The DCIT, Circle- 2(1)(1), Ahmedabad V. M/s. Gujarat Ambuja Exports Limited, Ahmedabad

ITA 3233/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5456 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 10-11-2015
• Court: TRIBUNAL

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO.3233/AHD/2015 WITH CROSS OBJECTION: 220/AHD/2015 [ASSTT.YEAR: 2012-13] AND ITA NO.2490/AHD/2014 & 2037/AHD/2016 [ASSTT.YEAR : 2011-12 & 2013-14] DCIT, CIR.2(1)(1) AHMEDABAD. VS. M/S.GUJARAT AMBUJA EXPORTS LTD. AMBUJA TOWER OPP: MEMNAGAR FIRE STATION NR.VIJAY CHAR RASTA NAVRANGPURA AHMEDABAD 380 013. PAN : AAACG 3980 A ( APPLICANT ) (RESPONDENT) REVENUE BY : SHRI TUSHAR P. HEMANI, AR ASSESSEE BY : SHRI S.K. DEV, SR.DR ! '#$ % &' / DATE OF HEARING : 31/07/2019 ()* % &' / DATE OF PRONOUNCEMENT: 23/08/2019 +, / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DERS OF THE LD.CIT(A) 24.6.2014, 20.8.2015 AND 20.8.2015 PA SSED FOR THE ASSESSMENT YEARS 2011-12, 2012-13 AND 2013-14 RESPE CTIVELY. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL FOR TH E ASSTT.YEAR ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 2 2012-13, THE ASSESSEE HAS FILED CROSS OBJECTION BEA RING CO NO.220/AHD/2015. SINCE COMMON ISSUES ARE INVOLVED, THEREFORE, WE HEARD THESE APPEALS TOGETHER AND DEEM IT APPROPR IATE TO DISPOSE OF THEM BY THIS CONSOLIDATED ORDER. FIRST W E TAKE UP APPEAL FOR THE ASSTT.YEAR 2011-12. ITA NO.2490/AHD/2014 2. REVENUE HAS TAKEN THREE GROUNDS OF APPEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE, VIZ. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCES OF RS.5,21,79,627/- CLAIMED BY THE ASSESSEE UNDER SECT ION 80IA OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COM PANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF AGRO P ROCESSING AND AGRO BASED PRODUCTS. IT HAS FILED ITS RETURN OF IN COME ON 30.9.2011 DECLARING TOTAL INCOME AT RS.80,78,56,590 /-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERV ED UPON THE ASSESSEE. THE AO HAS ISSUED A SHOW CAUSE NOTICE IN VITING EXPLANATION OF THE ASSESSEE AS TO WHY REVISED CLAIM FOR DETERMINATION UNDER SECTION 80IA SHOULD NOT BE DISA LLOWED. THE ASSESSEE CONTENDED THAT IN THE ORIGINAL RETURN IT H AS CLAIMED DEDUCTION UNDER SECTION 80IA AT RS.2,18,33,004/-. IN RESPONSE TO THE SHOW CAUSE, THE ASSESSEE HAS FILED WRITTEN SUBM ISSIONS, WHEREIN IT HAS COMPLIED DETAILS IN A TABULAR FORM E XHIBITING AS TO HOW IT HAS CLAIMED DEDUCTION UNDER SECTIN80IA. SUC H DETAILS READ AS UNDER: ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 3 SN NATURE OF CHANGES AMOUNT AMOUNT REMARK 1 TAXABLE INCOME 80,78,56,590 ORIGINAL RETURN OF INCOME 2 DEDUCTION U/S.80IA (-)5,21,79,627 AS PER ORIGINAL RETURN 2,18,33,004 EXPLANATIONS FOR REVISING THE CLAIM ARE GIVEN HEREUNDER THE TABLE AS PER REVISED RETURN 7,40,12,631 NET INCREASED IN DEDUCTION 5,21,79,627 4. IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE, THE ASSESSEE HAS CONTENDED THAT ORIGINALLY IT HAS CLAIMED DEDUCT ION UNDER SECTION 80IA AT RS.2,18,33,004/-. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT REVISED THE CLAIM BY ENHA NCING IT TO RS.7,40,12,631/-. THE LD.AO DID NOT ACCEPT THIS CL AIM ON THE GROUND THAT TIME LIMIT TO REVISE ITS RETURN HAS ALR EADY EXPIRED AND IT COULD NOT MAKE FRESH CLAIM IN THE ASSESSMENT PRO CEEDINGS. ACCORDINGLY, HE ALLOWED THE DEDUCTION UNDER SECTION 80IA AT RS.2,18,33,004/- ORIGINALLY CLAIMED BY IT. THIS EX ERCISE LED TO DISALLOWANCE OF RS.5,21,79,627/- [RS.7,40,12,631/- MINUS RS.2,18,33,004/-]. 5. DISSATISFIED WITH THE ACTION OF THE AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). IT WAS CONT ENDED BY THE ASSESSEE THAT THOUGH ACCORDING TO THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT (2006) 284 ITR 323 (SC), THE AO MAY NOT BE COMPETENT TO EN TERTAIN FRESH CLAIM UNLESS REVISED RETURN IS BEING FILED BY THE ASSESSEE, BUT THIS RESTRICTION IS NOT APPLICABLE ON THE FIRST APPELLATE AUTHORITY. THE ISSUE RAISED BY THE ASSESSEE IS LEG AL ONE AND IT CAN ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 4 BE ENTERTAINED BY THE FIRST APPELLATE AUTHORITY. HE MADE REFERENCE TO LARGE NUMBER OF DECISIONS VIZ. CIT VS. JINDAL SAW PIPES LTD., 328 ITR 338 (DEL), COMMISSIONER OF INCO ME TAX VS. PRUTHVI BROKERS AND SHAREHOLDERS P.LTD., 349 ITR 33 6. THE LD.CIT(A) HAS ENTERTAINED THE CLAIM OF THE ASSESSEE AND PROCEED TO DECIDE IT ON MERIT. ON MERIT, IT WAS CONTENDED BY THE ASSESSEE THAT BASICALLY, THE ISSUE INVOLVED IS ABOUT SELECTI ON OF INITIAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION UNDER SECTIO N 80IA. ACCORDING TO SUB-SECTION (5) OF SECTION 80IA, THE A SSESSEE HAS BEEN GIVEN AN OPTION TO SELECT INITIAL ASSESSMENT Y EAR FROM WHICH IT CAN CLAIM DEDUCTION FOR TEN CONSECUTIVE YEARS WI THIN 15 YEARS. THE ASSESSMENT YEAR 2011-12 HAS BEEN SELECTED BY TH E ASSESSEE AS INITIAL YEAR AND CONTENDED THAT UNABSORBED LOSS CANNOT BE ADJUSTED NOTIONALLY AGAINST THE PROFIT OF YEAR UNDE R CONSIDERATION WHILE COMPUTING DEDUCTION UNDER SECTION 80IA. IN O THER WORDS, THE CASE OF THE ASSESSEE IS THAT LOSS OF YEAR START ING FROM INITIAL ASSESSMENT YEAR ALONE TO BE CONSIDERED FOR SET OFF AGAINST THE ELIGIBLE PROFIT AND LOSS, IF ANY, INCURRED IN THE P RIOR YEAR TO INITIAL ASSESSMENT YEAR MUST BE IGNORED. FOR THIS PROPOSI TION, JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. VELAYUDHASWAMY SPINNING MILLS P.LTD., 340 ITR 477 ( MAD) WAS RELIED UPON. THE LD.CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND HELD THAT UNABSORBED DEPRECIATION OR LOSS OF TH E YEARS PRIOR TO INITIAL ASSESSMENT YEAR ARE NOT REQUIRED TO BE SET OFF AGAINST THE ELIGIBLE PROFITS AND THUS THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA ON THE ENHANCED AMOUNT. 6. AGAINST THIS DECISION OF THE LD.CIT(A), REVENUE IS IN APPEAL. THE LD.DR RELIED UPON THE ORDER OF THE LD.AO. ON T HE OTHER HAND, ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 5 THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT ACCE PTING THE PROPOSITION THAT UNABSORBED DEPRECIATION OR LOSS PR IOR TO THE INITIAL ASSESSMENT YEAR NOT TO BE SET OFF WITH THE ELIGIBLE PROFIT IN THE INITIAL ASSESSMENT YEAR OR THEREAFTER AND DEDUCTION HAS TO BE GRANTED INDEPENDENTLY. THE LD.AO HAS ACCEPTED THI S PROPOSITION IN THE ASSTT.YEAR 2012-13. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSMENT ORDER FOR ASSTT.YEAR 2012-13 IS ANNEXED WITH THE APPEAL OF THE REVENUE BEARING NO.3233/AHD/2015. SIMILARLY, FOLLOWING OF ORDER OF THE LD.CIT(A) IN THE PRESENT ASSESSMENT YEAR I.E. ASSTT.YEAR 2011 -12, THE LD.CIT(A) HAS ALLOWED DEDUCTION IN THE ASSTT.YEAR 2 013-14, AND REVENUE THOUGH CHALLENGED THE ORDER OF THE LD.CIT(A ) IN THE ASSTT.YEAR 2013-14 IN ITA NO.2037/AHD/2016, BUT HAS NOT TAKEN THIS GROUND OF APPEAL. THUS, THE DEPARTMENT HAS AL SO ACCEPTED THAT DEDUCTION IS ADMISSIBLE TO THE ASSESSEE IGNORI NG THE LOSS OF PRIOR YEARS THAN THE INITIAL ASSESSMENT YEARS. HE FURTHER MADE REFERENCE TO THE BOARD CIRCULAR NO.1 OF 2016 DATED 1 5.2.2016. COPY OF THIS CIRCULAR HAS BEEN ANNEXED AS ANNEXURE- B WITH THE BRIEF SYNOPSIS FILED BY THE ASSESSEE. THE BOARD HAS APPRAISED ITS ASSESSING OFFICERS THAT THE ASSESSEE WILL BE AT LIB ERTY TO CHOOSE INITIAL ASSESSMENT YEAR, AND THEREAFTER DEDUCTION U NDER SECTION 80IA IS TO BE GRANTED FOR TEN CONSECUTIVE YEARS AFT ER THE SELECTION OF THAT ASSESSMENT YEARS OUT OF 15 YEARS BLOCK. HE ALSO HAS PLACED A COPY OF ORDER OF THE TRIBUNAL PASSED IN IT A NO.2174/AHD/2013 IN THE CASE OF DCIT VS. SUZLON TOW ERS & STRUCTURES LTD. WHEREIN IDENTICAL ISSUE WAS CONSIDE RED BY THE TRIBUNAL. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 6 7. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. BOARD HAS RECOGNIZED RIGHTS O F THE ASSESSEE FOR SELECTING THE INITIAL ASSESSMENT YEAR FOR CLAIM ING DEDUCTION UNDER SECTION 80IA. THE BOARD HAS APPRAISED ITS AUT HORITIES AND CONTEMPLATED THAT SUB-SECTION (2) OF SECTION 80IA P ROVIDE THAT THE ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION UNDER S ECTION 80IA HAS OPTION TO CHOOSE THE INITIAL /FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS OUT OF SLAB OF 15 YEARS AS PRESCRIBED UNDER THAT SUB-SECTION. IT HAS ALSO BEEN PROPOUNDED BY THE BOARD THAT ONCE SUCH INITIAL ASSES SMENT YEAR HAS BEEN OPTED BY THE ASSESSEE, HE SHALL BE ENTITLE D TO CLAIM DEDUCTION UNDER SECTION 80IA FOR TEN CONSECUTIVE YE ARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. 8. AS FAR AS CONDITIONS OF SECTION ARE CONCERNED, T HE AO HAS HIMSELF ALLOWED THE DEDUCTION UNDER SECTION 80IA OF RS.2,18,33,004/-. THUS, HE HAS HIMSELF HAS NOT DIS PUTED ABOVE FULFILLMENT OF NECESSARY CONDITIONS FOR CLAIMING TH E DEDUCTION UNDER SECTION 80IA. IT IS ALSO PERTINENT TO NOTE T HAT IN THE ASSESSMENT YEARS 2012-13 AND 2013-14, THE STAND OF THE ASSESSEE THAT LOSS OF EARLIER YEARS I.E. PRIOR TO S ELECTION OF INITIAL ASSESSMENT YEAR ARE REQUIRED TO BE IGNORED FOR THE PURPOSE OF SECTION 80IA. AT THIS STAGE, WE DEEM IT APPROPRIAT E TO TAKE NOTE OF FOLLOWING FINDING FROM THE JUDGMENT OF HONBLE M ADRAS HIGH COURT WHICH READS AS UNDER: ..FROM A READING OF THE ABOVE, IT IS CLEAR THAT T HE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY S UBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE O PTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASS ESSMENT YEAR ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 7 ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EA RLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF TH E ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE I NITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE R EVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OF F AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE S ET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF T HE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. A FICTION CREATED IN SUB-SECTION DOES NOT CONTEMPLA TES TO BRING SET OFF AMOUNT NOTIONALLY. THE FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. SLP AGAINST THIS JUDGMENT HAS BEEN REJECTED BY THE HONBLE SUPREME COURT BEARING NO.334752012, AND COPY OF HON BLE SUPREME COURT DECISION HAS BEEN PLACED AS ANNEXURE- C. IT IS REPORTED IN 244 TAXMANN.COM 58. CONSIDERING THE AB OVE FACTS, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY A DJUDICATED THIS ISSUE BY KEEPING IN MIND THE DECISION OF HONBLE MA DRAS HIGH COURT AND THE POSITION OF LAW. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A), AND THE APPEAL OF THE REVEN UE IN THE ASSTT.YEAR 2011-12 IS DISMISSED. ITA NO.3233/AHD/2015 (ASSTT.YEAR 2012-13) AND ITA NO.2037/AHD/2016(ASSTT.YEAR 2013-14) 9. GROUND NO.2 IN BOTH THESE ASSESSMENT YEARS IS CO MMON. GRIEVANCE OF THE REVENUE IN THIS GROUND IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,53,17,54 7/- AND RS.1,51,52,353/- WHICH WAS DISALLOWED BY THE AO WIT H AID OF SECTION 40(A)(I) OF THE ACT ON ACCOUNT OF NON-DEDUC TION OF TDS ON THE FOREIGN COMMISSION PAYMENT IN THE ASSTT.YEAR 01 2-13 AND 2013-14 RESPECTIVELY. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 8 10. THE FACTS ON ALL VITAL POINTS ARE COMMON. EVEN THE FINDING OF THE LD.CIT(A) IS VERBATIM SAME EXCEPT VARIATION IN QUANTUM IN BOTH THE YEARS. THEREFORE, FOR THE FACILITY OF REF ERENCE WE TAKE UP THE FACTS FROM THE ASSTT.YEAR 2012-13. 11. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON2 9.11.2012 DECLARING TOTAL INCOME AT RS.36,73,42,030/- WHICH W AS REVISED TO RS.30,62,30,930/-. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TR ADING OF AGRO PROCESSING, MAIZE PROCESSING, COTTON SPINNING AS WE LL AS GENERATING POWERS THROUGH WINDMILLS. ON VERIFICATI ON OF TDS DETAILS, AND CA CERTIFICATE FOR FOREIGN REMITTANCES IT REVEALED TO THE AO THAT THE ASSESSEE HAS DEBITED FOREIGN COMMISSION EXPENDITURE OF RS.1,56,17,547/-. HE DIRECTED THE ASSESSEE TO E XPLAIN AS TO WHY THIS COMMISSION BE NOT DISALLOWED. IN RESPONSE TO THE QUERY OF THE AO, THE ASSESSEE FILED A DETAILED WRITTEN SU BMISSIONS WHICH WAS IDENTICALLY SUBMITTED BEFORE THE LD.CIT(A), AND WE WILL BE GOING TO TAKE NOTE OF THE SUBMISSION IN THE SUBSEQU ENT PART. THE AO HAS GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND REJECTED THE SAME FOR TWO REASONS. IN THE FIRST FO LD OF REASONING, HE OBSERVED THAT THE ASSESSEE HAS NOT PROVIDED THE IDENTITY AND THE EVIDENCE OF SERVICES RENDERED BY FOREIGN COMMIS SION AGENT FOR WHICH THE COMMISSION WAS PAID. IN THIS REGARD, HE OBSERVED THAT NO COPY OF AGREEMENT OR DOCUMENTARY EVIDENCE IN SUP PORT OF COMMISSION PAYMENT ETC. WAS GIVEN BY THE ASSESSEE. IN THE SECOND FOLD OF REASONING, HE OBSERVED THAT THE ASSE SSEE FAILED TO DEDUCT TDS ON THIS AMOUNT, AND THEREFORE, IT IS NOT ENTITLED FOR ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 9 DEDUCTION UNDER SECTION 40(A)(IA) OF THE ACT. SIMI LAR ACTION WAS TAKEN WITH REGARD TO COMMISSION PAID AT RS.1,51,52, 353/- IN THE ASSTT.YEAR 2013-14. 12. DISSATISFIED WITH THE FINDING OF THE AO, THE AS SESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A). IT HAS FILED DETA ILED WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED BY THE CIT(A) . FOR APPRECIATING THE FACTS AND THE STAND OF THE ASSESSE E, WE ALSO DEEM IT APPROPRIATE TO TAKE NOTE OF THE SUBMISSIONS , WHICH READ AS UNDER: 6.2. APPELLANT'S SUBMISSION:- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE AP PELLANT ARE REPRODUCED HERE UNDER:- '8.2 THE APPELLANT IN ASSESSMENT PROCEEDINGS, ON TH E ISSUE OF FOREIGN COMMISSION U/S. 40(A)(I) OF RS. 153,17,547/-, FURNI SHED EXPLANATIONS TO THE AO VIDE LETTER DATED 18-02-2015, COPY OF REPLY FILE D IN PAPER BOOK (PG. NO. 173 TO 385), THE SAME IS REPRODUCED HEREUNDER: 'YOUR GOODSELF CALLED FOR TO FURNISH DETAILS OF COM MISSION PAID ON EXPORT SALES ALONG WITH EVIDENCES REGARDING FIXATION OF CO MMISSION, DEBIT NOTES FROM OVERSEAS BROKERS, RELATED EXPORT SALE AND ITS REALIZATION ALONG WITH PAYMENT BY BANKERS AND COPIES OF FORM NO. 15CA & 15 CB IN THIS REGARD. WITH REGARD TO COMMISSION PAYMENT ON EXPORT TO OVER SEAS BUYERS, WE FURNISH FOLLOWING DETAILS AND EXPLANATIONS FOR JUST IFICATION OF OVERSEAS COMMISSION AND ITS PAYMENTS: 1. THE ASSESSEE COMPANY IS IN EXPORT OF YARN & COTT ON WASTE, LIQUID GLUCOSE & STARCH I.E. MAIZE PROCESSED ITEMS AND DE- OILED CAKE. THE EXPORT SUMMARY OF THESE ITEMS DURING THE YEAR 2011 -12 AND PAYMENT OF COMMISSION IS AS UNDER: MANUFACTURING ITEMS EXPORT SALE COMMISSION AGRO PROCESSING: DOC 3576946239 748632 MAIZE PROCESSING: LIQUID GLUCOSE & STARCH 306863052 720535 ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 10 YARN MFG.: YARN & COTTON WASTE 1720000547 14148380 TOTAL 5603809838 15617547 2. YARN & COTTON WASTE ARE EXPORTED THROUGH BROKERS , AS MOST OF THE DEAL IS THROUGH BROKERS WHO BASICALLY WORK FROM TAIWAN, HON G KONG, KOREA, MALAYSIA, VIETNAM, BANGLADESH, PHILIPPINES, ITALY, PORTUGAL, CHINA AND USA, AS THE PRODUCT IS USED WORLDWIDE AND DEMAND CO MES FROM VARIOUS COUNTRIES THROUGH OVERSEAS BROKERS / COMMISSION AGE NTS WORKING OVERSEAS. WHEREAS, VERY FEW DEMANDS COMES THROUGH OVERSEAS BR OKERS / COMMISSION AGENTS FOR LIQUID GLUCOSE AND STARCH AND DOC. 3. IT IS FURTHER SUBMITTED THAT THESE OVERSEAS BROK ERS / COMMISSION AGENTS ARE PROVIDING EXPORT ORDERS TO US BY SEARCHING / IN QUIRING EXPORT IMPORT FROM THEIR COUNTRIES. THESE OVERSEAS BROKERS / COMM ISSION AGENTS ALSO PROVIDES SERVICES FOR NEGOTIATING THE RATES, FREIGH T, CONDITIONS FOR PAYMENTS, OPENING LCS OF IMPORTERS IN FOREIGN COUNTRIES AND I NFORMING US, TAKE CARE OF DELIVERIES OF GOODS TO THE IMPORTERS AND FOLLOW UP FOR FINAL PAYMENTS, ETC. 4. AS CALLED FOR BY YOUR GOODSELF DETAILED CHART CO NTAINING NAME & ADDRESS OF BROKER, NAME & COUNTRY OF BUYER TO WHOM EXPORT W AS MADE, ITEM EXPORTED, BILLED QUANTITY, EXPORT VALUE IN USD AND REALIZATION IN INR WITH BROKERAGE IN USD AND BROKERAGE IN INR AMOUNTING TO RS. 156,17,547/- FURNISHED EXB-1. 