Ita/7/2010 Of Commissiner Of Income Tax v. M/S Meghayaya Steels Ltd

ITA 7/2010BEFORETHE HON’BLE MR.JUSTICE I.A. ANSARITHE HON’BLE MR. JUSTICE P.K. MUSAHARY By this common judgment and order, we propose to dispose of these two appeals, preferred under Section 260A of the Income Tax Act, 1961 (hereinafter referred toas ’the Act’), against the orders, dated 19.03.2010, passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as the ’learned Tribunal’), Guwahati, in Income Tax Appeal (in short, ’ITA’) Nos. ITA 52/Gau/2009 and ITA 95/Gau/2007 inasmuch as these two appeals, as would be seen, cover all the four subsidies, namely, transport subsidy, interest subsidy, power subsidy and insurancesubsidy, which form the subject-matter of controversy in the present set of appeals. While disposing of the two appeals, as indicated above, the learned Tribunal took the view that the assessee-respondents are entitled to claim deduction either under Section 80IB or under Section 80IC of the Act, though the Revenue contends that the assessee-respondents are not entitled to receive, and could nothave been legally given, the benefit of deduction either under Section 80IB or under Section 80IC.2.Whereas, by the impugned order, dated 19.03.2010, the learned Tribunal has dismissed the appeal No. ITA 52/Gau/2009, preferred by the Revenue, by taking the view that the subsidies, namely, transport subsidy, power subsidy, interestsubsidy and insurance subsidy, received by the assessee-respondents, would go on to reduce the corresponding expenses incurred and the resultant profit would be the profits and gains of the business of the industrial undertaking, that all these subsidies are inter-linked, inter-laced and having a direct nexus with themanufacturing activities of the assessee which are inseparable from the expenditure incurred by the assessee on account of transportation of purchase as well as sales, power, interest, insurance cover of the business of the assessee and, therefore, there is a direct nexus between the subsidy received by the assessee’sindustrial undertaking and the resulting profits and gains thereof and the assessee is eligible for deduction under Section 80-IB/80-IC of the Act. 3.The learned Tribunal, by its order, passed on the same date (i.e., by the order, dated 19.03.2010), has allowed the appeal No. ITA 95/Gau/2007, preferred by the assessee, by taking the view that the subsidies, in question, would go on to reduce the corresponding expenses incurred and the resultant profit would be the profits and gains of the business of the industrial undertaking, that allthese subsidies are inter-linked, inter-laced and having a direct nexus with the manufacturing activities of the assessee which are inseparable from the expenditure incurred by the assessee on account of transportation of purchase as well as sales, power, interest, insurance cover of the business of the assessee and, therefore, there is a direct nexus between the subsidy received by the assessee’s industrial undertaking and the resulting profits and gains thereof and the assessee is eligible for deduction under Section 80-IB/80-IC of the Act. 4.The principal distinction between the two impugned orders, passed on thesame date, i.e., on 19.03.2010, may be set out as follows: (i) By the impugned order, passed in No. ITA 52/Gau/2009, the learned Tribunal dismissed the appeal of the Revenue and allowed deduction under Section 80-IB/80-IC of the Act; whereas, by the impugned order, passed in ITA. 95/Gau/2007, the learned Tribunal allowed the appeal of the assessee and, in consequence thereof,allowed deduction under Section 80-IB/80-IC of the Act. (i) By the impugned order, passed in No. ITA 52/Gau/2009, the learned Tribunal dismissed the appeal of the Revenue and allowed deduction under Section 80-IB/80-IC of the Act; whereas, by the impugned order, passed in ITA. 95/Gau/2007, the learned Tribunal allowed the appeal of the assessee and, in consequence thereof,allowed deduction under Section 80-IB/80-IC of the Act. (ii) While, in ITA. 52/Gau/2009, the subsidies involved were transport subsidy,insurance subsidy, interest subsidy and power subsidy, the ITA 95/Gau/2007 involved transport subsidy, interest subsidy and power subsidy; and (iii) While, in ITA 95/Gau/2007, the deductions had been claimed under Section 80-IC of the Act, the deductions, claimed in ITA 52/Gau/2009, were claimed under Section 80-IB of the Act. The learned Tribunal, however, as already indicated hereinbefore, allowed the deductions without expressly saying as to whether the deductions, in the said two appeals, had been allowed under Section 80IB or 80IC of the Act. In other words, the learned Tribunal allowed the deductions in respect of the relevant subsidies, received by the assessee concerned, without speci fically determining if the deductions were allowable under Section 80IB or underSection 80IC.5.The substantial questions of law, which have been framed for hearing of the IT Appeal No. 7/2010, are as under:Substantial Question of law as framed in pursuant to Order dated 08.12.2010 Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that transport subsidy, power subsidy and interest subsidy, received by the respondent, are allowable for computation of deduction under Section 80IB of the Income Tax Act, 1961? Additional Substantial Question of law as framed in pursuant to Order dated 10.04.2013 (1)Whether, on the facts and circumstances of the case, the learned Tribunal was right in holding that the amount of transport subsidy, interest subsidy and power subsidy would go on to reduce the expenses incurred under that particular head and the resultant profits and gains of the business of Industrial Undertaking would be eligible for deduction under Section 80IB of the Income Tax Act, 1961? (2)If the answer to question no.1 is in the negative, whether, on the facts and in the circumstances of the case, the learned Tribunal was right in holding that the transport subsidy, interest subsidy and power subsidy are inter-linked, inter-laced and having a direct nexus with the manufacturing activities of the assessee, which are inseparable from the expenditure incurred by the assessee on account of transportation, purchase as well as sales of the business of the assessee are allowable for deduction under Section 80IB ? 