Law:

Section:

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings Interest subsidy received by assessee under a scheme formulated by State Government to encourage setting up of industries in remote areas does not form part of profits derived from industrial undertaking and is therefore not eligible for deduction under section 80-IB [In favour of revenue] Where in terms of incentive policy issued by the State of Himachal Pradesh to encourage the setting up of industries in remote areas, grant of subsidy on the interest paid by the industrial undertaking was received by the assessee : Held that, in view of the Liberty India v. CIT [2009] 225 CTR 233 (SC) and Sterling Food v. CIT [1984] 150 ITR 292 (Ker.) it was apparent that the interest subsidy received by the assessee was not a profit derived from business since it was not an operational profit. The source of the subsidy was not the business of the assessee but the scheme of the State Government. Thus, 'Interest subsidy' received by the assessee under a scheme formulated by the State Government did not form part of profits derived from the industrial undertaking and was, therefore, is not eligible for deduction under section 80-IB. Mrs. Vandana Kuthiala for the Appellant. Ashwani K. Lal for the Respondent JUDGMENT Deepak Gupta, J. : The following questions of law arise for decision in this appeal : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that 'interest subsidy' received by the assessee under a scheme formulated by the State Government forms part of profits derived from the industrial undertaking and is hence eligible for deduction under s. 80-IB of the IT Act, 1961, when it has been clearly laid down by the Hon'ble Supreme Court in the cases of Cambay Electric Supply Industrial Co. Ltd. v. CIT 1978 CTR (SC) 50 : [1978] 113 ITR 84 (SC) and CIT v. Sterling Foods[1999] 153 CTR (SC) 439 : [1999] 237 ITR 579 (SC) that the words 'derived from' referred to in s. 80-IB have a narrower meaning than 'attributable to', and the interest subsidy could not have been treated…

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