Transport, Power & Interest Subsidies received by the Industrial undertakings are Deductible u/ss 80-IB & 80IC of Income Tax Act: CBDT [Read Circular]

Job Work -Deduction - Interest

In a recent circular, the Central Board of Direct Taxes (CBDT) clarified that transport, power and Interest subsidies received by the Industrial Undertakings are deductible u/ss 80-IB & 80IC of the Income Tax Act, 1961.

The circular is issued with an object to give effect to the Apex Court decision in the case of Meghalaya Steels Ltd dated 09.03.2016 in which the Court held that the subsidies of transport, power and Interest given by the Government to the Industrial Undertakings are receipts which have been reimbursed for elements of cost relating to manufacture/ sale off the products. Accordingly, the Court observed that since here is a direct nexus between the profit and gains of the undertaking and the reimbursement of such subsidies, the same cannot be taxed under the head “income from other sources” and therefore, they are eligible for deduction under chapter VI A of the Income Tax Act.

“in view of the above it is settled position that the revenue subsidies received from the Government towards reimbursement of cot of production/ manufacture or sale of the 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.”

The Circular further directs the officials to withdraw the Department appeals which covers the above issue.

Read the full text of the circular below.