TaxTMI 
TaxTMI 
2022 (5) TMI 951
X X X X Extracts X X X X
X X X X Extracts X X X X
....acturing of Opal & Crystal Glassware and sale of electricity generated from wind farm. The AO notes that for AY 2015-16 the assessee filed its return of income u/s. 139 of the Act on 28.11.2015 declaring total income of Rs.43,63,19,250/-. The case was selected for scrutiny and notice u/s. 143(2) was issued on 21.09.2016. During the course of hearing the assessee was asked to furnish the details on the issues and the assessee submitted the same from time to time. Considering the facts and circumstances of the case, the total income of the assessee company and tax thereupon for the relevant assessment year was computed by the AO as under: "Calculation of total income as per normal provisions Income as per return filed by the assessee company Rs.43,63,19,250/- Total income as per order u/s. 143(3) Rs. 43,63,19,250/- Tax on normal provisions Rs.14,83,04,914/- (A) Calculation of total Income under MAT provisions Book Profit under MAT provisions u/s. 115JB Rs.51,73,70,741/- Book Profit as per order u/s. 143(3) of the I. T. Act Rs.41,73,70,741/- Total on MAT provisions Rs. 8,74,82,994/- (B). Tax as per normal p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 of his order to prepare the assessment afresh. The same is reproduced as under: "10. Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court, and in accordance with the amendment made in Section-263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 30.05.2018 passed by the A.O. is erroneous insofar as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 30.05.2018 is liable to be set-aside. Therefore, I set-aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 11. In the result, the assessment order u/s 143(3) dated 30.05.2018 for A.Y.2015-16 is set aside to the file of the Assessing officer with a direction to pass a fresh assessment order after considering the issues discussed in Para 2(i) and Para 2(ii) above, the aforesaid observations, as per law and after givi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 6,25,198/- Unclaimed balance adjusted Rs. 2,18,752/- Insurance & other claims Rs. 1,18,406/- Export Incentives Rs.96,51,611/- 6. The provisions as contained in sec 80-IC(1) is reproduced hereunder; "80-IC(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3)." The provisions as contained in sec 80-IC(1) does not define the words 'profits and gains derived by any undertaking'. We note that the Hon'ble Supreme Court in the case of Liberty India Vs CIT (317 ITR 218) has held that items of income which have first degree nexus with the business of the industrial undertaking can be held to be profits & gains derived from the undertaking 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rect nexus with the business of the assessee. Similarly, the interest received by the assessee on account of fixed deposits made for the purpose of providing margin money to the lending bank also has a direct nexus because the finding of the CIT (A) is, which is not disputed before us, that for the purpose of making such deposit the assessee had also borrowed money from the bank. The resultant effect is that if a deposit of Rs.l0/- is to be made by way of margin money for borrowing Rs.l00/-, the assessee has to borrow 6 Rs.ll0/- out of which Rs.l00/- can be used for his business and Rs.l0/- can be invested by way of margin money. When he is paying interest for Rs.ll0/- and receiving interest on the amount of Rs.l0/-, it can only be said that he is really paying interest for Rs.l00/- which he originally needed for the business. The income arising out of the deposit made by him is, therefore, his business income." In the case referred above, that assessee was in compulsion to maintain deposit with bank in order to provide margin money requirements for its eligible unit. Likewise, in the present case also the assessee is required to maintain security deposit with the electric....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purposes of earning such interest - Held, yes" (b) Exchange Difference (Net): From the facts on record it is noted that the assessee has export sales as well as import purchase of raw materials, in its eligible unit u/s 80-IC of the Act. Accordingly, Exchange differences arose, firstly being due to rate fluctuation in export/Import transactions of sales of finished goods and purchase of raw materials and secondly when the outstanding dues/receivables were translated into Indian currency in terms of AS-11 issued by ICAI. According to the Ld. AR of the assessee, the forex fluctuation is directly linked to the business activity of the assessee of sales of finished goods and purchase of raw materials and thus forms part of profits & gains of the eligible undertaking. We find sufficient force in the argument of the Ld. AR. The gain on fluctuation in foreign exchange represents the gain relating to the business activity of the assessee. 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Fluctuations was directly related to the business activity therefore assessee was entitled to deduction. However the details are not incorporated in the assessment order or in the impugned order, therefore, we set aside the order of Ld. CIT(A) and remit the matter back to the file of Assessing Officer with a direction that if the same relates to the business transaction on Revenue account, then deduction may be allowed on this amount, otherwise the issue may be decided in accordance with law." (c) Provision for Doubtful Receivable/Advances recovered/Written back: The assessee in earlier years had provided for Provision for doubtful Receivables/Advances. Since the provision for diminution in value of asset is not allowable as deduction, such provisions were disallowed in earlier years i.e. the years in which they were created. During the year the assessee was able to realize the dues from those parties, against whom such provision was accounted for. Hence, the provisions made in the 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciding 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 ..... " (e) Insurance & other claims: From the details on record, it is noted that the Insurance claim received pertained to breakage losses in transit of finished goods (transit between factory to party place). The assessee deals in crockery items which are of fragile nature and require utmost care. Accordingly there are possibility that there is some breakage or damage during the transport of goods, for which the assessee has taken insurance cover. The cost of production of goods which was lost upon damage and breakage as well the insurance premium paid on such goods are debited to the stand-alone accounts of the eligible Unit. The proceeds received from insurance company therefore effectively reduce cost of production of the goods/stock which was manufactured at the Unit but got damaged or destroyed. In the 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 jud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Import of Raw Material. Thus, on the cost of DEPB License, custom duty gets rebated on import of Raw Materials. As such, there is no profit element is involved in DEPB License received by the assessee and the same is nothing but subsiding the cost of the products exported, so that it can be competitive in the export market. (ii) Focus Product License incentive is received from the Government for incentivise export of such products which have high export intensity/employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products. The same was received as 2% of the FOB Value upto 31st May and thereafter @ 5% of the FOB Value from 1st June as per the government policies notified from time to time. Focus Product License is used for the payment of custom duty on Import of Raw Materials. Therefore, it is basically subsidising the cost of the assessee. There is no sale of Focus Product license made by the assessee and there is no profit element involved since the same is reimbursed at the actual cost only. It is like DEPB license which is to subsidise the cost of export sales so that it can be competitive in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vable by assessee and is covered under clause (iiib) of section 28, whereas profit on transfer of DEPB takes place on a subsequent date when DEPB is sold by assessee and is covered under clause (iiid) of section 28 - Held, yes" 12. In view of the discussion made in the preceding paras, we are of the considered opinion that while passing the assessment order allowing the deduction u/s 80IC in respect of items of other income and export incentives, the AO did not follow a view which can be said to be 'unsustainable in law'. In the circumstances therefore, the jurisdictional facts for usurping 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. We therefore quash the order impugned before us." 10. 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 elaborate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of January, 2003 and ending before 1st day of April, 2012, the deduction for the assessee will be available at 100% for the first 5 years from the initial assessment year and 30% for the Note: If digitally signed, the date of digital signature may be taken as date of document. AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA, West Bengal, 700069 Email: [email protected], Office Phone:03322136029 next 5 assessment years. 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 80IC 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 80IC of the Act, the assessee had taken into consideration the above- mentioned income of Rs. 2,54,23,788/....