TaxTMI 
TaxTMI 
2022 (3) TMI 919
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....258/- made on account of reduction of the claim u/s. 80IC of the Act. 3. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,32,64,686/- made on account of disallowance of deduction on foreign exchange gain u/s.80IC of the Act. 4. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 35,59,463/- made on account of disallowance of deduction on exports benefits u/s.80IC of the Act. 5. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 14,26,979/- made on account of disallowance of deduction on scrap value u/s.80IC of the Act. 6. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 54,42,994/- made on account of disallowance of deduction u/s.80IC on expenses disallowed u/s. 40(a)(ia) of the Act. 7. On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. 8. It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 2. In the appeal before us, the Ahmedabad ITAT ha....
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....tion under section 80IC. In the case of ONGC V/s CIT (supra), the Hon. Supreme Court has held as under: "13. We are of the opinion that the ratio of the said decision with which we are in respectful agreement , squarely applied to the facts at hand, and therefore, the loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of balance sheet is allowable as expenditure under sect ion 37(1) of the Act" In view of decisions of various courts in assesses favour I am inclined to agree with the contention of appellant and accordingly hold that foreign exchange fluctuation is part of business activities and income derived from it is allowable for deduction. Accordingly the appellant is eligible for deduction u/s 80 1C." 4. Before us, the Department placed reliance on the observations of the assessment order and relied on the case of Liberty India (supra) which has held that profits of the business undertaking will be exempt for those streams of income which have immediate and direct nexus with the undertaking. Since foreign exchange gains does not satisfy the "derived from" business condition, therefore, the same are not el....
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....on of foreign exchange rate was part of sale proceeds only, said fluctuation was eligible for section 80-IC deduction. We, therefore, find no infirmity in the order of the ld. CIT(A) whereby the disallowance on foreign exchange gain has been deleted. 6. In the result, this ground of appeal of the revenue is dismissed. Ground No. 4 (deletion of disallowance of Rs. 35,59,463/- made on account of disallowance of deduction of export benefits u/s. 80IC of the Act) 7. The brief facts of this ground of appeal are that the assessee during the year had received export benefit which are in the nature of excise duty refund, as its Baddi unit is eligible for outright excise duty exemption and same do not constitute independent source of income. The assessee claimed deduction u/s. 80IC of export benefits of Rs. 35,59,463/- representing refund of excise duty paid on material and other items purchased for manufacturing purposes for its Baddi unit. The ld. Assessing Officer disallowed the 80IC claim in the assessment order and held that the excise duty refund does not represent income with first degree of nexus with the manufacturing profits. Accordingly, following the Apex Court judgment....
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....the Department of Revenue for giving effect to the exemption notifications. There is also nothing to suggest that the assessee has recovered or passed on the excise duty element to its customers. Even assuming the refund does amount to income in the hands of the assessee, it is a profit or gain directly derived by the assessee from its industrial activity. The payment of Central excise duty has a direct nexus with the manufacturing activity and similarly, the refund of the Central excise duty also has a direct nexus with the manufactuing activity. The issue of payment of Central excise duty would not arise in the absence of any industrial activity. There is, therefore, an inextricable link between the manufacturing activity, the payment of Central excise duty and its refund. In the circumstances, we are of the opinion that question No. 2 must be answered in the affirmative in favour of the assessee and against the Revenue." As the issue is squarely covered in favour of assessee, we allow the claim of assessee. This ground of assessee's appeal is allowed. In this regard, reliance is placed on the decision of the Delhi High Court in 7 case of CIT vs Dha....
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....aya Steel Ltd. (supra) has given a categorical finding that where assessee received (a) transport subsidy; (b) interest subsidy; (c) power subsidy; and (d) insurance subsidy which were reimbursements of manufacturing cost incurred by assessee, deduction of said subsidies was allowed under sections 80-IB and 80-IC Accordingly, in our view, in the facts of the present case and in light of various decisions cited before us, the CIT(A) has not erred in granting 80IC deduction to the assessee in respect of its export benefits representing refund of excise duty paid u/s. 80IC of the Act. We therefore hold that the assessee is eligible for deduction on export benefits on account of refund of excise duty under section 80IC of the Act. 10. In the result, this ground of appeal of the revenue is dismissed. Ground No. 5 ( Deletion of Rs. 14,26,979/- on account of deduction of scrap value u/s. 80IC of the Act) 11. The brief fact relating to this ground of appeal are that during the year under consideration the assessee had claimed deduction u/s. 80IC of the Act on income of Rs. 14,26,979/- on scrap generated from manufacturing process. The ld. Assessing Officer in his assessment order ....
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....s. DCIT (283 ITR 402). 14. We have heard the rival contentions and perused the material on record. We observed that the Calcutta High Court in the case of Reckitt Benckiser Healthcare (I) Ltd. reported in 56 taxmann.com 415 has held that profits and gains from scraps resulting in manufacturing process were eligible for deduction u/s. 80IC. Again, the Gujarat High Court in the case of CIT vs. Shreeram Tech Ltd. 33 taxmann.com 194 has held that compensation received by industrial undertaking from insurance companies on account of loss raw materials and finished products in fire, would be eligible for deduction u/s. 80IA of the Act. In view of the above, we do not find any infirmity on the order of ld. CIT(A) in allowing the claim of deduction u/s. 80IC of the Act on scrap income. We accordingly hold that the assessee is eligible for deduction u/s. 80IC of the Act on income from sale of scrap. In effect, the ground no. 5 of the revenue is dismissed. 15. In the result, ground no. 5 of the revenue is dismissed. Ground No. 6 (Deletion of disallowance of Rs. 54,42,994/- made on account of expenses disallowed u/s. 40(a)(ia) of the Act) 16. The facts of this ground are that duri....
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....thdrawn or not to be pressed. The assessee further placed reliance on the case of Ahmedabad Tribunal in the case of DCIT vs. Ascendum Solution India (Pvt.) Ltd. 86 taxmann.com 114 and the Hon'ble Mumbai Tribunal in case of ITO vs. Anthelio Business Technologies Pvt. Ltd. (78 taxmann.com 203) in support of his contention. 17. We have heard rival contentions and perused the material on record. In view of the circular no. 37/2016 dated 2nd Nov, 2016 and the decision in the case of DCIT vs. Ascendum Solutions Pvt. Ltd. wherein the Ahmedabad ITAT Tribunal has held that where disallowance results in an enhancement of business profit, but such an enhancement is revenue neutral in as much as relates to business profits are eligible for disallowance under chapter VI. The Tribunal in the above decision made following relevant observation:- What has been accepted by the CBDT, as learned counsel rightly points out, is the principle that when a disallowance results in an enhancement of business profits but such an enhancement is revenue neutral inasmuch as related business profits, in totality, are eligible for deduction under chapter VI, such appeals need not be pursued. The refere....