9911796707
TMI Blog2022 (5) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the jurisdiction, being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and all subsequent actions are 'null' in the eyes of law. In the appeal before us and in the decision of the coordinate bench of ITAT, Kolkata in assessee s own case (supra), the issue of revisionary proceedings u/s. 263 of the Act is challenged on account of excess deduction claimed u/s. 80IC of the Act in relation to items of other income and export incentives. Each item of other income and export incentives has been elaborately dealt in the decision of the coordinate bench in assessee s own case (supra). We note that this issue is covered in favour of the assessee by the decision cited supra and the Ld. DR could not point out any change in facts or law which would have warranted any interference on our part to take a view divergent from that taken by the coordinate bench of ITAT, Kolkata in the case of assessee itself. Accordingly, we set aside/quash the order of the ld. Pr. CIT restoring the assessment order passed u/s. 143(3) - Decided in favour of assessee. - I.T.A. No. 153/Kol/2021 - - - Dated:- 18-5-2022 - Shri Sanjay Garg, Judicial Member And Shri Girish A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) is higher than the Tax on Book Profit under MAT provisions u/s. 115JB(B), hence the tax will be charged as per normal provisions of the Income Tax Act. Thereafter, the AO assessed the total income at Rs.43,63,19,250/- u/s. 143(3) of the Act and issued demand notice. 4. The Ld. Pr. CIT observed in para 2(ii) of his order for invoking the impugned revisionary jurisdiction as under: 2(ii) In the instant case, the assessee had an income of Rs. 50,80,13,667/- from Sitargunj exempted unit in which the assessee had claimed deduction u/s 80lC of the Act of Rs. 15,24,04,100 (30% of Rs. 50,80,13,667/-). It was observed from the Profit Loss Account for the year ended 31.03.2015 that the assessee had credited an amount of Rs. 2,21,04,514/- from Export Incentive and also other income totalling to Rs. 33,19,274/- which was mainly obtained from Interest, Dividend, recovery against provision for doubtful debts, gain on redemption of current Investment etc. Further, while calculating deduction u/s 80lC of the Act, the assessee had taken into consideration .the above-mentioned income of Rs. 2,54,23,788/- (Rs. 2,21,04,514/- + Rs. 33,19,274/-) and the Assessing Officer allowed the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 6. Thus, the ld. Pr. CIT in exercise of his powers u/s. 263 of the Act was of the view that order of the AO dated 30.05.2018 passed u/s. 143(3) of the Act was erroneous and prejudicial to the interest of the revenue and he was pleased to set aside the assessment order. 7. Aggrieved by the order of Ld. Pr. CIT the assessee has preferred the present appeal before the Tribunal. 8. We have heard the rival submissions and gone through the record carefully. We note that the Ld. Pr. CIT issued a show cause notice vide letter dated 04.12.2017 which reads as under: 9. We find that the issue involved in this case is with regard to exercise of powers of jurisdiction u/s. 263 of the Act by the Ld. Pr. CIT. First and foremost, we noticed that the Ld. Pr. CIT has not rebutted the facts as stated by the assessee in its submissions 22.03.2021 in reply to show cause notice u/s. 263 of the Act. In the aforesaid reply the assessee has clearly explained the nature of enquiries made by the AO before concluding the assessment on all the aspects that are set out in the show cause notice u/s. 263 of the Act. Suffice it to say the AO had made due enquiries and applied his mind on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to avail the profit-linked deduction u/s 80IA of the Act. In this background, it is now pertinent to examine the nature of each item credited under the head 'other income', which is the matter in dispute here. The same is discussed individually hereunder; (a) Interest: It is noted that interest income solely comprised of interest received from security deposits kept with electricity department. The Ld. AR of the assessee has contended that these are operational receipts of assessee as the company is required to compulsorily deploy funds by way of security deposits with the electricity boards in order to obtain supply of power for its unit. He thus pointed out that it is not a case where the assessee has kept deposit with the dominant intention to earn interest income but in this case the assessee was under compulsion to maintain deposit with the electricity board to ensure supply of power to the unit. He thus contended that such interest income had first degree nexus with the eligible undertaking of the assessee and accordingly the same would equally qualify for the deduction u/s 80IC of the Act. We note that this claim of the assessee is supported by the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... margin money requirements for its eligible unit. Likewise, in the present case also the assessee is required to maintain security deposit with the electricity department for supply of power to its eligible unit. We further note that on similar facts this Tribunal on 08.07.2016 has upheld the same view in favour of the assessee in ITA 2073/Kol/2014. We therefore hold that the eligibility of the interest income earned on deposit u/s 80IC, was clearly a plausible view in law. We also find merit in