6.The substantial questions of law, which have been framed for hearing of the IT Appeal No. 16/2011, are as under:Substantial questions of law as framed pursuant to the order dated 01.08.2011 Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that transport subsidy, insurance subsidy, interest subsidy andpower subsidy received by the respondent are allowable for computation of deduction U/s. 80IC of the Income Tax Act, 1961? Substantial questions of law as framed pursuant to the order dated 10.04.2013(1)Whether on the facts and in the circumstances of the case, the learned Tribunal was right in holding that the amount of transport subsidy, insurance subsidy, power subsidy and interest subsidy would go on to reduce the expenses incurred under that particular head and the resultant profits and gains of the business of Industrial Undertaking would be eligible for deduction under Section 80IC of the Income Tax Act, 1961 ? Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that transport subsidy, insurance subsidy, interest subsidy andpower subsidy received by the respondent are allowable for computation of deduction U/s. 80IC of the Income Tax Act, 1961? Substantial questions of law as framed pursuant to the order dated 10.04.2013(1)Whether on the facts and in the circumstances of the case, the learned Tribunal was right in holding that the amount of transport subsidy, insurance subsidy, power subsidy and interest subsidy would go on to reduce the expenses incurred under that particular head and the resultant profits and gains of the business of Industrial Undertaking would be eligible for deduction under Section 80IC of the Income Tax Act, 1961 ? (2)If the answer to question no.1 is in the negative, whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the transport subsidy, insurance subsidy, power subsidy and interest subsidy are inter linked, inter laced and having a direct nexus with the manufacturing activities of the assessee, which are inseparable from the expenditure incurred bythe assessee on account of transportation of purchase as well as sales of the business of the assessee are allowable for deduction under Section 80IC? 7.From a bare reading of the substantial questions of law, which have beenframed in the present two appeals, it becomes more than abundantly clear that the questions, raised in the present two appeals, are, in substance, same, the principal difference between the questions raised in these two appeals being that, while in ITA No. 7/2010, the deductions claimed were under Section 80IB of theAct, the deductions claimed, in ITA No. 16/2011, were under Section 80IC of theAct. Therefore, as we shall proceed further, it would become transparent that the substantial questions of law, which have been framed in these two appeals, are, in effect, akin to each other.8.Before entering into the discussion of the merit of the questions, which have been framed, for determination in the present two appeals, it is apposite that the material facts, giving rise to the present two appeals, be taken note of. With this end in view, the material facts, leading to each of these two appeals, are, in brief, set out as under: FACTS OF THE CASE IN ITA No. 7/2010: (i)The respondent is an assessee under the Act, the respondent being an industrial undertaking engaged in the business of manufacture of Steel and Ferro Silicon. (ii)The respondent submitted, on 19.10.2004, its return of income for the assessment year 2004-2005 disclosing income at Rs. 2,06,970/- after claiming deduction, under Section 80IB of the Act, on the profits and gains of business of the respondent’s industrial undertaking. The assessment of the respondent was completed, on 07.12.2006, under Section 143(3) of the Act, on a total income of Rs.1,33,76,535/-. (iii)During the previous year, relevant to the assessment year under consideration, the respondent had received the following amounts on account of subsidies:-Transport subsidyRs. 2,64,94,817. 00Interest subsidy-Rs.2,14,569. 00Power subsidy-Rs. 7,00,000. 00-TotalRs. 2,74,09,386. 00 (ii)The respondent submitted, on 19.10.2004, its return of income for the assessment year 2004-2005 disclosing income at Rs. 2,06,970/- after claiming deduction, under Section 80IB of the Act, on the profits and gains of business of the respondent’s industrial undertaking. The assessment of the respondent was completed, on 07.12.2006, under Section 143(3) of the Act, on a total income of Rs.1,33,76,535/-. (iii)During the previous year, relevant to the assessment year under consideration, the respondent had received the following amounts on account of subsidies:-Transport subsidyRs. 2,64,94,817. 00Interest subsidy-Rs.2,14,569. 00Power subsidy-Rs. 7,00,000. 00-TotalRs. 2,74,09,386. 00 (iv)The Assessing Officer, in his assessment order, dated 07.12.2006, held that the amounts, received by the assessee as subsidies, were revenue receipts innature and did not qualify for deduction under Section 80IB(4) of the Act. The Assessing Officer accordingly disallowed the respondent’s claim for deduction ofthe amount of Rs. 2,74,09,386/- , under Section 80 IB of the Act, on account oftransport subsidy, interest subsidy and power subsidy.