED FOR THE REASONS GI VEN BY US HEREINABOVE. 7. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT EV EN THE CBDT VIDE ITS CIRCULAR NO.39/2016 DATED 29.11.2016 AFTER TAKING NOTE OF THE DECISION OF THE HON'BLE APEX COU RT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA) HAD DIRECTED THAT THE POSITION VIS--VIS TREATMENT OF SUBSIDY OF TRANSPOR T, POWER AND INTEREST GIVEN BY THE GOVERNMENT TO INDUSTRIAL UNDERTAKINGS WAS SETTLED AS BEING PARTS OF PROFITS AND GAINS OF BUSINESS DERIVED FROM INDUSTRIAL UNDERTAKINGS AN D ENTITLED TO DEDUCTION U/S 80IB/80IC OF THE ACT AND HAD DIRECTED THAT THE APPEALS MAY NOT BE FILED BY THE DEPARTMENT ON THE ABOVE SETTLED ISSUE. THE RELEVAN T CIRCULAR IS REPRODUCED HEREUNDER: SUBJECT: TRANSPORT, POWER AND INTEREST SUBSIDIES RECEIVED BY AN INDUSTRIAL UNDERTAKING- ELIGIBILITY FOR DEDUCTION UNDER SECTIONS 80-IB, 80-IC ETC. OF THE INCOME TAX ACT, 1961-REG. THE ISSUE WHETHER REVENUE RECEIPTS SUCH AS TRANSPORT, POWER AND INTEREST SUBSIDIES RECEIVED BY AN INDUSTRIAL UNDERTAKING/ELIGIBLE BUSINESS ARE PART OF PROFITS AND GAINS OF BUSINESS DERIVED FROM ITS BUSINESS ACTIVITIES WITHIN THE MEANING OF SECTIONS 80-IB/80-IC OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND THUS ELIGIBLE FOR CLAIM OF CORRESPONDING DEDUCTION UNDER CHAPTER VI-A OF THE ACT HAS BEEN A CONTENTIOUS ONE. SUCH RECEIPTS ARE OFTEN TREATED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICERS. 2. THE HON'BLE SUPREME COURT IN ITS JUDGMENT DATED 9.3.2016 IN THE CASE OF MEGHALAYA STEELS LTD IN CA NO.7622 OF 2014 AND OTHER CASES HAS HELD THAT THE SUBSIDIES OF TRANSPORT, POWER AND INTEREST GIVEN BY THE GOVERNMENT TO THE INDUSTRIAL 8 UNDERTAKING ARE RECEIPTS WHICH HAVE BEEN REIMBURSED FOR ELEMENTS OF COST RELATING TO MANUFACTURE/SALE OF THE PRODUCTS. THUS, THERE IS A DIRECT NEXUS BETWEEN PROFIT AND GAINS OF THE INDUSTRIAL UNDERTAKING/BUSINESS AND REIMBURSEMENT OF SUCH BUSINESS SUBSIDIES. ACCORDINGLY, SUCH SUBSIDIES ARE PART OF PROFIT AND GAINS OF BUSINESS DERIVED FROM THE INDUSTRIAL UNDERTAKING AND ARE NOT TO BE INCLUDED UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, DEDUCTION IS ADMISSIBLE UNDER SECTION 80-IB/80-IC OF THE ACT ON SUCH REVENUE RECEIPTS DERIVED FROM THE INDUSTRIAL UNDERTAKING. 3. IN VIEW OF THE ABOVE, IT IS A SETTLED POSITION THAT REVENUE SUBSIDIES RECEIVED FROM THE GOVERNMENT TOWARDS REIMBURSEMENT OF COST OF PRODUCTION/MANUFACTURE OR FOR SALE OF MANUFACTURED GOODS ARE PART OF PROFITS AND GAINS OF BUSINESS DERIVED FROM THE INDUSTRIAL UNDERTAKING/ELIGIBLE BUSINESS, AND ARE THUS, ADMISSIBLE FOR APPLICABLE DEDUCTION UNDER CHAPTER VI-A OF THE ACT.. 4. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILED BY THE DEPARTMENT ON THE ABOVE SETTLED ISSUE, AND THOSE ALREADY FILED MAY BE WITHDRAWN/NOT PRESSED UPON. 5. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 8. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, STATED THAT IN VIEW OF THE ABOVE, THE ISSUE RELATING TO ALLOWANCE OF DEDUCTION U/S 80IC OF THE ACT ON TRANSPORT SUBSIDY WAS SETTLED IN FAVOUR OF THE ASSESSEE AND DISALLOWANCE OF DEDUCTION ON THE SAME UPHELD BY THE LD.CIT(APPEALS) , WAS, THEREFORE, AGAINST THE SETTLED POSITION OF LAW AND OUGHT TO BE DELETED. 9. THE LD. DR, ON THE OTHER HAND, THOUGH FAIRLY ADM ITTED THAT THE ISSUE HAD BEEN SETTLED BY THE HON'BLE APEX COURT IN THE CASE OF MEGHALAYA STEELS LTD. (SUPRA), PLACE D RELIANCE ON THE ORDER OF THE LD.CIT(APPEALS). 9 10. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. WE ARE IN AGREEMENT WITH THE LD. COUNSEL FOR ASSESSEE THAT THE ISSUE OF TREATMENT OF TRANSPORT SUBSIDY AS REVENUE RECEIPT BY THE ASSESSEE DERIVED FROM THE INDUSTRIAL UNDERTA KINGS OF THE ASSESSEE AND THUS ENTITLED TO DEDUCTION U/S 80I C OF THE ACT HAS BEEN SETTLED BY THE HON'BLE APEX COURT IN T HE CASE OF MEGHALAYA STEELS LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE,AND THE SAID POSITION HAS BEEN ACCEPTED BY THE REVENUE ALSO AS IS EVIDENT FROM THE CBDT CIRCULAR N O. 39/2016 DATED 29.11.2016 REFERRED TO ABOVE, DIRECTI NG REVENUE OFFICERS NOT TO FILE APPEALS OR WITHDRAW AP PEALS ALREADY FILED RELATING TO THE SAID ISSUE. IN VIEW O F THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) DENYING DEDUCT ION U/S 80IC ON THE SAME AND DIRECT THAT THE TRANSPORT SUBS IDY RECEIVED BY THE ASSESSEE BE TREATED AS REVENUE RECE IPT IN THE HANDS OF THE ASSESSEE AND DEDUCTION U/S 80IC O F THE ACT BE ALLOWED ON IT. 11. GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS , THEREFORE, DISMISSED SINCE IT CHALLENGES THE ACTION OF THE LD.CIT(APPEALS) IN TREATING TRANSPORT SUBSIDY AS I NCOME OF THE ASSESSEE WHICH WE HAVE NOTED ABOVE IS TO BE SO TREATED IN VIEW OF THE DECISION OF THE HON'BLE APEX COURT I N THE CASE OF MEGHALAYA STEELS LTD. (SUPRA). 12. GROUND NO.2 RAISED BY THE ASSESSEE WAS NOT CONT ESTED BEFORE US AND THE SAME IS, THEREFORE, ALSO TREATED AS DISMISSED. 10 13. GROUND NO.3 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF THE LD.CIT(APPEALS) IN NOT ALLOWING DEDUC TION U/S 80IC OF THE ACT ON THE TRANSPORT SUBSIDY RECEIVED S TANDS ALLOWED IN VIEW OF THE ISSUE BEING SQUARELY COVERED BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF M EGHALAYA STEELS LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE. 14. GROUND NO.4 RAISED BY THE ASSESSEE READS AS UND ER: 4. THAT THE LEARNED LOWER COURT ERRED IN FACTS AND LEGAL ASPECTS OF THE CASE IN TREATING CST RS 4,06,602/- A S INCOME OF THE APPELLANT. 15. THE SAME GROUND WAS NOT PRESSED BEFORE US AND, THEREFORE, THE SAME IS BEING TREATED AS DISMISSED. 16. IN EFFECT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH