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TMI Blog2022 (11) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... r as it is prejudicial to the interest of the revenue on the following grounds:- "Upon examination of case records, it is observed that the assessee had an income of Rs. 49,08, 14,480/- from Sitaganj exempted unit in which the assessee had claimed deduction u/s. 80IC of the Act of Rs. 14,72,44,452/- (30% of Rs.49,08, 14,480/-). It was observed from the Profit and Loss Accounts of the assessee for the year ended 31.03.2017 that the assessee had credited an amount of Rs. 2,43,75, 193/- from export incentives and also other Non-operating Income totaling to Rs. 25,39,952/-which mainly obtained from Interest, Sundry balance written off, Insurance claim received, rent received etc. Further while calculating the deduction u/s. 80IC of the Act, the assessee had taken into consideration the above mentioned income totalling to Rs. 2,69,15,145/-, which violates the provisions of section 80/C(2), which clearly states that the deduction is strictly restricted to only from Profit & gain of the assessee derived from business. However, the amount of Rs. 2,69,15,145/- was not derived from eligible business of the assessee. Therefore allowing the same has resulted in underassessment of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 wherein it has been mentioned that the issues involved are decided in favour of the assessee by the Hon'ble ITAT in its own case for AY 2013-14 bearing ITA No. 559/Kol/2018 dated 31.10.2019. It was also submitted that the Ld. AO after due examination has allowed the claim of the assessee. The Ld. PCIT did not pointed out any defect in the submission but adhocly set aside the assessment order and directed the AO to pass a fresh assessment order. Thus, the order passed u/s 263 of the Act setting aside the assessment order dt. 21.12.2019 passed u/s 143(3) of the Act is bad in law and the same needs to be quashed. 2. That the Ld. PCIT was wrong in setting aside the assessment order passed u/s 143(3) of the Act alleging that the deduction of Rs. 14,72,44,452/- i.e. 30% of Rs. 49,08,14,480/- u/s 80IC of the Act has been wrongly allowed to the assessee. The assessee has correctly claimed deduction u/s 80IC of the Act on the Other Income i.e. Interest income received from security deposit made to electricity dept., Exchange fluctuation difference, Insurance other claims and Export incentives etc. All these incomes are having direct nexus with the business activity carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same and, therefore, to this extent, the finding given by the ld. Pr. CIT is confirmed and thus Ground No. 3 raised by assessee is dismissed as not pressed. 9. So far as the first issue is concerned, regarding the correctness of claim of deduction u/s 80IC of the Act, the ld. Pr. CIT observed that the assessee credited an amount of Rs.2,43,75,193/- from export incentive and also other non-operating income of Rs.25,39,952/-, which is mainly obtained from interest, sundry balance written off, insurance claim received, rent received etc. Further it is observed by the ld. Pr. CIT that while calculating the deduction u/s 80IC of the Act, the assessee has taken into consideration the above mentioned income totaling to Rs.2,69,15,145/- which violates the provisions of Section 80IC(2) of the Act. 10. We, however, find that similar issue was raised in the revisionary proceedings u/s 263 of the Act in the assessee's own case for Assessment Year 2013-14 and this Tribunal in ITA No. 559/Kol/2018 dated 31.10.2019, quashed the order and the relevant finding of this Tribunal are reproduced below:- 4. We have heard rival submissions and gone through the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Uttranchal. [sec.80IC 2(a)(ii)]. In relation to this we are attaching herewith the approval certificate of DIC bearing number 1163-64 dated 21-08-2008 and marked as Annexure-D/l. Moreover undertaking also fulfils the conditions mentioned in section 80IC(4). ii) Conditions - For Deduction Claim under section 80IA The company claiming deduction under section 80IA (7) as it operates Wind Mill generating Wind power by satisfying conditions mentioned in the section 80IA(2) i.e. 'generates power' and conditions mentioned in section 80IA(4)(iv) i.e. undertaking set up in any part of India for generation or generation and distribution of power during the period beginning on the 1st day of April 1993 and ending on the 31st day of March 2017" In relation to this we attaching herewith commissioning certified issued by Executive Engineer - III(TCC-IV) Raj Rajya Vidyut Prasaran Nigam Limited, Barmer and marked as Annexure D/l/l. ii) We are also attaching audited and signed Balance Sheet and Profit and Loss account for the period ended 31st March, 2013 for the Sitarganj unit and marked as Annexure D/2. The common expenses have been apportioned properly. We are also at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the Revenue. The phrase "prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law". 7. Further, we note that the Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd. (227 CTR 133) drew the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld. CIT's finding fault with the order of the AO as erroneous as well as prejudicial to the interest of revenue on account of lack of inquiry has to fail. 10. Now we proceed to answer the question as to whether the decision of the AO, after perusal of the reply of the assessee in respect of deduction u/s. 80IC of the Act, can be held to be unsustainable in law or whether can it be said to be a plausible view. We note that in the notice issued u/s. 263, the Ld. CIT has alleged that the assessee has claimed excess deduction u/s. 80IC of the Act on certain items of 'other income' which were not derived from the eligible business of the assessee and hence were required to be disallowed for working out the sum eligible for deduction u/s 80IC of the Act. We note the details of other income and export incentive are as under: Particulars Amount (Rs.) Interest Rs. 4,64,496/- Exchange Differences (Net) Rs.24,66,086/- Provision for doubtful Receivables/Advances Recovered/Written back Rs. 6,25,198/- Unclaimed balance adjusted Rs. 2,18,752/- Insurance & other claims Rs. 1,18,406/- Export Incentives Rs.96,51,611/- 11. The provisions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. In the case of Pandian Chemicals (supra), interest was earned by the assessee from out of deposits made with the electricity board. It could, therefore, be said that the income arising out of interest did not have any direct nexus with the industrial undertaking of the assessee. In the case of CIT vs. Sterling Foods (supra), the assessee was engaged in the business of sea foods. The income in question was derived from out of sale of the import entitlements. It was, therefore, possible to say that the income was not or did not have any direct nexus with the activity of the assessee. Similarly, in the case of Liberty India (supra) the income in question was the amount of drawback incentives received by the assessee which did not have any direct nexus with the export made by the assessee. But, in the present case it is difficult to say that the interest earned by the assessee from the buyers of the goods on account of delayed payment of the sale proceeds does not have any direct 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business Held, yes [In favour of assessee]" (ii) CIT Vs. Bulher India Ltd. in (2012) 206 Taxmann 62 Hon'ble High Court of Karnataka; "Section 80IA of the Income-tax Act 1961 Deductions Profit and gains from infrastructure undertakings Assessment year 199798 Whether for purpose of computation of deduction under section 80IA interest income earned by assessee after deducting interest payments on borrowed tunas should be taken into account Held, yes [In favour of assessee]" (iii) CIT Vs. Shri Ram Honda Power Eguip. In (2007) 289 ITR 475 Hon'ble High Court of Delhi . "Whether where, as a result of computation of profits and gains of business and profession, Assessing Officer treats interest receipt as a business income, deduction under section 80HHC would be permissible in terms of Explanation (baa) to section 80HHC, of net interest, i.e. gross interest less expenditure incurred for 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, first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. RachnaUdyog (supra), 1 hold that the difference on account of exchange rate fluctuation is entitled to deduct ion under sect ion 80IC of the Act. This ground of appeal is allowed. " (iii) M/sAnsysco Vs. ACIT in ITA 895/Chd/2012 Hon'ble ITAT Chandigarh; "However in respect of Foreign Exchange Fluctuation Gain of Rs. 35,432/, hold that the same is directly linked to the business activity and consequently, the assessee is entitled to the claim of deduction under section 80IC of the Act. The ground of appeal raised by the assessee is, thus partly allowed." (iv) M/s Hycron Electronics Vs. ITO inITA 798/Chd/2012 Hon'ble ITAT Chandigarh; "61. As far as the amount received on foreign exchange fluctuation is concerned, though in case of Ansysco (supra) it was held that gain from Foreign Exchange 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 Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Auto (P) Ltd. in (2011) 336 ITR 434 Punjab &. Haryana High Court; ''Appeal (High Court) Substantial question of law Deduction under s. 80IB Tribunal is justified in law in allowing deduction under s. 80IB on labour job receipts Miscellaneous receipts from rebate, discount and balances written off are incidental to the profits and gains derived from eligible business under s. 80IB No substantial question of law arises CIT vs. Impel Forge & Allied Industries Ltd. (IT Appeal No. 543 of 2008, dt. 5th Dec., 2008) followed." (ii) M/s.Ansysco Vs. ACIT in ITA 895/Chd/20l2 Hon'ble ITAT Chandigarh; ''However, the claim of the assessee was allowed on the amount received on scrap sales, credit balances written off the parties and insurance claim received towards material damage. 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 ..... " (e) Insurance & other claims: From the details on record, it is noted that the Insurance claim received pertained to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Id. CIT(Appeals), therefore, we do not find any justification to interfere with the order of Id. CIT(Appeals). This ground is accordingly, dismissed. 28. In the result, departmental appeal is dismissed." (f) Export Incentive: It is noted that the assessee had received export incentives from the Government in the form of Duty drawback, Focus product license and Status holder license etc. in respect of the export sales made by the eligible unit. The nature of each of the export incentive as explained by the Ld. AR of the assessee is discussed as under: (i) DEPB License is received for the export of the goods and the same is used for subsidising the cost of Raw Material as payment of the custom duty. There is sale of DEPB License and the same is used only for the payment of custom duty on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance premium incurred by the assessee in relation to the premises as well the stock manufactured at the eligible Unit. Accordingly the Court observed that such subsidy being relatable to the cost of production of the Unit had direct & first degree nexus with the business of the eligible undertaking and therefore was held to be eligible for computation of deduction u/s 80IC of the Act. We find that similar view was also expressed by the Hon'ble Supreme court in the case of Topman Exports Vs. CIT(2012) 18 Taxmann.com 120 in the context of duty drawbacks received on exports. The relevant extracts of Topman Exports (Supra) are reproduced hereunder; "Section 28(iiib), read with section 28(iiid) of the Income-tax Act 1961 Business income Cash assistance Assessment year 200203 Whether DEPB is a 'cash assistance' receivable 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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