(v) Against the said assessment order, the assessee-respondent preferred appeal before the Commissioner of the Income Tax (Appeals), Guwahati, (in short, ’theCIT (A)’), who, vide his order, dated 08.03.2007, dismissed the appeal of the respondent by taking the view that the subsidies, received by the assessee-respondent, were not entitled to deduction under Section 80IB inasmuch the subsidies could not be termed as the profits and gains derived from manufacturing business of the respondent and the profits and gains, in order to be eligible for deduction under Section 80IB of the Act, have to be derived from industrial undertakingand, as the immediate source of subsidies was schemes of the Government, it wasonly incidental to the assessee-respondent’s business. The CIT(A) was, however, also of the view that the subsidies, received by the respondent’s industrial undertaking, had some commercial connection with the business of the respondent and, hence, such receipts were to be assessed as ’business income’ and not as income from other sources. (vi)Aggrieved by the aforesaid order of the CIT(A), the respondent preferred appeal before the learned Tribunal. The said appeal was registered, we have already indicated above, as ITA No. 95/Gau/2007. The learned Tribunal has, by its order, dated 19.03.2010, allowed the appeal of the respondent. (vii)While so allowing the appeal of the respondent concerned, the learned Tribunal followed its own order, passed in the case of C.I.T. V/s. Meghalaya Steels Ltd. in I.T.A. No. 46/Gau/2009, for the assessment year 2006-2007, decided on 19.03.2010. The learned Tribunal held that the subsidies, received by the respondent’s industrial undertaking, would go on to reduce the corresponding expenses incurred under those particular heads and the resultant profit would be the profits and gains of the business of the industrial undertaking eligible for deduction under Section 80-IB of the Act. The learned Tribunal further held that all the subsidies were inter-linked, inter-laced and have direct nexus with the manufacturing activities of the assessee-respondent’s industrial undertaking.(viii)Against the order, dated 19.03.2010, so passed by the learned Tribunal, the Revenue is, now, in appeal before us. (i)The respondent is an assessee under the Act, the respondent being an industrial undertaking engaged in the business of manufacture of coke products.(ii)The respondent submitted, on 17.11.2006, its return of income for the assessment year 2006-07 disclosing income at Rs. NIL. The assessment of the respondent was completed, on 31.12.2008, under Section 143(3) of the Act, on atotal income of Rs. 87,93,230/-.(iii)During the previous year, relevant to the assessment year under consideration, the respondent had received the following amounts on account of subsidies:-Transport subsidyRs. 6,55,40,049. 00Insurance subsidy-Rs.4,84,836. 00-Interest subsidyRs. 10,11,771. 00Power subsidy-Rs.1,86,010. 00-TotalRs. 6,72,22,666. 00 (iv)The Assessing Officer, in his assessment order, dated 31.12.2008, held that the subsidies, so received by the assessee, had no direct nexus with the business of the respondent’s industrial undertaking, that the subsidies were incomeincidental to the business of the respondent’s industrial undertaking and, therefore, the subsidies had to be treated as ’other business income’ and could not be allowed for the purpose of working out the profits and gains of the respondent’s business undertaking within the meaning of Section 80IC. The Assessing Officer accordingly disallowed the respondent’s claim of deduction of the amount of 6,72,22,666/-, under Section 80IC of the Act, on account of transport subsidy, insurance subsidy, interest subsidy and power subsidy. (v) Against the said assessment order, the assessee-respondent preferred appeal before the Commissioner of the Income Tax (Appeals), Guwahati, (in short, ’theCIT (A)’), who, vide his order, dated 09.06.2009, allowed the appeal of the assessee-respondent by taking the view that the subsidies, received by the respondent, would go on to reduce the expenditure incurred under those respective heads for the purpose of working out profits and gains of the business of the assessee-respondent’s industrial undertaking within the meaning of Section 80IC of the Act. (vi)Aggrieved by the aforesaid order of the CIT(A), the Revenue preferred appeal before the learned Tribunal. The said appeal was registered, we have already indicated above, as ITA No. 52/Gau/2009. The learned Tribunal, by its order, dated 19.03.2010, dismissed the appeal preferred by the Revenue. (vii)While so dismissing the Revenue’s appeal, the learned Tribunal followed its own order, passed in the case of C.I.T. V/s. Meghalaya Steels Ltd. in I.T.A.No. 46/Gau/2009, for the assessment year 2006-2007, decided on 19.03.2010. The learned Tribunal held that the subsidies, received by the assessee-respondent’s industrial undertaking, would go on to reduce the corresponding expenses incurred under those particular heads and the resultant profit would be the profits andgains of the business of the industrial undertaking eligible for deduction under Section 80-IC of the Act. The learned Tribunal further held that all the subsidies were inter-linked, inter-laced and have a direct nexus with the manufacturing activities of the respondent’s industrial undertaking. (viii)Against the order, dated 19.03.2010, passed by the learned Tribunal, theRevenue is, now, in appeal before us.9.We have heard Mr. K. P. Pathak, learned Additional Solicitor General, appearing for the appellants. We have also heard Mr. R. P. Agarwalla, learned Senior counsel, for the assessee-respondents. SUBMISSIONS MADE BY THE APPELLANTS:10.Presenting the case of the appellant, Mr. K. P. Pathak, learned ASG, sub mits that the crux of the matter, which falls for determination in the present appeals, is: Whether the assessee-respondents herein were entitled to deductions,either under Section 80IB or under Section 80IC of the Act, in the light of theSchemes of the various subsidies formulated by the Government.11.The object of granting of the subsidies, in the present cases, was, submits the learned ASG, to encourage setting up of new industries in the backward region and the subsidies were made available to the industries only after the production commenced. 