Insurance Subsidy received from Government Eligible for Deduction u/s 80IC: ITAT [Read Order]

Income Tax Appellate Tribunal (ITAT), Kolkata bench comprising Sanjay Garg, Judicial Member, and Girish Agrawal, Accountant Member held that insurance subsidy received from Government Eligible for deduction u/s 80IC of the Act.

The assessee company, M/s. La OpalaRg. Ltd. is engaged in the business of manufacturing Opal and Crystal Glassware and the sale of electricity generated from the wind farm. The Assessing Officer (AO) submitted that the assessee filed its return of income u/s. 139 of the Act declaring a total income of Rs.43,63,19,250/-. During the course of the hearing, the assessee was asked to furnish the details on the issues and the assessee submitted the same from time to time. Thereafter, the AO assessed the total income at Rs.43,63,19,250/- u/s. 143(3) of the Act and issued a demand notice. The assessee submitted its reply to the above observation on explaining the case that the issue relating to deduction u/s. 80IC and hence CIT proceeded to conclude the revisional proceedings u/s. 263 of the Act by giving his direction to the AO to prepare the assessment afresh. CIT in the exercise of his powers u/s. 263 of the Act was of the view that the order of the AO was erroneous and prejudicial to the interest of the revenue and he was pleased to set aside the assessment order. Aggrieved by the said order the assessee filed an appeal before ITAT.

The Tribunal said” interest income solely comprised of interest received from security deposits kept with electricity department. The operational receipts of the assessee as the company are required to compulsorily deploy funds by way of security deposits with the electricity boards in order to obtain the supply of power for its unit and pointed out that it is not a case where the assessee has kept deposit with the dominant intention to earn interest income but in this case, the assessee was under compulsion to maintain a deposit with the electricity board to ensure supply of power to the unit and such interest income had first-degree nexus with the eligible undertaking of the assessee and accordingly the same would equally qualify for the deduction u/s 80IC of the Act”

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