December 2022
45. Subsidy in the nature of remission of sales tax given to promote industries is capital in nature and not chargeable to tax. Further, a subsidy under a retention pricing scheme is eligible for deduction u/s 80IB of the Act.
Tata Chemicals Ltd vs. Deputy Commissioner of Income-tax
[2022] 95 ITR(T) 134 (Mumbai - Trib.)
ITA No.: 2439(MUM) of 2011
A.Y.: 2003-04
Date of order: 16th February, 2022
Sections: 4, 80IB
45. Subsidy in the nature of remission of sales tax given to promote industries is capital in nature and not chargeable to tax. Further, a subsidy under a retention pricing scheme is eligible for deduction u/s 80IB of the Act.
FACTS
During the captioned A.Y. the assessee company merged with a corporate entity. The assessee did not claim a deduction u/s 80IB of the Act in the revised return pursuant to the merger but reserved the right to claim it during the assessment proceedings.
During the assessment proceedings, the AO taxed the sales tax incentive considering the same as a revenue item and held that the fertilizer subsidy was not eligible for deduction u/s 80(IB).
Aggrieved, the assessee filed an appeal before the CIT(A). However, the assessee’s appeal was dismissed on the following grounds:
- Sales tax incentive scheme does not have a direct nexus with the activities of the industrial unit.
- Fertilizer subsidy provided by the government as price concession was not income from the industrial undertaking and therefore not eligible for deduction u/s 80(IB).
Aggrieved, the assessee filed further appeal before the IT