12.It is, therefore, an admitted position, contends the learned ASG, that the subsidies, in question, are revenue receipts and not capital receipts. What is, however, crucial, for decision, in the present appeals, is, the question, according to the learned ASG, whether the revenue receipt, in the form of transport subsidy, or interest subsidy or power subsidy or insurance subsidy,, at the hands of the assessee-respondents herein, goes on to reduce the cost of productionof the industrial undertaking concerned and thereby affects the resultant profits and gains derived from, or derived by, the industrial undertaking concerned and whether the amount of subsidy, in question, in a case of present nature, would be permitted to be deducted under the provisions of either under Section 80IB or under Section 80IC of the Act, as the case may be.13.Candidly submits the learned ASG that, in the present appeals, it is notin dispute that the industrial undertakings of the assessee-respondents herein are eligible industrial undertakings, under the relevant Government Policy/Scheme, to receive the subsidies, which were received by the assessee-respondents. However, what is in question, once again, points out the learned ASG, is whether any of the subsidies, in question, goes on to reduce the cost of production of the industrial undertakings concerned and thereby makes, the assessee-respondents concerned entitled to claim deductions, either under Section 80IB or under Section 80IC of the Act of the amounts of the subsidies, which were received, in the form of revenue receipt, by the assessee-respondents.14.Referring to the schemes the of subsidies,, the learned ASG submits thatthe schemes had been introduced by the Government with the main object of promoting industrial growth in the areas, where the schemes had been made available, and this policy had been continued during the relevant year, but, in order to obtain the benefit of deduction of profits and gains, under the Act, arising out of the schemes of subsidies, an industrial undertaking has to satisfy the conditions embodied under Section 80IB or 80IC of the Act, as the case may be. 15.While, in the case of Section 80IB, the fundamental requirement, according to Mr. Pathak, learned ASG, is that the profits and gains have to be ’derivedfrom’ the industrial undertaking, the profits and gains have to be ’derived by’the industrial undertaking if one has to claim deduction under Section 80IC. Nevertheless, in either case, submits the learned ASG, in order to become entitledto claim deduction of the amount of subsidy, received by an industrial undertaking, the assessee must be able to show a direct nexus between the subsidy received, on the one hand, and the profits and gains of the industrial undertaking concerned, on the other, inasmuch as there is no material distinction, contends thelearned ASG, between the phrase, ’derived from’ and the phrase, ’derived by’ and any attempt to distinguish the meaning of the said two expressions would be anacademic exercise with no substantial gain and it is for this reason that the two phrases, namely, ’derived from’ and ’derived by’, are used interchangeably. 16.What is, however, according to the learned ASG, imperative to show by anassessee, in order to claim deduction, be it under Section 80IB or under Section 80IC, is that the profits and gains have been, as the case may be, derived from or derived by the industrial undertaking, because of the subsidy received by the assessee . 16.What is, however, according to the learned ASG, imperative to show by anassessee, in order to claim deduction, be it under Section 80IB or under Section 80IC, is that the profits and gains have been, as the case may be, derived from or derived by the industrial undertaking, because of the subsidy received by the assessee. As a corollary thereto, submits the learned ASG, the assessee wouldhave to show, if the assessee has to claim deduction either under Section 80IB or under Section 80IC, that the profits and gains of the industrial undertaking concerned are directly relatable to, and connected with, the subsidies received and, hence, the profits and gains, so derived or so received, are not attributable to the subsidies, which the assessee received, but either ’derived from’ or ’derived by’, the industrial undertaking concerned. 17.According to the learned ASG, the word, ’derive’, which is of material significance, has been the subject-matter of interpretation in various judicial pronouncements without any reference to the suffix ’from’ or ’by’. A reference, in this regard, is made by the learned ASG to the case of Pandian Chemicals Ltd.vs. Commissioner of Income Tax [2003] 262 ITR 278.18.Further elaborating his submission, the learned ASG points out that the word ’derive’ is of importance and the use of the suffixes, ’from’ or ’by’ to the word ’derive’ are merely a manner of usage rather than an unintelligible differentia. In support of his contention, the learned ASG refers to the case of National Organic Chemical Industries Limited vs. Collector of Central Excise, Bombay (AIR 1997 SC 690), wherein the Supreme Court held as under: �The dictionaries state that the word ’derive’ is usually follows by the word ’from’ and it means get or trace from a source, arise from, originate in, show the origin or formation of’. It, therefore, suggests that the root word is ’derived’ and the suffix ’from’ or’by’ or ’directly’, etc., are indistinguishable and do not impinge on the interpretation at hand. In other words, there is no greater significance in the word ’from’ following the word ’derived’ other than the fact that it is the usual linguistic practice & & &.. � (Emphasis added) (Emphasis added) 19.The learned ASG has also placed reliance on the decisions rendered by various High Courts as well as the Supreme Court, in Sharavathy Steel Products (P)Ltd vs. ITO [2011], 347 ITR 371, Commissioner of Income-tax vs. Maharani Packaging (P) Ltd [2012] 209, reported in Taxman 49 (HP) (Mag), Commissioner of Income Tax in [2010] 193 Taxman 12, Janak Raj Bansal vs. CIT [2010], 228 CTR 167, Commissioner of Income Tax Karnal vs. Accent for living [2010], reported in 191 Taxman 88, and Pine Packaging (P) Ltd vs. CIT, reported in 250 CTR 45, on the controversy if any distinction, between the meaning of the expressions, ’derived from’ and ’derived by’ really exists. 20.From the decisions referred to above, further submits the learned ASG, it can be safely said that a number of superior judicial authorities have chosen to ignore the word ’from’ or ’by’, appearing after the word ’derived’, while considering the subject-matter involving and/or using the said two expressions. 21.According to the learned ASG, since there is no existing authority or decided case, which establishes any intelligible distinction between the two expressions, namely, ’derived from’ and ’derived by, what has to be considered by this Court, in the present appeals, is whether the profits and gains of the industrial undertakings, in question, were ’derived from’ or ’derived by’ the industrial undertakings concerned and whether the profits and gains, so derived, have a first degree nexus with the subsidies, which were received by the industrial undertakings. In consequence thereof, one can also safely gather, contends the learned ASG, that if no first degree nexus is established between the profits and gains derived by the industrial undertaking, on the one hand, and the subsidy or subsidies received by the industrial undertaking concerned, on the other, the assessee would neither be entitled to deduction under Section 80IB nor would the assessee be entitled to deduction under Section 80IC.22.In his endeavour to establish his contention, that there does not reallyexist any distinction or difference between the two expressions, ’derived from’and ’derived by’, the learned ASG has chosen to refer also to Chapter VI-A of the Act, particularly, Section 80-IA, Section 80-ID, Section 80-IAB, Section 80-HHE, Section 80-HHF, etc. of the Act and submits that after going through the Sections, as mentioned hereinbefore, it is not at all difficult for a prudent person to come to the conclusion that the phrases, ’derived from’ and ’derived by’, used in these Sections of the Act, are, by no means, of any material significanceand statutorily, it does not matter whether the profits and gains are derived from or derived by an industrial undertaking.23.The learned ASG submits that considering the fact that the expression, ’derived from’, appearing in Section 80IB, as well as the expression, ’derived by’, appearing in Section 80IC, are narrower in scope than the expression, ’attributable to’, it becomes transparent that if one has to receive the benefit of Sec tion 80IB or Section 80IC, he must show that the source of profits and gains is directly from the manufacturing activities of the assessee and that the profits and gains, so derived, are directly affected by subsidy or subsidies received. 24.Mr. Pathak has also submitted that merely because the scheme, in question, provides for various subsidies, it does not mean that the subsidies have a direct nexus with the profits and gains of the assessee-respondents’ industrial undertakings. Had any subsidy been given on the cost of the raw materials actually consumed by the assessee-respondent’s industrial undertakings, the subsidy, onraw materials, would have, perhaps, been, according to the learned ASG, eligible for deduction under Section 80IB or 80IC.25.Referring to the cases of Janak Raj Bansal vs CIT [2010], reported in 228 CTR 167, CIT vs. Maharani Packaging (P) Ltd, reported in [2012] 209 TAXMAN 49 (Mag.), Eastman Exports Global Clothing (P) Ltd vs. ACIT, reported in [2011] 331ITR 232, Karnal vs. Accent of Living [2010], reported in 191 TAXMAN 88, and M.M. Forgings Ltd vs. Addl. CIT [2010], reported in 349 ITR 643, the learned ASG submits that in these cases, the Courts have taken the view that the Duty Drawbackis not a profit or gain derived from industrial activity and, hence, Duty Drawback would not be eligible for deduction under Section 80IB.26.The learned ASG has further pointed out that, in the case of Supriya Gill vs. Commissioner of Income Tax [2010], reported in 193 TAXMAN 12, the HimachalPradesh High Court has held that that freight subsidy, received from the government by the assessee, will not be eligible for deduction, under Section 80-IA ofthe Act, on the ground that the source of freight subsidy was not the business of the assessee, but a scheme of the Central Government and, therefore, the samecould not be treated as a profit ’derived from’ business. 