DCIT, Jaipur V. OMIL-JSC (JV), KAMENG, Jaipur

ITA 1114/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2139 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 16-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 16-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI
• Assessee Lawyers: B B MAHESHWARI CA DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 1114/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. CUKE VS. M/S OMIL-JSC (JV), KAMENG, OM TOWER, CHURCH ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAJO 0083 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI B.B. MAHESHWARI (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/03/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/04/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE REVENUE EMANATES FRO M THE ORDER DATED 18/10/2016 PASSED BY THE LD CIT(A)-I, JAIPUR FOR TH E A.Y. 2012-13, WHEREIN THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUC TION U/S 80IE OF THE ACT IN RESPECT OF FOREIGN CURRENCY FLUC TUATION GAIN OF RS. 31,50,972/-. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUC TION U/S ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 2 80IE OF THE ACT IN RESPECT OF INCOME OF RS. 68,397/ - EARNED BY WAY OF EXCESS PROVISION WRITTEN BACK. 2. BOTH THE GROUNDS OF THE REVENUES APPEAL ARE INT ERLINED AND ARE AGAINST ALLOWING THE DEDUCTION U/S 80IE OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT). THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A JOINT VENTURE FIRM BETWEEN OM METALS INFRA PROJECT LTD. AN D JSC(JV), UKRAIN. IT HAS BEEN AWARDED A WORK OF MANUFACTURING, FABRICATION , ERECTION AND COMMISSIONING OF PENSTOCK, STEEL LINERS, STEEL RADI AL GATES OF HYDRO MECHANICAL WORK/EQUIPMENTS IN THE STATE OF ARUNACHAL PRADESH. THE WORK WAS AWARDED BY NIPCO. THE ASSESSEE HAS CARRIED OUT THE MANUFACTURING WORK IN ARUNACHAL PRADESH. THE ASSESSEE IS ELIGIBLE F OR DEDUCTION U/S 80IE OF THE ACT. 3. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF T HE ASSESSING OFFICER. AT THE OUTSET OF HEARING, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE RAISED IN THIS APPEAL HAS ALREADY BE EN DECIDED BY THE HONBLE ITAT IN ASSESSEES OWN CASE IN ITA NO. 160/JP/2015 FO R THE A.Y. 2011-12 ORDER DATED 16/6/2016, THEN THE LD CIT(A) HAS GRANTE D RELIEF BY CONSIDERING THE ORDER OF THE HONBLE ITAT. 4. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE, THE L D. CIT(A) HAS DECIDED BOTH THE ISSUES BY HOLDING AS UNDER:- ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 3 (I) THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS A JOINT VENTURE FIRM BETWEEN M/S OM METALS INFRA PROJECT LTD AND JSC (JV ) UKRAIN. IT HAS BEEN AWARDED A WORK OF MANUFACTURING, FABRICATION, ERECT ION AND COMMISSIONING OF PENSTOCK, STEEL LINERS, STEEL RADI AL GATES OF HYDRO- MECHANICAL WORK/EQUIPMENT IN THE STATE OF ARUNACHAL PRADESH. THE WORK WAS AWARDED BY NIPCO. THE AO HAS ALLOWED DEDUCTION U/S 80IE OF INCOME TAX ACT TO THE APPELLANT, BUT EXCLUDED THE MISCELLA NEOUS INCOME AND FOREIGN CURRENCY GAIN BY OBSERVING THAT FOR CLAIMIN G DEDUCTION U/S 80IE OF THE ACT: (I) THE PROFIT AND GAIN SHOULD BE DERIVED BY AN UNDERTA KING TO WHICH THIS SECTION APPLIES (II) THE UNDERTAKING SHOULD MANUFACTURE OR PRODUCE FOR ELIGIBLE ARTICLES OR THINGS. (II) CONSEQUENTLY, THE AO DID NOT CONSIDER MISCELLANEOUS INCOME ON ACCOUNT OF EXCESS PROVISION WRITTEN BACK : RS. 68,397/-, CURRENCY FLUCTUATION : RS. 31,50,972/- AS A PART OF MANUFACTURING INCOME AND THEREBY MADE THE ADDITIONS AND DETERMINED THE TOTAL INCOME AT RS . 