The CBDT has issued Circular No. 39/ 2016 dated 29.11.2016 in which it has stated that in accordance with the judgment of the Supreme Court in Meghalaya Steels Ltd, the subsidies of transport, power and interest given by the Government to the Industrial Undertaking are receipts which have been reimbursed for elements of cost relating to manufacture/sale of the products and there is a direct nexus between profit and gains of the industrial undertaking / business and reimbursement of such business subsidies.
CBDT directs that such subsidies are part of profits and gains of business derived from the Industrial Undertaking and are not to be included under the head ‘Income from other sources’. Therefore, deduction is admissible under section 80-IB/80-IC of the Act on such revenue receipts derived from the Industrial Undertaking.
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