5. ALONG WITH ABOVE CHART, BROKER WISE PAYMENT EVID ENCES ALONG WITH BANK PAYMENT DETAILS, COMPANY PAYMENT ADVICE, FORM NO. 1 5CA AND 15CB, DEBIT NOTE FROM OVERSEAS BROKER / COMMISSION AGENT, INVOI CE FOR EXPORT BY COMPANY WITH COMMISSION CONTRACT AND EXPORT CONTRAC T FURNISHED AS EVIDENCES FOR JUSTIFICATION OF COMMISSION TO OVERSE AS BROKERS / COMMISSION AGENTS AND GENUINENESS OF THE PAYMENTS THROUGH BANK ING CHANNEL AND CERTIFICATES FOR NON-DEDUCTION OF TAX AS THE SAME I S NOT APPLICABLE (FORM NO. 15CB) [ANNEXURE 1 TO 23]. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE PAYM ENTS OF COMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS IS PART OF EXP ORT OF PRODUCTS AND AN IMPORTANT MEDIATORY CHANNEL TO BOOK OUR EXPORT O RDERS AS WELL AS TO TAKE CARE OF REALIZATION OF EXPORT PROCEEDS. THUS, THE COMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS IS GENUINE AND PAID THROUGH BANKING CHANNEL ON EXPORT ORDERS PROCURED AND FINAL REALIZATION OF EXPORT PROCEEDS. THE SAME IS EXPENSE FOR THE PURPOS E OF BUSINESS INCURRED BY COMPANY IN PRUDENT WAY TO INCREASE EXPO RT AND INCREASE CUSTOMER BASE IN FOREIGN COUNTRIES.' 8.3 FURTHERMORE, THE APPELLANT COMPANY IN ASSE SSMENT PROCEEDINGS, ON JUSTIFICATION OF PAYMENT OF FOREIGN COMMISSION T O OVERSEAS BROKERS / ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 11 COMMISSION AGENTS AND APPLICABILITY OF TAXES THEREON, FURNISHE D LETTER TO AO DATED 20-02-2015, COPY OF REPLY FILED IN PAPER B OOK (PG. NO. 386 TO 388), THE SAME IS REPRODUCED HEREUNDER: 'IN CONNECTION TO THE COMMISSION ON EXPORT SALES PA ID TO OVERSEAS BROKERS / COMMISSION AGENTS, WE HAVE FURNISHED DETAILED REPLY VIDE LETTER DATED 18- 02-2015 WITH EVIDENCES RELATED TO FOREIGN COMMISSIO N AMOUNTING TO RS. 156,17,547/-. NOW, FOR JUSTIFICATION OF PAYMENT OF COMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS AND APPLICABILITY OF TA X THEREON, WE FURNISH FURTHER SUBMISSION AS UNDER FOR YOUR KIND PERUSAL: 1. THE ASSESSEE COMPANY IS EXPORTER OF YARN, MAIZE DERIVATIVES AND DOC. IN GLOBAL MARKET MOST OF THE EXPORT IS DONE BY COMPANY THROUGH ITS OWN SOURCES AND CUSTOMERS IN OVERSEAS, BUT MANY TIMES E XPORT INQUIRIES COME THROUGH OVERSEAS BROKERS / COMMISSION AGENTS, WHO A RE SITUATED IN FOREIGN COUNTRIES AND THEY HAVE SOME LOCAL IMPORT DEMAND. T HEY NEGOTIATE WITH US ON BEHALF OF SUCH IMPORTERS AND FINALIZE THE DEAL, FOR THIS THEY CHARGE COMMISSION EITHER ON PERCENTAGE OF EXPORT INVOICE O R COMMISSION ON PER METRIC TON OF EXPORT QUANTITY. 2. THESE OVERSEAS BROKERS / COMMISSION AGENTS ARE P ROVIDING EXPORT ORDERS TO US BY SEARCHING / INQUIRING EXPORT - IMPORT FROM THEIR COUNTRIES. THESE OVERSEAS BROKERS / COMMISSION AGENTS ALSO PROVIDES SERVICES FOR NEGOTIATING THE RATES, FREIGHT, CONDITIONS FOR PAYMENTS, OPENIN G LCS OF IMPORTERS IN FOREIGN COUNTRIES AND INFORMING US, TAKE CARE OF DE LIVERIES OF GOODS TO THE IMPORTERS AND FOLLOW UP FOR FINAL PAYMENTS, ETC. HO WEVER, THEY ARE NOT OUR AGENTS IN THOSE COUNTRIES. THEY WORK ON BEHALF OF M ANY PARTIES AND ON SO MANY PRODUCTS / COMMODITIES INDEPENDENTLY. 3. AS PER PROVISIONS OF SECTION 5(2) OF THE IT ACT, THE TOTAL INCOME OF A PERSON WHO IS A NON-RESIDENT IS TAXABLE IN INDIA, I F IT IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA ON BEHALF OF SUCH PE RSON OR ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN IN DIA. IN ANALOGY, WE SUBMIT THAT THE COMMISSION PAYMENT TO OVERSEAS BROK ERS / COMMISSION AGENTS IS NOT FALLING EITHER OF THE TWO CONDITIONS OF SECTION 5(2): (I) THE PAYMENTS ARE MADE TO OVERSEAS BROKERS / COM MISSION AGENTS IN THEIR COUNTRIES THROUGH BANKING CHANNEL I.E. THE PAYMENT IS RECEIVED BY THEM IN FOREIGN COUNTRY. (II) THE COMMISSION ACCRUES / ARISES IN FOREIGN COU NTRIES AS THE COMMISSION IS PAYABLE ONLY WHEN THE INDIAN COMPANY RECEIVES PA YMENT OF EXPORT SALES. SUCH REALIZATION OF EXPORT PROCEEDS ARE RELEASED BY FOREIGN IMPORTER AND AT THIS JUNCTURE THE ACTIVITY OF OVERSEAS BROKERS / CO MMISSION AGENTS COME TO AN END, AS THE EXPORT PAYMENT IS MADE BY FOREIGN BA NK FROM FOREIGN COUNTRY AND AT THE SAME TIME THE COMMISSION ACCRUE OR ARISE IN FOREIGN COUNTRY TO THE OVERSEAS BROKERS / COMMISSION AGENTS, IF THE PA YMENT DOES NOT REALIZE, THERE WILL BE NO COMMISSION AT ALL PAYABLE TO SUCH NON-RESIDENT COMMISSION AGENTS. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 12 4. AS PER PROVISIONS OF SECTION 9(1 )(I) OF THE IT ACT. INCOME DEEMED TO ACCRUE OR ARISE IN INDIA, WHETHER DIRECTLY OR INDIR ECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FROM AN Y PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN IN DIA OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATED IN INDIA. EXPLANATION - 1: BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIE D OUT IN INDIA. IT MEANS: THE OVERSEAS BROKERS / COMMISSION AGENTS IS NOT DOI NG ANY BUSINESS IN INDIA, THEY ARE MERELY PROVIDING EXPORT ORDERS AND FACILITATE TO INDIAN COMPANY. THE BUSINESS MEANS ANY ACTIVITY OF MANUFACTURING OF PRODUCTS SIMILAR TO THE ASSESSEE COMPANY. EXPLANATION - 2: BUSINESS CONNECTION SHALL INCLUDE ANY BUSINESS ACT IVITY CARRIED OUT THROUGH A PERSON WHO, ACTING ON BEHALF OF THE NON-RESIDENT AND HAS HABITUALLY EXERCISE IN INDIA, HABITUALLY MAINTA INS STOCK OF GOODS / MERCHANDIZE IN INDIA, HABITUALLY SECURES ORDERS IN INDIA UNDER COMMON CONTROL OF NON-RESIDENT. PROVIDED THAT SUCH BUSINES S CONNECTION SHALL NOT INCLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A BROKER, GENERAL COMMISSION AGENT OR ANY OTHER AGENT HAVING AN INDEP ENDENT STATUS AND ACTING IN THE ORDINARY COURSE OF HIS BUSINESS. IT MEANS: THE OVERSEAS BROKERS / COMMISSION AGENTS IS NOT HAV ING ANY BUSINESS CONNECTION AND CARRYING ANY BUSINESS ACTIV ITY. WHEREAS, THE NON- RESIDENT IS MERELY A COMMISSION AGENT OR BROKER ACT ING FROM FOREIGN COUNTRY AND HAS INDEPENDENT STATUS AND NOT WORKING UNDER COMMON CONTROL OF INDIAN COMPANY AT ALL. IN ANALOGY, WE SUBMIT THAT THE COMMISSION PAYMENT TO OVERSEAS B ROKERS / COMMISSION AGENTS CANNOT BE SAID AS INCOME DEEMED T O ACCRUE OR ARISE IN INDIA IN THE LIGHT OF ABOVE EXPLANATIONS TO THE PRO VISIONS OF SECTION 9(L)(I) OF THE ACT. IN THE MATTER OF COMMISSION PAYMENT TO OVE RSEAS BROKERS / COMMISSION AGENTS, IT IS SUBMITTED THAT COMMISSION DOES NOT ACCRUE OR ARISE OR DEEMED TO ACCRUE OR ARISE IN INDIA TO SUCH NON-R ESIDENT COMMISSION AGENTS AS THEY HAD RENDERED SERVICES OUTSIDE INDIA AND COMMISSION WAS ALSO PAID TO THEM OUTSIDE INDIA. THUS, THE ASSESSEE COMPANY WAS NO WHERE UNDER OBLIGATION TO DEDUCT TAX FROM SUCH COMMISSION PAYMENTS TO OVERSEAS BROKERS / COMMISSION AGENTS AS PER PROVISIONS OF SE CTION 195 OF THE IT ACT. 5. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE C OMMISSION AGENT DID NOT CARRY ON ANY ACTIVITY IN INDIA IN THE ABSENCE OF AN Y ACTIVITY BEING CARRIED IN INDIA BY A NON-RESIDENT COMMISSION AGENT, THE COMMI SSION DOES NOT ACCRUE OR ARISE IN INDIA. THEREFORE, SUCH PAYMENTS ARE NOT TAXABLE IN INDIA. ACCORDINGLY, SUCH PAYMENTS DO NOT REQUIRE ANY DEDUCTION OF TAX OR TAX WITHHOLDING. HOWEVER, THE COMPANY HAS TAKEN CERTIFICATE IN FORM NO 15CB F ROM CHARTERED ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 13 ACCOUNTANTS, WHICH ALSO STATES THAT NO TDS IS REQUI RE ON PAYMENT OF COMMISSION TO THE NONRESIDENT COMMISSION AGENTS. 