32,19,369/- AGAINST RETURNED INCOME OF RS. NIL. (III) DURING THE APPELLATE PROCEEDINGS, IT WAS SUBM ITTED BY THE APPELLANT THAT THE PROVISIONS WERE MADE FOR THE EXPENSES INCURRED IN THAT YEAR, BUT NOT PAID DUE TO SAME TECHNICAL REASONS. IN ITS CASE, TH E DEDUCTION U/S 80IE HAS BEEN ALLOWED SINCE ITS INCEPTION, HENCE THE PROVISI ON MADE IN EARLIER YEAR WAS MADE FOR SOME EXPENSES AND IN THAT YEAR NET INC OME EVEN AFTER THIS PROVISIONS WAS NOT TAXABLE. AS SUCH, THIS IS THE EX PENDITURE WHICH HAS BEEN BOOKED IN EXCESS IN EARLIER YEAR AND BY THIS AMOUNT THE DEDUCTION U/S 80IE HAS BEEN REDUCED IN THE SAID YEAR SINCE THE DEDUCTI ON IS AVAILABLE FOR THE UNIT FOR CONSECUTIVE 10 YEAR. THE AO HAS WRONGLY IN TERPRETED THE SAME AND ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 4 TAKEN OUT FROM THE ELIGIBLE INCOME AND THAT TOO WIT HOUT ANY OBSERVATION. IT WAS FURTHER SUBMITTED THAT THE PROVISION WRITTEN BA CK IS THE PART AND PARCEL OF INCOME OF THE UNIT AND, HENCE IT CANNOT B E SEPARATED. (IV) REGARDING THE ACTION OF THE AO IN NOT ALLOWING DEDUCTION U/S 80IE OF THE ACT ON FOREIGN CURRENCY FLUCTUATION OF RS. 31,50,97 2/-, IT WAS SUBMITTED THAT FOR MANUFACTURING, IT HAS TO PURCHASE THE RAW MATERIALS WITHIN THE COUNTRY AS WELL HAS TO IMPORT AND WHATEVER PRICE IT PAID FOR THE IMPORT, IS CLAIMED AGAINST THE RECEIPT. THE IMPORTED RAW MATER IAL WAS PURCHASED ON THE BASIS OF LETTER OF CREDIT (L/C), AND WHILE MAKI NG THE PAYMENT OF L/C, THE RATE OF FOREIGN CURRENCY (US$) WAS REDUCED AND, THE REFORE, THE PAYMENT WAS MADE A LITTLE LESS THAN THE BILLED AMOUNT, AND, THEREFORE, THE DIFFERENCE WAS CREATED AS INCOME IN FLUCTUATION OF FOREIGN CURRENCY STANDARDS. HOWEVER THE AO TREATED IT AS INCOME FROM OTHER SOURCES WHICH IS TOTALLY WRONG SINCE IT IS VERY MUCH A PART AND P ARCEL OF THE MANUFACTURING UNIT OF THE JV. IT WAS FURTHER SUBMIT TED THAT THE FOR THE AY 2011-12, THE LD. CIT(A) HAS ALLOWED DEDUCTION U/S 8 0IE OF THE ACT IN RESPECT OF BOTH OF THE ABOVE ISSUES, WHICH WAS ALSO CONFIRM ED BY THE HONBLE ITAT, JAIPUR. (V) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT FOR THE AY 2011-12, IN THE CASE OF THE APPELLANT ITSELF IN ITA NO. 459/13- 14, VIDE ORDER DATED 29.12.2014, THE LD. CIT(A) HAS ALLOWED DEDUCTION U/ S 80IE OF THE ACT IN RESPECT OF EXCESS PROVISION WRITTEN BACK AND GAIN O N FOREIGN CURRENCY FLUCTUATION, WHICH WAS UPHELD BY THE HONBLE ITAT, JAIPUR VIDE ITS ORDER DATED 16.06.2016 IN ITA NO. 160/JP/2015. THE RELEVA NT EXTRACTS OF THE ABOVE REFERRED ORDER OF HONBLE ITAT ARE REPRODUCED AS UNDER: ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 5 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ID. CIT (A) IN PARA 3.3.2. HAS GIVEN THE FINDING OF FACT AS UNDER: I HAVE DULY CONSIDERED AOS CONTENTION AND APPELL ANT'S SUBMISSION, PERUSED THE MATERIALS ON RECORD, DULY CONSIDERED FA CTUAL MATRIX OF THE CASE AS ALSO APPLICABLE LEGAL POSITION. ASSESSEE IS A JV CONCERN, WHICH SOURCES ITS RAW MATERIALS LOCALLY AND ALSO IMPORTS A SUBSTANTIAL PART FROM INTERNATIONAL MARKET. FOR IMPORTED RAW MATERIALS, P AYMENTS ARE BEING MADE IN FOREIGN CURRENCIES, WHICH ARE QUITE VOLATIL E, THERE IS NO DISPUTE IN THIS REGARD. THE FOREIGN CURRENCY GAIN IS THE PART OF RAW MATERIAL AS ASSESSEE CONTENDS THAT RAW MATERIALS HAVE BEEN BOOK ED BY LESS AMOUNT OF RS. 22,41,619/- THERE IS NOTHING WRONG IN THIS C LAIM. ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IE OF THE ACT, ON THIS ALSO. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE, AO IS D IRECTED TO ALLOW DEDUCTION U/S 80IE IN THIS REGARD AND ALSO TO DELET E THE ADDITION OF RS. 22,41,619/-.' THE REVENUE HAS NOT REBUTTED THESE FINDINGS BY PLA CING ANY CONTRARY MATERIAL ON RECORD. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE RAW MATERIAL AS IMPORTED BY THE ASSESSEE WAS NOT UTILIZ ED IN THE MANUFACTURING PROCESS. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF ID. CIT (A). THE GROUND OF THE RE VENUE IS REJECTED. '5.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL ON RECORD. THE ID. CIT (A) HAS GIVEN THE FINDING OF FA CTS AS UNDER: '3.2.2. I HAVE DULY CONSIDERED AO'S CONTENTION AND APPELLANTS SUBMISSION, PERUSED THE MATERIALS ON RECORD, DULY C ONSIDERED FACTUAL MATRIX OF THE CASE AND ALSO APPLICABLE LEGAL POSITI ON. THE AMOUNT WRITTEN OFF PERTAINS TO SUNDRY CREDITORS. IT'S AN EXCESS PR OVISION MADE FOR SOME EXPENSES, NOT MADE IN THE CURRENT YEAR BUT BOOKED E XCESS IN EARLIER YEARS AND ONCE IT IS REVERSED I.E. WRITTEN BACK, ASSESSEE HAS TO OFFER FOR TAXATION. THIS IS PERFECTLY CORRECT AS PER ACCOUNTA NCY PRINCIPLE. AS SUCH, THIS IS THE EXPENDITURE, WHICH HAS BEEN BOOKED IN E XCESS IN EARLIER YEAR AND BY THIS AMOUNT THE DEDUCTION U/S 80IE HAS BEEN REDUCED IN THE SAID YEAR SINCE THE DEDUCTION IS AVAILABLE FOR THE UNIT FOR CONSECUTIVE 10 YEARS. IN VIEW OF FACTS AND CIRCUMSTANCES DISCUSSED ABOVE, AOS ACTION IN TREATING THE EXCESS PROVISION WRITTEN BACK AS INCOM E OF RS. 63,899/- CANNOT BE JUSTIFIED, HENCE DELETED. THE ABOVE FINDING OF THE ID. CIT (A) IS NOT REBUTT ED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, WE DO NOT SEE ANY ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 6 REASON TO INTERFERE INTO THE ORDER OF ID. CIT (A). THE GROUND OF THE REVENUE IS REJECTED.' (VI) AS THE FACTS OF THE CASE APPARENTLY REMAINS THE SAM E, I DO NOT FIND ANY REASON TO DIFFER THE FINDINGS OF LD. CIT (A) AND TH E HONBLE ITAT FOR THE AY 2011-12, THEREFORE, RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE ITAT, AS DISCUSSED ABOVE, IT IS HELD THAT THE AO WAS NOT JUS TIFIED IN NOT ALLOWING DEDUCTION U/S 80IE OF THE ACT IN RESPECT OF EXCESS PROVISION WRITTEN BACK OF RS. 68,397/- AND FOREIGN CURRENCY FLUCTUATION GAIN AMOUNTING TO RS. 31,50,972/- AND THUS, THE AO IS HEREBY DIRECTED TO ALLOW DEDUCTION U/S 80IE OF THE ACT IN RESPECT OF EXCESS PROVISION WRIT TEN BACK AND FOREIGN CURRENCY FLUCTUATION. SINCE BOTH THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT DATED 16/06/2016 PASSED IN ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2011-12 AND THE LD. CIT(A) HAS GIVE N RELIEF RELYING ON THE DECISION OF THE ITAT. THEREFORE, BY RESPECTFULLY FOL LOWING THE ORDER OF THE LD. CIT(A), I DISMISS BOTH THE GROUNDS OF THE REVENU ES APPEAL. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24 TH APRIL, 2017 *RANJAN ITA 1114/JP/2016_ DCIT VS M/S OMIL-JSC(JV), KAMENG 7 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S OMIL-JSC (JV), KAMENG, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1114/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR