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Tata Chemicals Allowed I-T Deduction for Fert Subsidy

The Income Tax Appellate Tribunal (ITAT) has ruled that the fertilizer subsidy Tata Chemicals had received from the government was eligible for income tax deduction.

For the assessment year 2003-04, the company had claimed a deduction of sales tax remission of Rs3.31 crore and price concession of Rs105.40 crore on the subsidy it received for its Haldia plant.

The claim was rejected by the assessment officer. Tata Chemicals approached the ITAT after the commissioner of income tax upheld the assessment officer’s decision.

In its appeal, Tata Chemicals raised the ground with respect to the taxability of sales tax and, if yes, whether the same was eligible for deduction u/s 80 IB of the Income Tax Act.

Tata Chemicals had also sought clarification whether the fertilizer price concession from the government of Rs10,540 crore was eligible for deduction under the same section.

It had submitted that the fertilizer concession it received was nothing but part of the sale proceeds, which should not be excluded while working out profit u/s 80 IB of the Act.

The department representative supported the order of the assessing officer and stated that fertilizer subsidy was merely an aid by the government and in the earlier years, the issue had been decided against the assessee.

However, the ITAT ruled that the fertilizer subsidy income was an income derived from the business of the industrial undertaking and hence was eligible for deduction under 80 IB of the Income Tax Act.

Last year, the Mumbai bench of the ITAT had allowed Rs3.7 crore paid by Tata Chemicals for using the ‘TATA’ logo as a business deduction.

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