6. IT IS FURTHER SUBMITTED THAT AS PER DOUBLE TAXAT ION AVOIDANCE AGREEMENT (DTAA) WITH THE COUNTRIES WHERE THE NON-RESIDENT CO MMISSION AGENTS RESIDES, IN ARTICLE 7: BUSINESS INCOME, STATES THAT THE INCOME FROM BUSINESS IS LIABLE TO BE TAXED IN THE COUNTRY WHERE THE PERS ON IS HAVING PERMANENT ESTABLISHMENT. NONE OF THE NON-RESIDENT COMMISSION AGENTS ARE HAVING ANY PE IN INDIA, COMPLETE ADDRESSES OF SUCH NON-RESIDEN T COMMISSION AGENTS ARE PROVIDED IN LETTER DATED 18-02-2015. IN VIEW OF THE ABOVE FACTS OF THE CASE AND LEGAL SU BMISSION EXAMINING THE APPLICABILITY OF VARIOUS PROVISIONS OF THE IT ACT, IT IS SUBMITTED THAT THE PAYMENTS OF COMMISSION TO OVERSEAS -BROKERS / COMMI SSION AGENTS MADE OVERSEAS ARE NOT LIABLE TO TDS /TAX WITHHOLDING AS PER PROVISIONS OF SECTION 195 OF THE IT ACT.' 8.4 IN THIS REGARD, IN THE APPELLATE PROCEEDINGS, T HE APPELLANT COMPANY ON THE ISSUE OF COMMISSION PAYMENT ON EXPORT SALE TO N ON-RESIDENTS, SUBMITS FOLLOWING FACTS AND EXPLANATIONS FOR YOUR KIND PERU SAL: (I) THE OVERSEAS BROKERS / COMMISSION AGENTS ARE PR OCURING EXPORT ORDERS BY SEARCHING / INQUIRING EXPORT - IMPORT FROM THEIR COUNTRIES. THESE OVERSEAS BROKERS / COMMISSION AGENTS PROVIDE SERVIC ES FOR NEGOTIATING THE RATES, FREIGHT, CONDITIONS FOR PAYMENTS, OPENING LC S OF IMPORTERS IN FOREIGN COUNTRIES AND INFORMING US, TAKE CARE OF DELIVERIES OF GOODS TO THE IMPORTERS AND FOLLOW UP FOR FINAL PAYMENTS, ETC. (II) THE APPELLANT COMPANY HAS FURNISHED A DETAILED CHART CONTAINING NAME & ADDRESS OF BROKER / AGENTS, NAME & COUNTRY OF BUY ER TO WHOM EXPORT WAS MADE, ITEM EXPORTED, BILLED QUANTITY, EXPORT VALUE IN USD AND REALIZATION IN INR WITH BROKERAGE IN USD AND BROKERAGE IN INR. (III) THE APPELLANT COMPANY HAS FURNISHED ALONG WIT H ABOVE CHART, BROKER WISE PAYMENT EVIDENCES ALONG WITH BANK PAYMENT DETA ILS, COMPANY PAYMENT ADVICE, FORM NO. 15CA AND 15CB, DEBIT NOTE FROM OVE RSEAS BROKER / COMMISSION AGENT, INVOICE FOR EXPORT BY COMPANY WIT H COMMISSION CONTRACT AND EXPORT CONTRACT FURNISHED AS EVIDENCES FOR JUST IFICATION OF COMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS AND GENUINE NESS OF THE PAYMENTS THROUGH BANKING CHANNEL AND CERTIFICATES FOR NON-DE DUCTION OF TAX AS THE SAME IS NOT APPLICABLE. (IV) THE APPELLANT COMPANY HAS SUBMITTED THAT THE P AYMENTS OF COMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS IS PART OF EXPORT OF PRODUCTS AND AN IMPORTANT MEDIATORY CHANNEL TO BOOK OUR EXPORT O RDERS AS WELL AS TO TAKE CARE OF REALIZATION OF EXPORT PROCEEDS. THUS, THE C OMMISSION TO OVERSEAS BROKERS / COMMISSION AGENTS IS GENUINE AND PAID THR OUGH BANKING CHANNEL ON EXPORT ORDERS PROCURED AND FINAL REALIZATION OF EXPORT PROCEEDS. THE ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 14 SAME IS EXPENSE FOR THE PURPOSE OF BUSINESS INCURRE D BY COMPANY IN PRUDENT WAY TO INCREASE EXPORT AND INCREASE CUSTOMER BASE I N FOREIGN COUNTRIES. (V) AS PER PROVISIONS OF SECTION 5(2) OF THE IT ACT , COMMISSION INCOME TO NON-RESIDENTS IS NOT TAXABLE IN INDIA, AS THEY ARC PROVIDING SERVICES FROM THEIR COUNTRIES AND THE PAYMENT IS ALSO RECEIVED TO THEM IN THEIR COUNTRY. THUS, THE COMMISSION IS NEITHER RECEIVED / DEEMED T O BE RECEIVED IN INDIA ON BEHALF OF SUCH PERSON NOR ACCRUES OR ARISES / DEEME D TO ACCRUE OR ARISE IN INDIA. SIMILARLY, COMMISSION PAYMENT TO OVERSEAS BR OKERS / COMMISSION AGENTS CANNOT BE SAID AS INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IN THE LIGHT OF ABOVE EXPLANATIONS TO THE PROVISIONS OF SE CTION 9(1 )(I) OF THE ACT. (VI) THE COMMISSION PAYMENT TO OVERSEAS BROKERS /CO MMISSION AGENTS DOES NOT ACCRUE OR ARISE OR DEEMED TO ACCRUE OR ARISE IN INDIA AS THEY HAD RENDERED SERVICES OUTSIDE INDIA AND COMMISSION WAS ALSO PAID TO THEM OUTSIDE INDIA. THUS, THE ASSESSEE COMPANY WAS NO WH EREUNDER OBLIGATION TO DEDUCT TAX FROM SUCH COMMISSION PAYMENTS TO OVERSEA S BROKERS A COMMISSION AGENTS AS PER PROVISIONS OF SECTION 195 OF THE IT ACT. (VII) AS PER DOUBLE TAXATION AVOIDANCE AGREEMENT (D TAA) WITH THE COUNTRIES WHERE THE NON-RESIDENT COMMISSION AGENTS RESIDES, IN ARTICLE 7: BUSINESS INCOME, STATES THAT THE INCOME FROM BUSINESS IS LIABLE TO B E TAXED IN THE COUNTRY WHERE THE PERSON IS HAVING PERMANENT ESTABLISHMENT. NONE OF THE NON-RESIDENT COMMISSION AGENTS ARE HAVING ANY P E IN INDIA, COMPLETE ADDRESSES OF SUCH NON-RESIDENT COMMISSION AGENTS AR E PROVIDED IN ABOVE DETAILS. (VIII) AN ANALYSIS OF COMMISSION TO NON-RESIDENTS F OR THE FY 2008-09, FY 2009-10, FY 2010-11 AND FY 2011-12 FURNISHED (PG. NO. 395 TO 397), WHICH SHOWS THAT THIS IS NOT A NEW PAYMENT, BUT PAID FROM LAST SO MANY YEARS AND ALLOWED BY IT DEPARTMENT IN ALL PAST YEARS. (IX) IT IS ALSO SUBMITTED THAT IN ASSESSMENT PROCEE DINGS, EVIDENCES WITH REGARD TO IDENTITY AND GENUINENESS OF NON-RESIDENTS COMMISSION AGENTS: WE HAVE SUBMITTED MOST OF EVIDENCES WITH REGARD TO IDE NTITY, SERVICES RENDERED BY THE FOREIGN COMMISSION AGENT, PAYMENT EVIDENCES FOR FOREIGN COMMISSION EXPENSE AND EVIDENCES FOR GENUINENESS OF TRANSACTIO NS ON SAMPLE BASIS. SUCH EVIDENCES ARE IN THE NATURE OF AGENCY AGREEMEN T, TAX RESIDENCY CERTIFICATE, DEBIT NOTE, EXPORT INVOICES, SHIPPING BILL, BANK CERTIFICATE FOR EXPORT REALIZATION, COMMISSION PAYMENT SWIFT MESSAG E BY BANK AND EMAILS. (X) THE APPELLANT COMPANY HAS APPLIED FOR NIL TAX W ITHHOLDING CERTIFICATES, FOR PAYMENT OF COMMISSION TO NON-RESI DENTS TOWARDS EXPORT SALES UNDER THE PROVISIONS OF SECTION 195(2) OF THE ACT, AS DISCUSSED BY AO ON PAGE NO. 24 IN PARA NO. 7.8 OF THE ASSESSMENT OR DER FOR THE FINANCIAL YEAR 2014-15 ON 24-03-2015, AGAINST THIS NIL WITHHO LDING CERTIFICATE IS ISSUED BY ITO, INTERNATIONAL TAXATION-I, AHMEDABAD VIDE CERTIFICATE DATED 31-03-2015, COPY FURNISHED (PG. NO. 398 TO 401). FURTHERMORE, SIMILAR CERTIFICATE WAS APPLIED FOR THE YEAR 2015-16, VIDE APPLICATION DATED 09-04- ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 15 2015, THE ITO, INTERNATIONAL TAXATION-I, AHMEDABAD VIDE CERTIFICATE DATED 10-04-2015 AUTHORIZED THE APPELLANT COMPANY TO PAY OR CREDIT COMMISSION TO VARIOUS NON-RESIDENTS TOWARDS EXPORT SALES, WITH OUT DEDUCTION OF TAX AT SOURCE, COPY FURNISHED (PG. NO. 402 TO 405). THE CERTIFICATE FROM INTERNATIONAL TAXATION DIVISION CERTIFYING TO PAY C OMMISSION TO VARIOUS NONRESIDENTS TOWARDS EXPORT SALES, WITHOUT DEDUCTIO N OF TAX AT SOURCE, ITSELF SHOWS THAT THERE IS NO NEED TO DEDUCT TAX ON SUCH P AYMENTS. 8.5 THE AO HAS MADE VARIOUS OBSERVATIONS IN ASSESSM ENT ORDER ON COMMISSION PAYMENT TO NON-RESIDENT REBUTTAL TO SUCH OBSERVATIONS OF THE AO ARE FURNISHED: PARA NO. AOS OBSERVATIONS REBUTTAL BY APPELLANT COMPANY 7.3 THE ABOVE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CONSIDERED BUT THE SAME IS NOT FOUND ACCEPTABLE. THE ASSESSEE HAS NOT' PROVIDED THE IDENTITY AND 'THE EVIDENCES OF SERVICES RENDERED BY THE FOREIGN COMMISSION AGENT FOR WHICH COMMISSION WAS PAID BY THE ASSESSEE. NO COPY OF AGREEMENT OR DOCUMENTARY EVIDENCES IN SUPPORT OF COMMISSION PAYMENT ETC. WAS GIVEN BY THE ASSESSEE WHICH COULD JUSTIFY THE REASONABLENESS OF THE COMMISSION PAYMENT TO THE NONRESIDENT AS WELL AS THE GENUINENESS OF EXPENDITURE INCURRED FOR THE PURPO.SE OF BUSINESS. THEREFORE, IN ABSENCE OF COPY OF AGREEMENT WITH THE FOREIGN COMMISSION AGENT, IDENTITY OF COMMISSION AGENT AND EVIDENCES PERTAINING TO SERVICES RENDERED BY THE FOREIGN COMMISSION AGENT HAVING NEXUS WITH THE BUSINESS OF THE ASSESSEE, THE PAYMENT OF FOREIGN COMMISSION EXPENSES IS NOT FOUND GENUINE. THE APPELLANT COMPANY HAS FURNISHED FOLLOWING EVIDENCES IN CONNECTION TO COMMISSION PAYMENTS TO NON-RESIDENTS: ' ; \ 1 \ (I) COPIES OF CONTRACT WITH COMMISSION AGENT AND CONTRACT WITH EXPORTER. (II) COPIES OF INVOICES / DEBIT NOTES J RAISED BY COMMISSION AGENT. | (III) COPIES OF FORM NO. 15CA & FORM NO. 15CB FOR PAYMENT IN FOREIGN CURRENCY. (IV) BANK PAYMENT SWIFT COPY. (V) COPY OF SHIPPING BILL FOR COMMISSION REFERENCE, ETC. THESE DOCUMENTS ARE SUFFICIENT TO PROVE GENUINENESS OF THE COMMISSION PAYMENTS AND IDENTITY OF COMMISSION AGENTS. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 16 7.6 UNDER SECTION 9(1 )(I) OF THE ACT, INCOME ACCRUING OR ARISING DIRECTLY OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA OR SOURCE OF INCOME IN INDIA SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA. NO DOUBT THE AGENTS MUST HAVE RENDERED SERVICES ABROAD AND HAVE SOLICITED ORDERS THERE FROM, BUT THE RIGHT TO RECEIVE THE COMMISSION ARISES IN INDIA WHEN THE ORDER IS EXECUTED BY THE ASSESSEE IN INDIA AND THEREFORE THE INCOME ACCRUED I SOURCED IN INDIA. AS PER PROVISIONS OF SECTION 5(2) OF THE IT ACT, COMMISSION INCOME TO NON- RESIDENTS IS NOT TAXABLE IN INDIA, AS THEY ARE PROVIDING SERVICES FROM THEIR COUNTRIES AND THE PAYMENT IS ALSO RECEIVED TO THEM IN THEIR COUNTRY. THUS, THE COMMISSION IS NEITHER RECEIVED / DEEMED TO BE RECEIVED IN INDIA ON BEHALF OF SUCH PERSON NOR ACCRUES OR ARISES / DEEMED TO ACCRUE OR ARISE IN INDIA. SIMILARLY, COMMISSION PAYMENT TO OVERSEAS BROKERS / COMMISSION AGENTS CANNOT BE SAID AS INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IN THE LIGHT OF ABOVE EXPLANATIONS TO THE PROVISIONS OF SECTION 9(1 )(I) OF THE ACT. 7.7 THE ASSESSEE COMPANY INSTEAD OF COMPLYING THE AFORESAID PROVISIONS OF LAW AS SPECIFIED IN SECTION 195 RELIED HEAVILY ON THE ERSTWHILE CIRCULAR OF THE CBDT NO. 786 DATED 7/2/2000. AS .REGARDS THE APPLICABILITY OF. THE SAID CIRCULAR IT IS MENTIONED THAT THE SAID CIRCULAR HAS SINCE BEEN WITHDRAWN BY CBDT'S CIRCULAR NO. 7 OF 2009 DATED 22ND OCTOBER, 2009, THERE IS NO EXISTENCE OF THE CIRCULAR OF CBDT WHICH HAS BEEN RELIED UPON WHILE DECIDING THE ISSUE OF WITHHOLDING OF TAX AT SOURCE U/S 195 OF THE ACT. THE APPELLANT COMPANY HAS NOT DISCUSSED SINGLE LINE ABOUT CIRCULAR NO. 786 DATED 07-02-2000 OR CIRCULAR NO. 7 OF 2009. WHEREAS, THE APPELLANT COMPANY HAS MERELY STATED THAT THE COMMISSION PAYMENT TO OVERSEAS BROKERS / COMMISSION AGENTS DOES NOT ACCRUE OR ARISE OR DEEMED TO ACCRUE OR ARISE IN INDIA AS THEY HAD RENDERED SERVICES OUTSIDE INDIA AND COMMISSION WAS ALSO PAID TO THEM OUTSIDE INDIA. FURTHER, AS PER DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) WITH THE COUNTRIES WHERE THE NON- RESIDENT COMMISSION AGENTS ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 17 RESIDES, IN ARTICLE 7: BUSINESS INCOME, STATES THAT THE INCOME FROM BUSINESS IS LIABLE TO BE TAXED IN THE COUNTRY WHERE THE PERSON IS HAVING PERMANENT ESTABLISHMENT. NONE OF THE NON-RESIDENT COMMISSION AGENTS ARE HAVING ANY PE IN INDIA, COMPLETE ADDRESSES OF SUCH NONRESIDENT COMMISSION AGENTS ARE PROVIDED IN ABOVE DETAILS. 7.8 THUS, THE ASSESSEE COMPANY HAS ALSO FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 195(2) OF THE INCOME TAX ACT 1961 WHILE DECIDING THE ISSUE OF APPLICABILITY OR OTHERWISE OF WITHHOLDING TAX U/S 195 OF THE INCOME FAX ACT 1961. HAVING FAILED TO MAKE AN APPLICATION BEFORE THE ASSESSING OFFICER AS PRESCRIBED U/S 195(2) OF THE ACT, TO DETERMINE THE CHARGEABILITY AND TDS LIABILITY, THE ASSESSEE ACTED UNILATERALLY BY NOT DEDUCTING TAX AT SOURCE U/S 195 OF THE ACT. THE PROVISIONS OF ACT ALSO GIVE AUTHORIZATION TO CHARTERED ACCOUNTANTS TO ISSUE CERTIFICATES IN FORM NO. 15CB FOR PAYMENT IN FOREIGN CURRENCY, THE APPELLANT COMPANY COMPLIED WITH THE SAME. AS THE FOREIGN COMMISSION IS NOT TAXABLE IN INDIA, THE APPELLANT COMPANY INSTEAD OF APPROACHING TO THE AO, APPROACHED TO THE CHARTERED ACCOUNTANT TO ISSUE CERTIFICATE, WHICH COMPLY THE PROVISIONS. 7.9 IT IS CLEAR THAT THE ASSESSEE WAS UNDER OBLIGATION TO DEDUCT TAX AT SOURCE AS ENVISAGED U/S 195 OF THE ACT FROM THE PAYMENTS OF COMMISSION MADE TO NON- RESIDENT AGENTS TOWARDS THE SERVICES RENDERED BY THEM.*THE ASSESSEE, HOWEVER HAD FAILED TO DISCHARGE THE OBLIGATION. THEREFORE, THE EXPENDITURETLAIMED UNDER THE HEAD COMMISSION EXPENSES PAID.TO NORI RESIDENTS IS DISALLOWED AND ADDED BACK TO INCOME U/S IT WAS EXPLAINED THAT NEITHER SERVICES ARE RENDERED BY NONRESIDENTS IN INDIA NOR PAYMENTS ARE MADE TO NON- RESIDENTS IN INDIA. ALSO THE NON-RESIDENT AGENTS ARE NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA, THEREFORE, THE COMMISSION IS NOT TAXABLE UNDER ANY PROVISION OF INCOME TAX ACT, HENCE, NO TDS WAS DEDUCTED FROM SUCH COMMISSION PAYMENT TO NONRESIDENTS FOR EXPORT SALES. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 18 40(A)(I) OF INCOME TAX ACT 8.6 IN THIS REGARD, THE APPELLANT COMPANY ON THE IS SUE OF PAYMENT OF COMMISSION TO NON-RESIDENTS, RELIES ON FOLLOWING DE CISIONS OF JURISDICTIONAL HIGH COURT, TRIBUNALS, OTHER HIGH COURTS AND TRIBUN ALS, WHERE IT IS HELD THAT LOANS AND ADVANCES TO SUBSIDIARIES ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND INCIDENTAL TO THE ASSESSEE'S MAIN BU SINESS ACTIVITY, LOSS ON ACCOUNT OF IRRECOVERABLE LOAN GIVEN TO SUBSIDIARY C OMPANIES IN THE NORMAL COURSE OF BUSINESS IS ALLOWABLE AS REVENUE LOSS: (I) GE INDIA TECHNOLOGY CENTER (P). LTD VS. CIT & ORS. (2010) 327 ITR 456 (SC) 'A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON -RESIDENT IS LIABLE TO DEDUCT TAX UNDER S. 195 ONLY IF SUCH SUM IS CHARGEA BLE TO TAX IN INDIA AND NOT OTHERWISE.' 13. THE LD.CIT(A) HAS GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE, AND HELD THAT IT HAS SUBMITTED ALL NECESS ARY DETAILS EXHIBITING THE FACT THAT PAYMENT WAS MADE THROUGH B ANKING CHANNEL. ALL FOREIGN COMMISSION AGENTS ARE IDENTIF IABLE. COPIES OF THE INVOICES AND THE CONTRACT WITH COMMISSION AGENT S, COPIES OF FORM NO.15CA AND 15CB FOR PAYMENT IN FOREIGN CURRENC Y, COPIES OF SHIPPING BILLS WERE PRODUCED. THE LD.CIT(A) HAS FU RTHER OBSERVED THAT TDS UNDER SECTION 195 WAS REQUIRED TO BE DEDUC TED IF ELEMENT OF INCOME INVOLVED IN THOSE FOREIGN COMMISS ION. IN OTHER WORDS, IF THE ALLEGED FOREIGN AGENTS WERE LIABLE TO TAX WITH INDIA ONLY THEN ELEMENT OF INCOME WOULD BE INVOLVED, ON S UCH PAYMENTS AND TAX WOULD BE REQUIRED TO BE DEDUCTED. FOR HARB OURING THIS PLEA, THE LD.CIT(A) MADE REFERENCE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE PVT. LTD., 327 ITR 456. IN THIS WAY, THE LD.CIT(A) HAS DELETED THE DISALLOWANCE IN BOTH THE YEARS. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 19 16. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ASS ESSMENT ORDER WOULD INDICATE THAT THE LD.AO HAS DISALLOWED THE CL AIM OF COMMISSION EXPENSES ON TWO COUNTS VIZ. (A) THE ASSE SSEE FAILED O SUBMIT BASIC DETAILS I.E. IDENTITY OF THE AGENTS, C OPIES OF INVOICES AND THE CONTRACT AGREEMENT WITH THE COMMISSION AGEN TS ETC., (B) IT FAILED TO DEDUCT TDS UNDER SECTION 195 OF THE IN COME TAX ACT. AS FAR AS FIRST FOLD OF REASONING IS CONCERNED, A P ERUSAL OF THE ASSESSEES SUBMISSIONS WHICH HAS BEEN ACCEPTED BY T HE LD.CIT(A) IT IS EVIDENT THAT THIS FINDING OF THE AO IS FACTUA LLY INCORRECT. THE SUBMISSIONS MADE IN TABULAR FORM AND EXTRACTED BY U S ON PAGE NO.15 OF THIS ORDER WOULD INDICATE THAT THE ASSESSE E HAS DEMONSTRATED THAT ALL THESE DETAILS HAVE SPECIFICAL LY BEEN FILED. THE ASSESSEE HAS FILED CERTIFICATE OF THE CHARTERED ACCOUNTANT OBTAINED IN FORM NO.15CA AND 15CB WITH REGARD TO FOR EIGN REMITTANCE. IT HAS FILED COPIES OF CONTRACTS WITH THE COMMISSION AGENT AND CONTRACT WITH EXPORTER. THUS, IT HAS GI VEN ALL BASIC DETAILS DEMONSTRATING THE FACT AS TO HOW THESE AGEN TS HAVE FACILITATED IN MAKING SALES OUTSIDE INDIA. 