27.Pointing out to the case of Sri Umesh M. Joshi, Mumbai vs. ITO [ITA No. 4287/Mum/2010, dated 23.12.2011], the learned ASG submits that in this case, thelearned Income Tax Appellate Tribunal, Mumbai, confirmed the action of the Assessing Officer in disallowing the assessee’s claim for deduction, under section 80-IA of the Act, in respect of sales tax incentives on the ground that the immediate source of the incentives, received by the assessee, was the relevant schemeof the State Government and not the business of the industrial undertaking of the assessee.28.Referring to the case of CIT vs. Gheria Oil Gramudyog Workers Welfare Association, reported in [2011] 330 ITR 117 (HP), the learned ASG submits that in this case, the Court has taken the view that interest subsidy, received by the assessee, under a scheme formulated by the State Government, is not a profit derived from business, because it not an operational profit. 29.Referring to the case of CIT vs. Kiran Enterprises [2010], reported in 189 TAXMAN 457, the learned ASG also submits that transport subsidy, received by the assessee, was not a profit derived from business, for, it was not an operational profit and that the source of the subsidy is not the business of the assessee, but a scheme of the Central Government and, hence, the subsidy, received by the assessee, was not entitled to deduction under the Act. 30.Mr. Pathak, learned ASG, contends that the ratio of the judgment, rendered by this High Court, in Pancharatna Cement Vs. Union of India, reported in (2009) 6 GLR 459, which is relied on by the assessee-respondents, is not an issue in lis, in the present case, and the ratio of the said judgement of this High Court is, therefore, not applicable to the substantial questions of law, framed by this Court, in the present cases . 30.Mr. Pathak, learned ASG, contends that the ratio of the judgment, rendered by this High Court, in Pancharatna Cement Vs. Union of India, reported in (2009) 6 GLR 459, which is relied on by the assessee-respondents, is not an issue in lis, in the present case, and the ratio of the said judgement of this High Court is, therefore, not applicable to the substantial questions of law, framed by this Court, in the present cases. 31.In the cases at hand, submits the learned ASG, none of the subsidies canbe said to be reducing the cost of production of the industrial undertakings concerned and no first degree nexus can be said to have been established between the profits and gains derived from, or derived by, the assessee-respondents’ industrial undertakings concerned, on the one hand, and the subsidies, received by the assessee-respondents, on the other, and it is for this purpose that a subsidy, in a case of present nature, cannot be regarded as a subsidy, which helps in the profits and gains of the industrial undertaking and, in such a case, the profits and gains, derived from, or derived by, cannot be attributed to the subsidy received and, in a case of this nature, deduction, neither under Section 80IB no r under Section 80IC, would be available to the assessee concerned.32.Heavily relying upon the case of Liberty India vs. CIT, reported in [2009] 317 ITR218: (2009) 9 SCC 328, the learned ASG submits that the ’profits and gains’ derived from, or derived by, the industrial undertakings of the assessee-respondents, are, in effect, the subsidies provided by the Government and, although the profits and gains of the industrial undertakings concerned may be attributable to the subsidies received by the industrial undertakings concerned, the fact of the matter remains that the subsidies are revenue receipts and are liable to be taxed.33.The issue, in these appeals, if a subsidy is or is not entitled for deduction under Section 80IB or 80IC has, submits the learned ASG, no longer remained res integra inasmuch as the issue is fully covered by the decision in Liberty India (supra). By referring to the case of Liberty India (supra), the learned ASG submits that, in this case, the issue, which fell for consideration, was: Whether the profit from Duty Entitlement Passbook Scheme and Duty Drawback Scheme could be said to be profit derived from the business of industrial undertaking eligible for deduction under Section 80-IB of the Act.?34.Referring to the case of Liberty India (supra), it is contended by Mr. Pathak, learned ASG, that, in Liberty India (supra), the Supreme Court has unambiguously laid down that the tax incentives, under Chapter VI-A of the Act, are attracted only to the generation of operational profits and that the benefit of deduction will not be available in respect of the receipts, which do not have anydirect nexus with the operation of industrial undertaking of the assessee, i.e., whose source is beyond the ’first degree’. The learned ASG refers to paragraph 17 and 18 of the case of Liberty India (supra) and contends that the Supreme Court has already held, in Liberty India (supra), that DEPB and Duty Drawback areincentives, which flow from the Schemes framed by Central Government, and theseincentives do not, in any way, establish a nexus between the profits and gains of the industrial undertakings and cannot, therefore, entitle the assessee-respondents to seek exemption under Section 80IB or 80IC. In fact, it has been clearly held, in Liberty India (supra), reiterates Mr. Pathak, that these incentives are revenue receipts, which belong to the category of ancillary profits of the industrial undertakings concerned and shall be taxed accordingly.35.In other words, submits the learned ASG, the Supreme Court has held, Liberty India (supra), that incentives, originating from a Government Scheme, such as