Commissioner of Income Tax vs India Pistons Repco. Ltd.

Ramanujam, J.—The assessee is a public limited company. For the assessment year 1971-72, it claimed deduction u/s 80-I of the income

tax Act, 1961, of a sum of Rs. 5,079 being the cash subsidy referable to its exports and of a sum of Rs. 1,562 being the refund of drawback duty

on the ground that they are profits and gains attributable to. the priority industry. The assessee claimed similar relief u/s 80-I of the income tax Act,

1961, for the assessment year 1972-73 in relation to cash subsidy of Rs. 12,262 and drawback duty of Rs. 12,643. The income tax Officer

negatived the assessee''s claim holding that the amounts received by the assessee by way of cash subsidy and refund of drawback duty during the

relevant previous assessment years could not be considered as income attributable to the priority industry and, therefore, the deduction cannot be

allowed u/s 80-I of the income tax Act, 1961. The disallowance of the assessee''s claim by the income tax Officer was challenged before the

Appellate Assistant Commissioner. The Appellate Assistant Commissioner, however, held that the amounts received by the assessee during the

two relevant previous years by way of cash subsidy and by way of refund of drawback duty were income attributable to the priority industry and

hence the deduction has to be allowed as claimed by the assessee u/s 80-I of the income tax Act, 1961. The said view of the Appellate Assistant

Commissioner was challenged before the income tax Appellate Tribunal. The income tax Appellate Tribunal referring to its earlier view in ITO v.

Shardlow India Limited (ITA No. 3025 of 1972-73, dated May 28, 1975) upheld the assessee''s claim for deduction u/s 80-I of income tax Act,

1961, in relation to the cash subsidy and the refund of drawback duty. Aggrieved by the decision of the income tax Appellate Tribunal, the

Revenue has sought a reference to this court on the following question:

Whether, on the facts and in the circumstances of the case, Rs. 5,079 and Rs. 12,262 received by the assessee by way of cash subsidy and Rs.

1,562 and Rs. 12,643 received by the assessee by way of refund of drawback duty during the previous years ending December 31, 1970, and

December 31, 1971, respectively, should be considered as profits and gains arising from the priority industry for the purpose of computing the

deduction allowable u/s 80-I of the income tax Act, 1961, for the assessment years 1971-72 and 1972-73, respectively?

The view taken by the income tax Appellate Tribunal in ITO v. Shardlow India Limited (ITA No. 3025 of 1972-73, dated May 28, 1975) was

the subject-matter of a tax case before this court and this court upheld the said order of the income tax Appellate Tribunal in Shardlow India Ltd.

Vs. Commissioner of Income Tax, Madras, . The decision of this court in Shardlow India Ltd. Vs. Commissioner of Income Tax, Madras, follows

an earlier decision of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. Vs. The Commissioner of Income Tax, Gujarat-II,

Ahmedabad, Hence, in view of the decision of this court in Shardlow India Ltd. Vs. Commissioner of Income Tax, Madras, , which clearly

governs this case, the question of law is answered in the affirmative and against the Revenue. There will be no order as to costs.