the alternate contention of the Ld. AR that even if such interest is held to be not eligible for deduction u/s 80IC of the Act, then it is the net interest which should be considered for the purposes of computing deduction u/s 80IC of the Act. Going by the figures as set out in the standalone accounts of the eligible unit, the following position emerges: Particulars Amount (Rs.) Interest paid Rs. 3,12,66,009/- Interest Received Rs. 4,64,496/- Net Interest Paid Rs.3,08,01,513/- This alternative plea of the assessee is found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The manufactured goods are exported and the sale consideration is received in foreign exchange. Exchange rate difference arises out of, and is directly related to the sale transaction involving export of goods of the specified eligible unit of the assessee and the same logic equally applies for purchase of imported raw materials. In our considered view therefore the exchange rate fluctuation gain/loss is part parcel of the profits and gains of the eligible unit and is therefore entitled for deduction under section 80-IC of the Act. In this regard, we rely on the following decisions; (i) CIT Vs. RachnaUdyog in (2010) 35 DTR 65 Hon'ble Bombay High Court; Deduction under sec. 80IB -Profits and gains derived from industrial undertaking- Exchange rate difference Exchange rate difference arises out of and is directly related to sale transaction involving export of goods of the industrial undertaking-Difference arises purely as a result of fluctuation in the rate of exchange between the date of export and the date of receipt of proceeds - Therefore, the difference on account of exchange rate fluctuation is entitled to deduction under sec. 80-ID. (ii) JCBL India Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier years were reversed in the year under consideration. Since the provision was not claimed as deduction from the business profit, as a corollary the write back out of such provision was also excluded from the computation of eligible profits. We note that the provisions written back were indeed deducted from the computation of the eligible profits u/s 80IC of the Act. This fact is verified from the computation of income of the assessee. In the circumstances since the assessee has already disallowed and excluded such item of income in the computation of eligible profit u/s 80-IC, the question of its deductibility u/s 80IC does not arise under the facts and circumstances of the case. (d) Unclaimed balances adjusted: This head includes amount of sundry balance written back in respect of sundry creditors. The assessee had account for cessation / remission of trading liabilities which constituted income u/s 41(1) of the Act. The liabilities were accounted as expenses of the eligible undertaking in the earlier years and therefore in arriving at profits eligible for deduction u/s 80IE of the earlier years, deduction for such trading liabilities were allowed. In the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances we find force in the Ld. AR s argument that the insurance receipt has a first degree nexus with the business of the eligible Undertaking. Some of judicial references are discussed hereunder:- (i) ACIT Vs. M/s.Ansvsco in ITA 910/Chd/2012 Hon'ble ITAT Chandigarh; We have already in the paras herein above, while deciding appeal of the revenue upheld the order of Commissioner of Income Tax (Appeals) in allowing deduction under sec 80IC of the Act on Miscellaneous Income, Insurance Claim, and income from sale of scrap ..... i) DCIT Vs. M/s. VMT Spinning Co. Ltd. in ITA 12/Chd/2014 Hon'ble ITAT Chandigarh; ''26( i) The revenue also challenged order of Id. CIT(Appeals) in increasing eligible profit under section 80IC of the Act on insurance claim received for Rs.2,50,125/- regarding income from insurance claim. Regarding the income from insurance claim, Assessing Officer referred to the decision of the Hon'ble Supreme Court in the case of Sterling Foods 237 ITR 597 and disallowed claim of assessee. The Id. CIT(Appeals) considering the issue directed the Assessing Officer to examine whether the assessee had received any real income on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost only. It is like DEPB license which is to subsidise the cost of export sales so that it can be competitive in the market. (iii) Status Holder License is given with the objective to promote investment in up-gradation of technology of some specified sectors at 1% of the FOB value of the exports in the form of Duty Credit. The same is received over above the duty credit claimed under other provisions. Status holder License is based on actual user condition and shall only be used for the Import of capital Goods for payment of custom duty. Again, there is no sale of Status Holder License made by the assessee and there is no profit element involved since the same is reimbursed at the actual cost only. It is also like DEPB license which is to subsidise the cost of export sales so that it can be competitive in the market. From the above discussion it is clear that these export incentives, by whatever name called, given by the Government is with a view to incentivize and reduce the effective cost of production of the assessee. There is essentially no element of profit derived from export incentives, but it is meant to reduce the cost of production. The Ld. AR invited our attent ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