17. AS FAR AS SECOND FOLD OF REASONING IS CONCERNED , TDS UNDER SECTION 195 WAS REQUIRED TO BE DEDUCTED IF THE INCO ME IN HANDS OF THE ALLEGED AGENTS WAS TAXABLE WITHIN INDIA. THE LD.CI T(A) HAS EXAMINED THE ISSUE ELABORATELY AND RECORDED THE FINDING THAT THESE AGENTS HAVE NO PERMANENT ESTABLISHMENT IN INDIA. THEY ARE NOT OPERATING FROM INDIA AND ALLEGED COMMISSION INCOME RECEIVED BY THE M IS NOT TAXABLE IN INDIA. THUS, ACCORDING TO THE CIT(A) ON THE STRENG TH OF HONBLE SUPREME COURT DECISION IN THE CASE OF GE INDIA TECH NOLOGY CENTRE P.LTD. (SUPRA) IF THE REMITTANCES DO NOT CONTAIN EL EMENT OF INCOME, THEN TDS WAS NOT REQUIRED TO BE DEDUCTED. THIS ASPECT H AS BEEN EXAMINED ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 20 IN HOST OF DECISIONS. BEFORE US, THE LD.COUNSEL FO R THE ASSESSEE PUT RELIANCE UPON THE ORDER OF THE ITAT IN THE CASE OF DCIT VS. PANCHMAHAL STEEL LTD., ITA NO.634/AHD/2017. IN THIS ORDER, TR IBUNAL HAS RELIED UPON ORDER OF THE TRIBUNAL PASSED IN THE CASE OF DC IT VS. WELSPUN CORPORATION LTD., 77 TAXMANN.COM 165 (AHD). DISCUS SION MADE IN THE DECISION OF WELSPUN CORPORATION LTD. (SUPRA) HAS B EEN TAKEN NOTE OF, WHICH READS AS UNDER: THE ASSESSEE-COMPANY WAS A GLOBAL MANUFACTURER OF S TEEL PIPES, PLATES AND COILS, OFFERING THE HIGHEST QUALI TY OF PIPES. THE MANUFACTURING ACTIVITIES PERFORMED BY THE COMPA NY WERE HIGHLY TECHNICAL IN NATURE. THE MANUFACTURING OF SPECIALISED PIPE WAS A HIGHLY TECHNICAL ACTIVITY IN VOLVING A HIGHLY-TECHNICAL COMPLEX EXERCISE OF TECHNOLOGY AND SKILLED LABOUR AND THE FINEST GRADE OF RAW MATERIALS. TO PR OCURE ORDERS, THE COMPANY REQUIRED SPECIALIST AGENTS WHO COULD UNDERSTAND THE TECHNICAL NITTY-GRITTY OF THE ASSESS EE'S BUSINESS AND COULD DEMONSTRATE THE ASSESSEE'S BUSIN ESS PROFILE AND THE QUALITY OF THE PRODUCTS OF THE ASSE SSEE TO THE POTENTIAL CLIENTS TO CONVINCE THEM TO ENTER INTO A CONTRACT WITH THE ASSESSEE FOR SUPPLY OF THE PIPES ETC. AND OTHER ALLIED WORKS. IN ORDER TO PERFORM THE AFORESAID HIGHLY TECHNICAL ACTIVITY, THE ASSESSEE ENTERED INTO A CONTRACT WITH FOREIGN A GENTS. IN TERMS OF THE AGREEMENT, THE AGENT WAS TO DEVELOP, E XPAND AND PROMOTE THE SALES AND MARKETING FOR ASSESSEE'S PRODUCTS, MAKE MARKET PLANS AND ESTABLISH A MARKETI NG NETWORK OF REPRESENTATIVES TO HELP AND PROMOTE ASSE SSEE'S PRODUCTS, TO PROVIDE INFORMATION SUCH AS MARKET DEVELOPMENT, ACTIVITIES OF COMPETITORS, INTENTIONS AND PLANS OF CLIENTS AND FINANCIAL INFORMATION ON CLIENTS, TO PROVIDE ADVANCED INFORMATION ABOUT THE TENDERS, GATHERING T ECHNICAL SPECIFICATIONS OF PROJECT AND WORK INCIDENTAL THERE TO, AND TO IDENTIFY SUB-CONTRACTORS AND LOGISTIC SERVICE PROVI DER, SUCH AS SHIPPERS AND CARGO HANDLING AGENCIES, TO ENSURE THE SMOOTH EXECUTION OF CONTRACTS. DURING RELEVANT YEAR, THE ASSESSEE MADE PAYMENT OF EXPORT COMMISSION TO COMMISSION AGENTS WITHOUT DEDUCTING T AX AT SOURCE. THE ASSESSEE CLAIMED THAT THE EXPORT COMMIS SION WAS NOT A SERVICE AND IF AT ALL THEY ARE BEING CONS TRUED AS SERVICES, THE SAME WAS BEING RENDERED OUTSIDE INDIA AND WAS NOT TAXABLE IN INDIA UNDER SECTION 5(2). ACCORD INGLY, THE TAX WAS NOT REQUIRED TO BE WITHHELD UNDER SECTI ON 195. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 21 THE ASSESSING OFFICER HELD THAT THE RESPONSIBILITIE S OF AGENTS SHOWED THAT AGENTS WERE REQUIRED TO RENDER TECHNICA L SERVICES, ALLOW THE USE OF INFORMATION CONTAINING I NDUSTRIAL, COMMERCIAL AND TECHNICAL EXPERIENCE WHICH WAS MADE AVAILABLE TO THE ASSESSEE, AND THAT THE CONSIDERATI ON RECEIVED FOR THESE SERVICES WAS NOTHING BUT FEES FO R TECHNICAL SERVICES. THESE PAYMENTS ACCORDING TO THE ASSESSING OFFICER WERE TAXABLE UNDER SECTION 9(1)(V II). THEREFORE, THE ASSESSEE WAS LIABLE FOR TAX DEDUCTIO N AT SOURCE FROM THESE PAYMENTS UNDER SECTION 195. ON APPEAL, THE COMMISSIONER(APPEALS) HELD THAT THE PAYMENTS COULD NOT BE HELD TO BE FTS AND THEY WERE IN THE NATURE OF COMMISSION EARNED FROM SERVICES RENDERED OUTSIDE INDIA WHICH DID NOT HAVE TAX IMPLICATIONS I N INDIA. 6. THE TRIBUNAL MADE ELABORATE DISCUSSION ON ALL PO SSIBLE ANGLES IN THIS JUDGMENT, AND THEREAFTER CONCLUDED A S UNDER: 41. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE, WE UPHOLD WELL REASONING FINDINGS OF THE LEARNED CIT(A ) THAT THE COMMISSION PAYMENTS MADE TO THE NON-RESIDENT AG ENTS DID NOT HAVE ANY TAXABILITY IN INDIA, EVEN UNDER TH E PROVISIONS OF THE DOMESTIC LAW I.E. SECTION 9. ONCE WE COME TO THE CONCLUSION THAT THE INCOME EMBEDDED IN THESE PAYMENTS DID NOT HAVE ANY TAX IMPLICATIONS IN INDIA , NO FAULT CAN BE FOUND IN NOT DEDUCTING TAX AT SOURCE F ROM THESE PAYMENTS OR, FOR THAT PURPOSE, EVEN NOT APPROACHING THE ASSESSING OFFICER FOR ORDER UNDER SECTION 195. IN O UR CONSIDERED VIEW, THE ASSESSEE, FOR THE DETAILED REA SONS SET OUR ABOVE, DID NOT HAVE TAX WITHHOLDING LIABILITY F ROM THESE PAYMENTS. AS HELD BY HON'BLE SUPREME COURT IN THE C ASE OF GE INDIA TECHNOLOGY CENTRE (P.) LTD. V. CIT [20101 327 ITR 456/193 TAXMAN 234/7 TAX.MANN.COM 18, PAYER IS BOUN D TO WITHHOLD TAX FROM THE FOREIGN REMITTANCE ONLY IF THE SUM PAID IS ASSESSABLE TO TAX IN INDIA. THE ASSESSEE CA NNOT, THEREFORE, BE FAULTED FOR NOT APPROACHING THE ASSES SING OFFICER UNDER SECTION 195 EITHER. AS REGARDS THE WI THDRAWAL OF THE CBDT CIRCULAR HOLDING THAT THE COMMISSION PA YMENTS TO NON-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, NO THING REALLY TURNS ON THE CIRCULAR, AS DE HORS THE AFORES AID CIRCULAR, WE HAVE ADJUDICATED UPON THE TAXABILITY OF THE COMM ISSION AGENT'S INCOME IN INDIA IN TERMS OF THE PROVISIONS OF THE INCOME TAX ACT AS ALSO THE RELEVANT TAX TREATY PROV ISIONS. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 22 17. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS EXAMINED ISSUE WITH ALL POSSIBLE ANGL E IN ORDER TO FIND OUT WHETHER COMMISSION PAID BY THE ASSESSEE IS GENUINE OR ALLEGED COMMISSION HAS ELEMENT OF INCOME TAXABLE IN INDIA. AFTER SATISFYING HIMSELF ON BOTH THE COUNTS, THE LD.CIT(A) HAS ALLOW ED DEDUCTION OF THE ABOVE EXPENDITURE TO THE ASSESSEE IN BOTH THESE ASS ESSMENT YEARS. ON DUE CONSIDERATION OF THE DETAILED FINDING, WE DO NO T FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE. ACCOR DINGLY, GROUND NO.2 IS REJECTED IN BOTH THE ASSESSMENT YEARS. 18. GROUND NO.1 IN REVENUES APPEAL FOR THE ASSTT.Y EAR 2012-13 AND 2013-14 IS COMMON. GRIEVANCE OF THE REVENUE IN THI S REGARD IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANC E OF RS.19,33,215/- AND RS.11,74,258/- MADE BY THE AO OUT OF DEDUCTION CLAIMED UNDER SECTION 80IC OF THE ACT. 19. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD. AS FAR AS ADMISSIBILITY OF DED UCTION UNDER SECTION 80IC IS CONCERNED, THAT IS NOT IN DISPUTE. DISPUTE RELATES TO CERTAIN RECEIPTS, WHETHER THEY QUALIFY FOR GRANT OF SUCH DE DUCTION, THE RECEIPTS WHICH HAVE BEEN EXCLUDED BY THE AO IN BOTH THE ASSE SSMENT YEARS ARE AS UNDER: ASSTT.YEAR : 2012-13 PARTICULARS AMOUNT NATURE OF INCOME INTEREST ON NSC 13,586/- INTEREST RECEIVED FROM NSC. WHICH ARE KEPT BY 80IC UNIT FOR THE PURPOSE OF SALES TAX REGISTRATION, THEREFORE, INTEREST ON NSC IS PART OF PROFIT OF 80IC UNIT. INTEREST ON ELECTRICITY DEPOSIT 5,50,140/- INTEREST RECEIVED ON ELECTRICITY DEPOSIT, WHICH IS KEPT BY 80IC UNIT FOR THE PURPOSE OF POWER CONNECTION OF FACTORY, THEREFORE INTEREST ON ELECTRICITY DEPOSIT IS PART OF PROFIT OF 80IC UNIT ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 23 INTEREST ON STAFF LOAN 45,842/- INTEREST RECEIVED ON STAFF LOAN, SUCH LOAN IS GIVEN TO 80IC UNIT STAFF FOR THE PURPOSE OF KEEPING GOOD HR RELATION WITH STAFF AND! THEREFORE, INTEREST ON STAFF LOAN IS PART OF PROFIT OF 80IC UNIT RECOVERED FROM TRANSPORTERS 32,2857- RECOVERIES FROM TRANSPORTER ARC ON ACCOUNT OF LOSS OF MATERIAL IN TRANSIT I.E. IN THE NATURE OF RECOVERY OF GOODS. THEREFORE, THE SAME IS PART OF PROFIT OF 8 0IC UNIT. SUNDRY BALANCE OF VENDORS WRITTEN BACK 12,91,3627- SUNDRY BALANCE W/OFF ARE MAINLY ON ACCOUNT OF KASAR 7 DISCOUNT IN SUPPLIERS 7 PURCHASE PARTY PAYMENTS OR PAYMENTS RECEIVED FROM CUSTOMERS. THEREFORE, THE SAME IS PART PROFIT OF 80IC UNIT. TOTAL 19,33,215/- ASSTT.YEAR 2012-13 PARTICULARS AMOUNT EXPLANATIONS INTEREST ON FIXED DEPOSIT 3834/- INTEREST ON NSC 16326/- UNIT HAS FURNISHED NSC TO SALES TAX AUTHORITIES IS DEPOSIT AND INTEREST HAS ACCRUED ON THOSE NSC. INTEREST ON ELECTRICITY DEPOSIT 706997/- UNIT HAS GIVEN ELECTRICITY DEPOSIT FOR SUPPLY OF WWER AND INTEREST HAS ACCRUED ON SUCH DEPOSIT. INTEREST ON STAFF LOAN 79614/- A . S PER COMPANY'S POLICY STAFF ARE GIVEN VARIOUS CANS ON WHICH INTEREST IS RECOVERED. TOTAL : 806771/- PENALTIES AND FINES RECOVERED FROM TRANSPORTERS 30576/- CHARGES ARE RECOVERED FROM MAINLY RAW MATERIAL TRANSPORTERS ON ACCOUNT OF SOME DISCIPLINARY ISSUES, SHORTAGES, CONTAMINATION, ETC. SUNDRY BALANCES OF VENDORS WRITTEN BACK 336911/- DETAILED LIST FURNISHED GIVING NATURE OF SUPPLIES AND AGE. TOTAL : 367487/- TOTAL: 1174258/- 20. BEFORE ADVERTING TO THE SPECIFIC NATURE OF AMOU NTS, WE DEEM IT APPROPRIATE TO OBSERVE THAT THE LD.CIT(A) HAS CONSI DERED THIS ASPECT ELABORATELY IN THE ASSTT.YEAR 2012-13 AND THIS ORDE R HAS BEEN FOLLOWED ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 24 IN THE ASSTT.YEAR 2013-14. IN THE ASSTT.YEAR 2013- 14, THE LD.CIT(A) HAS EXTRACTED THE FINDING OF THE LD.CIT(A) IN THE ASSTT .YEAR 2012-13. THEREFORE, FOR THE FACILITY OF REFERENCE, WE TAKE N OTE OF THE FINDING RECORDED BY THE CIT(A) IN THE ASSTT.YEAR 2013-14 WH ICH CONTAINED THE DISCUSSION MADE BY THE LD.CIT(A) IN THE ASSTT.YEAR 2012-13 ALSO. IT READS AS UNDER: 2.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IC OF I. T. ACT, 1961 IN RESPECT O F THE FOLLOWING INCOME DERIVED BY THE APPELLANT IN THE YEAR UNDER CONSIDER ATION:- (I) INTEREST ON NSC - RS. 16,326/- (II) INTEREST ON ELECTRICITY DEPOSIT - RS.7,06,9 97/- (III) INTEREST ON STAFF LOAN - RS. 79,614/- (IV) RECOVERY FROM TRANSPORTERS - RS. 30,576/- (V) SUNDRY BALANCES OF VENDORS WRITTEN OFF RS. 3,36,911/- (VI) INTEREST ON FIXED DEPOSITS - RS. 3,834/- TOTAL - RS.11,74,258/- 2.4. IT IS HERE TO BE MENTIONED THAT THE AO HAS NOT GRANTED THE DEDUCTION ON THE AFORESAID AMOUNTS BY SAYING THAT NONE OF THE AB OVE INCOME CAN BE HELD TO BE GENERATED FROM THE MANUFACTURING ACTIVITIES O F THE UNDERTAKING, AND THEREFORE, THE NATURE OF ABOVE INCOMES CANNOT BE HE LD AS INCOME DERIVED FROM MANUFACTURING ACTIVITIES. THUS, HE HELD THE SA ME AS NON - ELIGIBLE INCOMES FOR DEDUCTION UNDER THE PROVISIONS OF SECTI ON 80IC OF THE I. T. ACT, 1961. 2.5. ON THE OTHER SIDE, THE APPELLANT SUBMITTED THA T ALL THE AFORESAID INCOMES HAVE BEEN DERIVED DIRECTLY OR INDIRECTLY FR OM THE BUSINESS OF MANUFACTURING AS STIPULATED UNDER THE PROVISIONS OF SECTION 801C OF THE I. T. ACT, 1961. THE APPELLANT FURTHER CLAIMED THAT AS PE R TIRE VARIOUS DECISIONS AND JUDGEMENTS THE INCOME PERTAINING TO THE INTERES T ON ELECTRICITY DEPOSIT, RECOVERY FROM TRANSPORTERS AND SUNDRY BALANCES OF S UPPLIERS RETURN BACK WAS HELD TO BE THE INCOME DERIVED INDIRECTLY FROM T HE BUSINESS / MANUFACTURING ACTIVITIES OF THE APPELLANT, AND THER EFORE, THE SAME IS ELIGIBLE FOR THE DEDUCTION U/S. 80IC OF THE I. T. ACT, 1961. 2.6. IT IS SEEN FROM THE FACTS OF THE CASE, THAT ID ENTICAL ISSUE HAS BEEN DECIDED BY THIS OFFICE IN APPELLANT'S OWN CASE FOR A. Y. 2012-13 VIDE APPELLATE ORDER IN APPEAL NO.CLT(A)-2/506/DC. CIR. 2(1)(1)/2014-15 DATED 20/08/2015. THE RELEVANT FINDINGS GIVEN IN THE ORDE R ARE REPRODUCED HEREUNDER:- ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 25 2.3. DECISION: 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IC OF 1. T . ACT, 1961 IN RESPECT OF THE FOLLOWING INCOME DERIVED BY THE APPE LLANT IN THE YEAR UNDER CONSIDERATION:- (I) INTEREST ON NSC - RS. 13,586/- (II) INTEREST ON ELECTRICITY DEPOSIT - RS.5,50,14 0/- (III) INTEREST ON STAFF LOAN - RS. 45,842/~ (IV) RECOVERY FROM TRANSPORTERS - RS. 32,28 5/- (V) SUNDRY BALANCES OF VENDORS WRITTEN OFF - R S. 12,91,362/- TOTAL - RS.19,33,215/- 2.4. IT IS HERE TO BE MENTIONED THAT THE AO HAS NOT GRANTED THE DEDUCTION ON THE AFORESAID AMOUNTS BY SAYING THAT N ONE OF THE ABOVE INCOME CAN BE HELD TO BE GENERATED FROM THE M ANUFACTURING ACTIVITIES OF THE UNDERTAKING, AND THEREFORE, THE N ATURE OF ABOVE INCOMES CANNOT BE HELD AS INCOME DERIVED FROM MANUF ACTURING ACTIVITIES. THUS, HE HELD THE SAME AS NON - ELIGIBL E INCOMES -FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 80IC OF T HE I. T. ACT, 1961. 2.5. ON THE OTHER SIDE, THE APPELLANT SUBMITTED THAT ALL THE AFORESAID INCOMES HAVE BEEN DERIVED DIRECTLY OR IND IRECTLY FROM THE BUSINESS OF MANUFACTURING AS STIPULATED UNDER THE P ROVISIONS OF SECTION 80IC OF THE I. T. ACT, 1961. THE APPELLANT FURTHER CLAIMED THAT AS PER THE VARIOUS DECISIONS AND JUDGEMENTS THE INC OME PERTAINING TO THE INTEREST ON ELECTRICITY DEPOSIT, RECOVERY FR OM TRANSPORTERS AND SUNDRY BALANCES OF SUPPLIERS RETURN BACK WAS HELD T O BE THE INCOME DERIVED INDIRECTLY FROM THE BUSINESS / MANUFACTURIN G ACTIVITIES OF THE APPELLANT, AND THEREFORE, THE SAME IS ELIGIBLE FOR THE DEDUCTION U/S. 80IC OF THE I.T. ACT, 1961. 2.6. CONSIDERING THE FACTS AND SUBMISSION, IT IS FO UND THAT THE APPELLANT HAD DERIVED THE INTEREST INCOME ON NSC AN D INTEREST ON STAFF WHICH CANNOT BE SAID TO BE EVEN INDIRECT INCO ME FROM THE BUSINESS ACTIVITIES ELIGIBLE FOR DEDUCTION U/S. 80I C OF THE I. T. ACT, 1961. MAKING THE INVESTMENT IN NSC AND DERIVING THE INTEREST THEREUPON CANNOT BE SAID TO FOR THE PURPOSE OF THE BUSINESS FOR WANT OF NECESSARY DETAILS AND DOCUMENTS ESTABLISHING THE REQUIREMENT OF INVESTMENT IN THE NSCS. THERE WAS NO REASON TO MAKE THE INVESTMENT IN THE NSC FOR THE PURPOSE OF THE ELIGIB LE BUSINESS AND THUS THE INTEREST DERIVED THERE-FROM CANNOT FORM PA RT OF THE ELIGIBLE PROFITS FOR DEDUCTION. FURTHER, WITH REGARD TO INTE REST ON STAFF LOAN ALSO, WHICH WAS ONE KIND OF INCOME ON THE FUNDS LEN T TO THE STAFF MEMBERS. THUS, THIS INCOME IS NEITHER DIRECTLY OR I NDIRECTLY LINKED WITH THE BUSINESS ACTIVITIES OF THE APPELLANT. EVEN THE APPELLANT HAS NOT PROVIDED ANY DETAILS AND DOCUMENTS IN SUPPORT S TATING THAT THE LOANS WERE GIVEN TO THE EMPLOYEES WHO WERE ENGAGED IN THE ELIGIBLE ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 26 BUSINESS FOR WHICH INCOME WAS DEDUCTIBLE U/S. 80IC OF THE I. T. ACT. THUS, IN VIEW OF THE AFORESAID DISCUSSION, THE AOS ACTION FOR NOT GRANTING THE DEDUCTION ON THE INTEREST ON NSC AND I NTEREST ON STAFF LOAN IS CONFIRMED AND NO DEDUCTION U/S. 80IC IS GRA NTED UPON THE SAME. 2.7. FURTHER, WITH REGARD TO THE CLAIM OF DEDUCTION ON INTEREST ON ELECTRICITY DEPOSITS, IT WAS FOUND THAT IT WAS MAND ATORY ON THE PART OF THE APPELLANT TO MAKE THE DEPOSITS AS PER THE RULES OF THE ELECTRICITY BOARD AND WITHOUT MAKING SUCH DEPOSIT, THE ELECTRIC CONNECTION WAS NOT AVAILABLE AND IN ABSENCE OF THE SAME, THE PRODU CTION WAS ALSO IMPOSSIBLE. THUS, THIS INTEREST DERIVED FROM SUCH E LECTRICITY DEPOSIT WAS INDIRECTLY CONNECTED WITH THE ELIGIBLE BUSINESS PROFITS, AND THEREFORE, THE DEDUCTION U/S. 80IC IS REQUIRED TO B E GRANTED RELYING UPON THE DECISIONS / JUDGMENTS OF VARIOUS HON'BLE C OURTS AS UNDER:- CIT VS. SESHASAVEE PAPERS & BOARD LTD. (19941 207 I TR 0080 (MAD-HC): CONCLUSION: INTEREST EARNED BY ASSESSEE A PRIORITY INDUSTRY FR OM DEPOSITS MADE WITH ELECTRICITY BOARD IN ORDER TO EN SURE POWER SUPPLY, IS ATTRIBUTABLE TO PRIORITY INDUSTRY, HENCE ELIGIBLE FOR DEDUCTION UNDER S. 80-1'. > CIT VS. SESHASAVEE PAPERS & BOARD LTD. (2000) 243 ITR 0421 (MAD-HC): CONCLUSION: ASSESSEE WAS ENTITLED TO DEDUCTION UNDER S. 80-1, IN RESPECT OF THE INTEREST RECEIVED ON THE DEPOSITS MA DE BY THE ASSESSEE WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY.'