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

ITA 160/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5260 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 19-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R PAREEK
• Assessee Lawyers: B V MAHESHWARI C A DHK
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK ] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 160/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. THE INCOME TAX OFFICER, WARD 2(2), JAIPUR. CUKE VS. M/S. OMIL - JSC (JV) KAMENG OM TOWER, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAJO 0083 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI G.R. PAREEK (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI B.V. MAHESHWARI (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.06.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16/06/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD.CIT(APPEALS)-I, JAIPUR DATED 29.12.2014 PERTAINING TO A.Y. 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN ALLOWING D EDUCTION U/S 80IE OF THE I.T. ACT, IN RESPECT OF TECHNICAL SERVI CES RECEIPTS OF RS. 42,20,330/- WHICH WAS TREATED BY ASSESSEE ITSEL F AS INCOME FROM OTHER SOURCES. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN ALLOWING D EDUCTION U/S 80IE OF THE I.T. ACT, IN RESPECT OF FOREIGN CURRENC Y FLUCTUATION AGAIN OF RS. 22,41,619/- (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN ALLOWING D EDUCTION U/S 80IE OF THE I.T. ACT, IN RESPECT OF INCOME OF RS. 6 3,899/- EARNED BY WAY OF EXCESS PROVISION WRITTEN BACK. 2 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT CA SE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTION 143(3) OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAME D VIDE ORDER DATED 11 TH MARCH, 2015. WHILE FRAMING THE ASSESSMENT, THE AO MADE AD DITION OF RS. 65,25,818/- AS INCOME FROM OTHER SOURCES, DECLINING THE DEDUCTION CLAIMED UNDER SECTION 80IE OF THE ACT BY THE ASSESSEE. THE ASSESSEE AGGRIEVED B Y THIS ORDER, PREFERRED APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMI SSIONS ALLOWED THE APPEAL OF THE ASSESSEE AND DIRECTED THE AO TO GRANT DEDUCTION UND ER SECTION 80IE OF THE ACT. NOW THE REVENUE IS IN APPEAL BEFORE US. 3. GROUND NO. 1 OF THE REVENUES APPEAL IS AGAINST ALLOWING DEDUCTION 80IE OF THE ACT IN RESPECT OF RECEIPTS TREATED AS RECEIPTS FROM TECHNICAL SERVICES BY THE AO AMOUNTING TO RS. 42,20,330/-. 3.1. THE LD. D/R VEHEMENTLY ARGUED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION AS MADE BY THE AO. HE SUBMITT ED THAT THE ASSESSEE ITSELF HAS TREATED THE INCOME AS INCOME FROM OTHER SOURCES AND THE DEDUCTION U/S 80IE IS AVAILABLE IN CASE SUCH INCOME IS DERIVED FROM THE M ANUFACTURING UNIT AS ESTABLISHED AT THE PARTICULAR AREA. THE LD. D/R SUBMITTED THAT UNDER THE FACTS OF THE PRESENT CASE, THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 3.2. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT (A) AND REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. THE LD. COUNSEL SUBMITTED THAT FOR THE PURPOSE OF GROUP ING OF THE INCOME, THE INCOME WAS TREATED AS INCOME FROM OTHER SOURCES. HOWEVER, THE SAME WAS DERIVED FROM THE MANUFACTURING UNIT. THEREFORE, THE SAME ARE ELIGIBL E FOR DEDUCTION. THE LD. COUNSEL 3 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG DREW OUR ATTENTION TO THE BILL RAISED BY THE ASSESS EE COMPANY WHICH IS ENCLOSED AT PAGE 5 OF THE PAPER BOOK. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE L D. CIT (A) HAS GIVEN FINDING OF FACT IN PARA 3.1.2. OF HIS ORDER AS UNDER :- 3.1.2. I HAVE DULY CONSIDERED AOS CONTENTION AN D APPELLANTS SUBMISSION, PERUSED THE MATERIALS ON RECORD, DULY C ONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO APPLICABLE LEGAL POSITIO N. SINCE THE TECHNIQUE OF STEEL LINERS AND STEEL RADIAL GATES HAS BEEN DEV ELOPED IN THIS UNIT, THEREFORE, WHEN SUCH MATERIAL WAS REQUIRED AT ANOTH ER PROJECT SITES OF OM METALS, THEN THE SAME WAS DESIGNED AND MANUFACTU RED FROM THIS UNIT AND IT WAS SOLD & DISPATCHED TO OM METALS SITE S. AS SUCH, THOUGH IT IS CATEGORIZED AS INCOME FROM OTHER SOURCES SINC E IT WAS NOT RELATED TO THE PROJECT FOR WHICH THE UNIT IS WORKING, BUT I T IS THE INCOME FROM INDUSTRIAL UNIT AND DEDUCTION IS AVAILABLE FOR MANU FACTURING IN THE SPECIFIED AREA AS DONE IN SEC. 80IE OF THE ACT. IN OTHER PROJECTS OF THE GROUP, STEEL LINERS WAS REQUIRED, THEN THEY WERE MA NUFACTURED FROM THIS (NE) UNIT AND SENT THERE. ASSESSEES AUDITOR K EPT THIS INCOME FROM THE NE UNIT AS INCOME FROM OTHER SOURCES JUST TO SE GREGATE/IDENTIFY ITS REGULAR INCOME. THIS IS NOTHING BUT A NOMENCLAT URE DEFINITION JUST TO DIFFERENTIATE INCOME IN ITS BOOK AND PROFIT WILL NO T BE DISTURBED ONLY BECAUSE CLAIM MADE UNDER THE HEAD INCOME FROM OTHE R SOURCES AND THERE IS NOTHING WRONG IN THIS. INCOME OF THIS NE UNIT IS LINKED WITH MANUFACTURING UNIT AND AO HAS NOT DOUBTED THAT. FUR THER, IT IS ALSO A FACT THAT THE DEDUCTIONS U/S 80IE ARE AVAILABLE ON MANUFACTURING OF ANY ELIGIBLE ARTICLE OR THING AND THE UNIT HAS BEEN EST ABLISHED IN NORTH EASTERN STATE WHICH HAS BEEN MANUFACTURING THERE AR TICLES FROM ON OR AFTER APRIL, 2007 ONWARDS (TILL APRIL, 2017) AND AO HAS NOT MADE ANY ADVERSE COMMENTS ON THAT. AOS OBSERVATION REGARDI NG TREATING OF SALE LINER AT PARVATI (OMIL) AS TECHNICAL SERVICE IS NOT CORRECT. IN VIEW OF FACTS AND CIRCUMSTANCES DISCUSSED ABOVE, ASSESSEE IS ENTITLED FOR THE DEDUCTIONS U/S 80IE OF RS. 42,20,3 00/- WITH REGARD SALE OF LINER TO DIFFERENT UNITS OF OM PROJECTS AS THEY ARE VERY MUCH PART OF MANUFACTURING PROCESS DONE AT THE KEMANG UNIT. ADD ITION MADE OF RS. 42,20,300/- GETS DELETED. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E BILL WAS RAISED IN RESPECT OF FABRICATION, MANUFACTURING AND FIXING THE STEEL LIN ERS APART FROM SUPERVISION, 4 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG TECHNICAL CONSULTANCY, POST VERIFICATION OF STEEL L INERS. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT ALL THESE HAVE BEE N RELATED TO MANUFACTURING AND CANNOT BE TAKEN INTO ISOLATION. 3.4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. UNDISPUTEDLY, THERE IS NO DISPUTE THAT AMOUNT RELAT ES TO MANUFACTURING OF ELIGIBLE ARTICLE OR THING. THE REVENUE HAS NOT DOUBTED OR PL ACED ANY MATERIAL ON RECORD SUGGESTING THAT WHAT THE ASSESSEE HAS MANUFACTURED IS NOT ELIGIBLE OR THE UNDERTAKING IS NOT ELIGIBLE FOR THE BENEFIT OF DEDU CTION AS PROVIDED UNDER SECTION 80IE OF THE ACT. THE ONLY OBJECTION OF THE REVENUE IS THAT THE ASSESSEE ITSELF HAS TAKEN SUCH RECEIPTS AS INCOME FROM OTHER SOURCES. SINCE THE SOURCE OF THESE RECEIPTS IS MANUFACTURING, THE REVENUE HAS NOT PLAC ED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THESE RECEIPTS DO NOT PERTAIN TO T HE MANUFACTURING OF THE UNDERTAKING. IN THE ABSENCE OF SUCH SPECIFIC MATER IAL, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN DECLINING THE DEDU CTION AS AVAILABLE U/S 80IE OF THE ACT. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFE RE INTO THE ORDER OF LD. CIT (A). THE SAME IS HEREBY AFFIRMED. THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 4. GROUND NO. 2 IS AGAINST ALLOWING DEDUCTION OF RS . 22,41,619/- U/S 80IE OF THE ACT IN RESPECT OF FOREIGN CURRENCY FLUCTUATION. 4.1. THE LD. D/R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. 4.2. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT (A) AND REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. THE LD. CIT (A) IN PARA 3.3.2. HAS GIVEN THE FINDING OF FAC T AS UNDER :- 5 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG I HAVE DULY CONSIDERED AOS CONTENTION AND APPELL ANTS 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 MAT ERIALS LOCALLY AND ALSO IMPORTS A SUBSTANTIAL PART FROM INTERNATIONAL MARKET. FOR IMPORTED RAW MATERIALS, PAYMENTS ARE BEING MADE IN FOREIGN C URRENCIES, WHICH ARE QUITE VOLATILE, THERE IS NO DISPUTE IN THIS REG ARD. THE FOREIGN CURRENCY GAIN IS THE PART OF RAW MATERIAL AS ASSESS EE CONTENDS THAT RAW MATERIALS HAVE BEEN BOOKED BY LESS AMOUNT OF RS. 22 ,41,619/- THERE IS NOTHING WRONG IN THIS CLAIM. ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IE OF THE ACT, ON THIS ALSO. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AS DISCUSS ED ABOVE, AO IS DIRECTED TO ALLOW DEDUCTION U/S 80IE IN THIS REGARD AND ALSO TO DELETE THE ADDITION OF RS. 22,41,619/-. THE REVENUE HAS NOT REBUTTED THESE FINDINGS BY PLAC ING 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 UTILIZED IN THE MANUFACTURING PROCESS. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF LD. C IT (A). THE GROUND OF THE REVENUE IS REJECTED. 5. GROUND NO. 3 IS IN RESPECT OF DELETION OF ADDITI ON OF RS. 63,899/- MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION BY THE INCOME EARNED BY WAY OF EXCESS PROVISION WRITTEN BACK. 5.1. THE LD. D/R SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED TO ALLOW DEDUCTION AS NO DEDUCTION IS AVAILABLE ON THIS AMOUNT. 5.2. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (A) AND REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. 5.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. THE LD. CIT (A) HAS GIVEN THE FINDING OF FACTS AS UNDER :- 6 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG 3.2.2. I HAVE DULY CONSIDERED AOS CONTENTION AN D 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. ITS AN E XCESS PROVISION MADE FOR SOME EXPENSES, NOT MADE IN THE CURRENT YEAR BUT BOOKED EXCESS IN EARLIER YEARS AND ONCE IT IS REVERSED I.E. WRITTEN BACK, ASSESSEE HAS TO OFFER FOR TAXATION. THIS IS PERFECTLY CORRECT AS PE R ACCOUNTANCY PRINCIPLE. AS SUCH, THIS IS THE EXPENDITURE, WHICH HAS BEEN BO OKED IN EXCESS IN EARLIER YEAR AND BY THIS AMOUNT THE DEDUCTION U/S 8 0IE HAS BEEN REDUCED IN THE SAID YEAR SINCE THE DEDUCTION IS AVA ILABLE 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 LD. CIT (A) IS NOT REBUTTE D BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE, WE DO NOT S EE ANY REASON TO INTERFERE INTO THE ORDER OF LD. CIT (A). THE GROUND OF THE REVENUE IS REJECTED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16/06/2016. SD/- SD/- VH-VKJ-EHUK] ( DQY HKKJR ) ( T.R. MEENA) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 16/06/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ITO, WARD 2(2), JAIPUR. 2. THE RESPONDENT- M/S. OMIL-JSC (JV) KAMENG, JAIPU R. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 160/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO. 160/JP/2015 ITO VS. OMIL-JSC (JV) KAMENG