the one in Liberty India (supra), fall beyond the ’first degree’ rule and, hence, are not entitled to deduction under Chapter VI-A of the Act. In paragraph 18 of the decision, in Liberty India (supra), the Supreme Court has held, points out Mr. Pathak, as under: �We are satisfied that remission of duty is on account of the statutory/policy provisions of Custom Act/Scheme(s) framed by the Government of India. In these circumstances, we hold that profits derived by way of such incentives do not fallwithin the expression � profits derived from industrial undertaking � in section 80-IB. �36.Mr. Pathak, learned ASG, has also submitted that there is no material difference between an incentive scheme, such as, DEPB and Duty drawback, which were dealt with by the Supreme Court, in Liberty India’s case (supra), and the subsidies, which have fallen for consideration in the present cases. It cannot be disputed, according to the learned ASG, that the various kinds of subsidies may flow from Governmental schemes and, therefore, the subject-matter, which was dealt with by the Supreme Court, in Liberty India’s case (supra), cannot be distinguished from the cases at hand and that the Liberty India’s case (supra) is squarely applicable to the cases at hand inasmuch as the subsidies, in the present cases, cannot but be regarded as non-operational profits, having no direct nexus with the activities of the undertakings of the assessee-respondents. Any argument to the contrary, further submits Mr. Pathak, would be perverse and in breach of Article 141 of the Constitution of India.37.Assailing the contention of the assessee-respondents, that the subsidies, received by the assessee-respondents, in the present cases, go to reduce the expenditure actually incurred by the industrial unit of the assessee-respondents and, hence, the same ought to be regarded as operational profits, Mr. Pathak submits that this contention of the assessee-respondents cannot hold water on the ground that the classification of a particular receipt, by an industrial unit, is required to be done at the time of its receipt and the subsequent classification, in its books of account, under different heads, is immaterial. 38.Illustrating his above contention the learned ASG submits that for a textile industry producing cloth, the main industrial components for profits and gains would be the manufacture and sale of cloth itself. If any profits and gains are derived by the industry by operation of a canteen for its employees in the industry, the same would not be entitled for special deduction under Section 80 IB or Section 80 IC and it is in this context that the Supreme Court has observed, Liberty India’s case (supra), � & & & &profits derived by way of such incentives do not fall within the expression ’profits derived from industrial undertaking inSection 80-IB’. 39.In support of his above contention, the learned ASG has also referred toparagraph 24 of Liberty India’s case (supra), wherein the Supreme Court has observed as under: �In the circumstances, we hold that Duty drawback/DEPB benefits do not form partof the net profits of eligible industrial undertaking for the purposes of section 80I/80-IA/80-IB of the Act. �SUBMISSIONS BY THE RESPONDENTS:40.Interestingly enough, Mr. R.P. Agarwalla, learned Senior counsel, while resisting the appeals, does not dispute the fact that there is a difference between the two expressions, namely, ’derived from’ and ’attributable to’. In fact, Mr. Agarwalla submits that there can be no two opinions that the said two expressions carry two different meanings inasmuch as the expression ’derived from’ is narrower than the expression ’attributable to’. �In the circumstances, we hold that Duty drawback/DEPB benefits do not form partof the net profits of eligible industrial undertaking for the purposes of section 80I/80-IA/80-IB of the Act. �SUBMISSIONS BY THE RESPONDENTS:40.Interestingly enough, Mr. R.P. Agarwalla, learned Senior counsel, while resisting the appeals, does not dispute the fact that there is a difference between the two expressions, namely, ’derived from’ and ’attributable to’. In fact, Mr. Agarwalla submits that there can be no two opinions that the said two expressions carry two different meanings inasmuch as the expression ’derived from’ is narrower than the expression ’attributable to’. 41.The meaning of the word ’derived’ is, according to Mr. Agarwalla, learned Senior counsel, not a subject matter of controversy, but the attempted question, raised by the Revenue, regarding the expressions ’derived from’ and ’derived by’ is incorrect. It can be easily comprehended, submits Mr. Agarwalla, learned Senior counsel, that the ’profits and gains’, ’derived from’ an industrial undertaking means that it is the business of the undertaking, which is the direct source of the ’profit and gains’; whereas the expression ’derived by’ means that the business of the undertaking is the recipient of the profits and gains. 