Transport subsidy received by an industrial undertaking under a scheme of Central Government is not eligible for deduction u/s 80-IA

JUDGEMENT

Deepak Gupta, J. (oral)

These appeals are being disposed of by a single judgement as the question of law involved in both the appeal is the same and reads as follows:

“1.Whether the ITAT was right in law in holding that `Freight Subsidy’ received from the Govt. by the assessee is allowed to be included as profits derived from the industrial undertaking and eligible for deduction under Section 80-1A of the Income Tax Act, 1961, when it has been clearly laid down by the Supreme Court in its decision in the case of CIT vs. Cambay Electric supply Industrial Co. Ltd., 113 ITR 84 that the words “derived from” referred to in the section 80-1A has narrower meaning than “attributable to” and the freight subsidy cannot be treated as profits `derived’ from the industrial undertaking though it may be `attributable’ to the industrial undertaking?”

It would not be out of place to mention that after the amendment made in Section 80-1A by the Finance Act, 1999 w.e.f. 1.4.2000, Section 80-1A was split into two parts and now Section 80-1A applies to undertakings and enterprises engaged in infrastructure development and Section 80-1B applies to other eligible business. The provisions of Section 80-1B are para materia with Section 80-1A as they previously existed.

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