While considering a number of petitions having similar issues, the Single Bench of Supreme Court, on March 9thheld that the subsidies granted by the Governments to industries is business income and entitled to deduction under the Income Tax Act. The respondent is engaged in the business of manufacture of Steel and Ferro Silicon. On 9.10.2014, the Respondent submitted its return of income for the year 2004-2005 disclosing an income of Rs.2,06,970/- after claiming deduction under Section 80-IB of the Income Tax Act on the profits and gains of business of the respondent’s industrial undertaking. The respondent received a certain amount as transport subsidy, interest subsidy, and power subsidy. The Assessing Officer, in the assessment order dated 7.12.2006, held that the amounts received by the assessee as subsidies were revenue receipts and did not qualify for deduction under Section 80-IB(4) of the Act and, accordingly, the respondent’s claim for deduction of an amount of Rs.2,74,09,386/- on account of the three subsidies aforementioned were disallowed.
The respondent-assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Guwahati, who, vide his order dated 8.3.2007, dismissed the appeal of the respondent. Aggrieved by the aforesaid order, the respondent preferred an appeal before the ITAT which, by its order dated 19.3.2010, allowed the appeal of the respondent. The Revenue carried the matter thereafter to the High Court, under Section 260A of the Act, which resulted in the impugned judgment dated 29.5.2013, which decided the matter against the Revenue and therefore, the Revenue approached the Supreme Court.
The Court while dismissing the petitions expressed a view that “subsidies” are business income under section 28(iii)(b) in which it is clearly stated that that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax. To substantiate this R.F. Nariman.J added that “If cash assistance received or receivable against exports schemes are included as being income under the head “profits and gains of business or profession”, it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head “profits and gains of business or profession”, and not under the head “income from other sources”.
Read the full text of the judgment below.
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