42.At any rate, submits Mr. Agarwalla, the question of interpreting the expression ’derived from’ or the expression ’derived by’ would arise only when thisCourt finds that the nexus, between the subsidies, in question, on the one hand, the manufacturing process/production of the industrial undertaking, on the other, is not direct, or else, the question of distinguishing the expression ’derived by’ from the expression ’derived from’ would be, contends Mr. Agarwalla, irrelevant.43.While resisting the appeal, Mr. R.P. Agarwalla, learned Senior counsel, makes it also clear that it is not material, as far as the assessee-respondents are concerned, whether deduction is required to be allowed under Section 80IB or80IC of the Act for the subsidies, which the assessee-respondents’ industrial undertakings have received during the relevant year inasmuch as the assessee-respondents, in either case, according to Mr. Agarwalla, would be entitled to deductions if the assessee-respondents can show that the subsidies, given in the form of transport subsidy, or interest subsidy, or power subsidy, or insurance subsidy, are aimed at reducing the cost of production of the assessee-respondents’ industrial undertakings and thereby directly affect the profits and gains made by the industrial undertakings concerned.44.Referring to the case of Liberty India Vs. CIT, reported in (2009) 9 SCC328, Mr. Agarwalla, learned Senior counsel, submits that the issue, raised in Liberty India (supra), was distinct and different from the issues, which the cases at hand raise inasmuch as the subjects for consideration, in Liberty India (supra), were Duty Entitlement Passbook Scheme (DPEB) and Duty Drawback Scheme, which were schemes providing for incentives to augment export and these schemes were not meant for directly reducing the cost of production of the industrial under taking. In fact, in Liberty India (supra), submits Mr. R.K. Agarwalla, the assessee concerned, unlike the facts of the case at hand, was not involved in manufacturing activities.45.From the decision, in Liberty India (supra), it is clear, according to Mr. Agarwalla, that DPEB and Duty Drawback Scheme, being export incentives, were not related to the business of industrial undertaking per se for its manufacturing or production. 46.Entitlement of DPEB and Duty Drawback Scheme arose, in Liberty India (supra) points out Mr. Agarwalla, when the undertaking made export after manufacturing or production and remained restricted only to export component. Consequently, points out Mr. Agarwalla, when there was no export, the question of any entitlement, either under the DPEB or under Duty Drawback Scheme, did not arise and, as a result thereof, the relation of DPEB and/ or Duty Drawback Scheme with the manufacturing activities was not proximate or direct. This apart, DPEB entitlement was freely transferable or saleable resulting in profit or loss, which is not the case at hand.47.Coupled with the above, it is submitted by Mr. Agarwalla that the Supreme Court, in Liberty India (supra), clearly pointed out that so far as the Duty Drawback was concerned, the same envisaged repayment of customs and excise duty paid by an assessee, but the refund of the amount shall not arithmetically be equal to customs duty or central excise duty actually paid by an individual importer or manufacturer. 48.It is, therefore, clear, submits Mr. Agarwal, that the Duty Drawback wasnot related to the business of industrial undertaking so far as manufacturing or production was concerned and, that is why, the Supreme Court held, in Liberty India (supra), that the profits, derived by way of incentive, such as, DEPB, do not fall within the expression ’profits derived from industrial undertaking’ appearing in Section 80IB; whereas the present cases are the ones, wherein the subsidies directly affect the cost of production of the industrial undertakings concerned and are inextricably linked to the assessee-respondents’ manufacturing activities.49.Liberty India (supra) is, thus, according to Mr. Agarwalla, an authority 49.Liberty India (supra) is, thus, according to Mr. Agarwalla, an authorityfor the proposition, which governs the statutory schemes or provisions of DEPB and Duty Drawback inasmuch as the said scheme relate to the export of an industrial undertaking and is not at all an answer to the question of deduction arisingin each and every incentive embodied scheme, more particularly, a scheme, whichis directly connected with reduction of cost of production/manufacture of an industrial undertaking. By no means, therefore, contends Mr. Agarwalla, learned Senior counsel, Liberty India (supra) can be said to be a decision applicable to the facts of the present case.50. Referring to the case of Liberty India (supra), Mr. Agarwalla submits that though the Revenue has heavily relied on the decision, in Liberty India (supra), the fact of the matter remains that the chief question, which has fallen fordetermination, in the present cases, was not at all a question, which was raised and decided in Liberty India (supra) and, hence, the reference, made by the Revenue to the decision, in Liberty India (supra), or to the observations made therein, which is not in the context of a case of present nature, cannot be said tobe the answer to the question(s) raised in the present appeals. 51.In fact, the Supreme Court has, in the past, points out Mr. Agarwalla, cautioned the courts not to mechanically rely upon a decision of the Supreme Court without taking into account the facts of the case, which render colour to the decision of the Court, and that the decision of the Supreme Court is not to be read like a statute and the words or the sentences are not to be read de hors the context in which the question arose. Unless, therefore, an issue is raised anddecided by the Supreme Court in a case, the question of applying the decision of the Supreme Court would not, contends Mr. Agarwalla, learned Senior counsel, arise. A reference, in this regard, is made by Mr. Agarwalla, to the case of Commissioner of Income Tax vs. Sun Engineering Works P. Ltd. [1992] 198 ITR 297 (SC), wherein the Supreme Court observed as under: �It is neither desirable nor permissible to pick out a word or a sentence from t he judgment of this court, divorced from the context of the question under consideration and treat it to be the complete \ law \ declared by this court. The judgment must be