. > PONDICHERRV DISTILLERIES LTD VS. INCOME TA X OFFICER (1984) 8 ITD 0039 (CHEN-TRIB): HELD: (I) THE FACTS OF THE CASE SUPPORT THE CONTENTION OF THE ASSESSEE THAT IT HAD TO BUILD UP FINANCE TO MEET THE PROJECTS AND EXPANSION SCHEME LIKELY TO TAKE PLACE IN FUTURE AND IT IS TOWARDS TH IS PURPOSE THAT THE PROFITS ARE KEPT BACK WITHOUT DISTRIBUTION AND THE AMOUNT AVAILABLE IN RESPECT OF THE SAME AND ALSO THE RESERVES WERE INVE STED TEMPORARILY IN FIXED DEPOSITS. NONETHELESS THE AMOUNTS HELD BY IT IN FIXED DEPOSITS CONSTITUTED PART OF ITS CAPITAL EMPLOYED I N ITS UNDERTAKING OF MANUFACTURE OF LIQUOR AND, THEREFORE, IT FOLLOWS TH AT ANY INCOME OR PROFITS GENERATED BY SUCH FUNDS EMPLOYED IN THE UND ERTAKING OF THE ASSESSEE PARTAKE THE CHARACTER OF PROFITS AND GAINS DERIVED FROM SUCH UNDERTAKING. (PARA 3 & 4) ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 27 (II) THUS EVEN IF THE INTEREST INCOME DERIVED BY TH E ASSESSEE CANNOT BE STRICTLY REFERABLE TO THE BUSINESS ACTIVITY OF M ANUFACTURE OF LIQUOR AND HAS NOT DIRECT NEXUS THERETO, IT CAN STILL BE R EGARDED AS PROFIT OR GAIN DERIVED FROM THE UNDERTAKING AS A WHOLE. IT DO ES NOT MAKE ANY DIFFERENCE AS TO WHETHER ANY SUCH ITEM OF INCOME IS ASSESSED UNDER THE HEAD 'BUSINESS' OR UNDER THE HEAD 'OTHER SOURCE S'. FURTHER EVERY INCOME, PROFIT OR GAIN TO BE DERIVED FROM THE UNDER TAKING NEED NOT NECESSARY BE DIRECTLY RENTABLE TO THE OPERATION OF MANUFACTURE AND SALE OF THE PARTICULAR COMMODITY OR ARTICLES DEALT IN BY THE ASSESSEE. THE ASSESSEE IS THEREFORE, ENTITLED TO CLAIM DEDUCT ION UNDER S. 80HH ON THE AMOUNT OF INTEREST EARNED, BY IT ON THE FIX ED DEPOSITS.' 2.8. FURTHER, WITH REGARD TO THE RECOVERIES FROM TR ANSPORTERS, IT IS FOUND THAT IT WAS THE RECOVERY ON ACCOUNT OF LOSS O F MATERIAL IN TRANSIT I.E. IN THE NATURE OF RECOVERY OF GOODS. THUS, IT I S A DIRECT INCOME RELATING TO THE ELIGIBLE BUSINESS OF THE APPELLANT FOR THE REASON THAT THE SHORTAGE DERIVED ON ACCOUNT OF LOSS OF MATERIAL WAS THE TRADING LOSS /BUSINESS LOSS AND THE RECOVERIES MADE FROM TH E TRANSPORTERS AGAINST SUCH LOSS IS THE REIMBURSEMENT TOWARDS SUCH LOSSES. THUS, THE RECOVERIES BEING IN THE NATURE OF BUSINESS INCO ME ARE ELIGIBLE FOR DEDUCTION U/S. 80IC OF THE I. T. ACT. 2.9. FURTHER, WITH REGARD TO SUNDRY BALANCES WRITTE N OFF IN RESPECT OF THE KASAR / DISCOUNT RECEIVED FROM SUPPLIER / SUPPL IER PARTIES IS ALSO HAVING A DIRECT CONNECTION WITH THE PURCHASES MADE BY THE APPELLANT AND TO THIS EXTENT THE PURCHASES WOULD BE REDUCED A ND ACCORDINGLY THE ELIGIBLE PROFITS WOULD CONSEQUENTLY BE INCREASE D. THUS, IT HAS THE DIRECT NEXUS WITH THE ELIGIBLE PROFITS. IN THIS REG ARD, RELIANCE IS PLACED ON THE DECISION OF HON'BLE BANGALORE ITAT IN THE CA SE OF WIPRO INFORMATION TECHNOLOGY LTD. VS. DCIT [2004] [88 TTJ 0778] WHICH READS AS UNDER:- > WLPRO INFORMATION TECHNOLOGY LTD VS. DV. CI T (2004) 88 TTJ 0778 F BANG-TRIP): '34.4. WE FIND FROM THE FACTS OF THE CASE THAT TOTA L DETAILS IN RESPECT OF MISCELLANEOUS INCOME WERE FURNISHED BEFORE THE A O AS WELL AS THE CIT(A). THE CIT(A) HIMSELF HAS NOTED THIS IN HI S ORDER, AS REPRODUCED EARLIER. THERE IS NO MATERIAL WITH US TO SUGGEST THAT THE ASSESSEE HAS NO OBJECTION IN TREATING THESE ITEMS A S NOT FORMING PART OF PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. ON THE CONTRARY, THE ASSESSEE HAS RAISED A SPECIFIC GROUND AND FURNISHED BEFORE THE CIT(A) AS PER ITS LETTER, DT. 6TH JAN., 1998. WE HA VE, THEREFORE, NO HESITATION IN HOLDING THAT THE MISCELLANEOUS INCOME WHICH IS IN THE NATURE OF TRADING RECEIPT LIKE DISCOUNT RECEIVED FR OM SUPPLIERS FOR EARLY PAYMENT AND THE AMOUNT WRITTEN BACK IN RESPEC T OF SUNDRY CREDIT BALANCES WOULD FORM PART OF THE PROFIT DERIV ED FROM THE INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER SS. 80HH AND 80-1 OF THE ACT. THE AO IS DIRECTED TO INCLUDE THE SUM O F RS. 11,41,949 ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 28 BEING THE MISCELLANEOUS INCOME WHILE COMPUTING THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF DEDU CTION UNDER SS. 80HH AND 80-1 OF THE ACT.' 2.10. IN VIEW OF THE AFORESAID DISCUSSION, CONSIDE RING THE SUBMISSION AND DECISION OF AUTHORITIES THE APPELLAN T IS ELIGIBLE TO GET THE DEDUCTION ON THE INCOME DERIVED FROM INTEREST O N ELECTRICITY DEPOSIT, RECOVERIES FROM TRANSPORTERS AND SUNDRY BA LANCES OF VENDORS WRITTEN BACK AS THE SAME ARE HAVING NEXUS W ITH THE ELIGIBLE BUSINESS, AND THEREFORE, DEDUCTION U/S. 80IC IS GRA NTED THEREUPON. 2.11. IN RESULT, THE GROUND OF APPELLANT IS PARTLY ALLOWED.' 2.7. ON GOING THROUGH THE ABOVE, IT HAS BEEN NOTICE D THAT THE DEDUCTION OF THE INCOME ON ACCOUNT OF INTEREST ON NSC AND INTERE ST ON STAFF LOAN AMOUNTING TO RS.16,326/- AND RS.79,614/- RESPECTIVE LY IS NOT ALLOWED FOR THE REASONS DISCUSSED IN THE AFORESAID APPELLATE OR DER AS THE SAME CANNOT BE SAID TO BE DIRECT/OR INDIRECT INCOME FROM THE BU SINESS ACTIVITIES BEING DERIVED OUT OF MANUFACTURING ACTIVITIES. THUS, THE AFORESAID TWO INCOMES ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80IC OF THE I. T. A CT, 1961 AND THE DISALLOWANCE OF THE DEDUCTION UPON THE SAME BY THE AO IS CONFIRMED. WITH REGARD TO THE INTEREST ON FIXED DEPOSIT AMOUNTING T O RS.3,834/-, THE SAME IS ALSO NOT FOUND DERIVED FROM THE MANUFACTURING ACTIV ITIES AND HENCE THE APPELLANT IS NOT ENTITLED FOR THE DEDUCTION U/S. 80 IC OF THE I. T. ACT, 1961. THUS, THE DISALLOWANCE OF DEDUCTION BY THE AO IS CO NFIRMED. 2.8. WITH REGARD TO THE OTHER INCOMES SUCH AS INTER EST ON ELECTRICITY DEPOSIT, PENALTIES AND FINES RECOVERED FROM TRANSPORTERS AND SUNDRY BALANCES OF VENDORS WRITTEN BACK, THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/SE 80IC OF THE I. T. ACT, FOLLOWING THE DECISION OF THE CIT(A) IN THE IMMEDIATELY PRECEDING YEAR AND ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO ON THESE INCOMES IS DELETED. 21. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET SUBMITTED THAT AS FAR AS AMOUNTS MENTIONED UNDER THE HEAD INTEREST ON NSC AND INTEREST ON STAFF LOAN IS CONCERNED THEY ARE NOT IN DISPUTE. THE DEDUCTION CLAIMED UNDER SECTION 80IC WITH REGARD TO BOTH THESE ITEMS HAVE NOT BEEN GRANTED BY THE LD.CIT(A), AND THE ASS ESSEE IS NOT CHALLENGING THE FINDING OF THE LD.CIT(A). THE REVE NUE IS CHALLENGING THE GRANT OF DEDUCTION WITH REGARD TO INCOME EARNED ON INTEREST ON ELECTRICITY DEPOSITS, RECOVERY FROM TRANSPORTERS AN D SUNDRY BALANCE OF VENDORS WRITTEN OFF. HE SUBMITTED THAT ISSUE IN DI SPUTE IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 29 MEGHALAYA STEEL LTD., 383 ITR 217 (SC). HE FURTHE R RELIED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. SESHASAYEE PAPERS & BOARD LTD., 243 ITR 0421 (MAD) WHICH HAS BEEN CONSIDERED BY THE LD.CIT(A) IN THE FINDING EXTRACTE D (SUPRA). ON THE STRENGTH OF THESE DECISIONS, HE SUBMITTED THAT THE LD.CIT(A) HAS RIGHTLY GRANTED DEDUCTION TO THE ASSESSEE. ON THE OTHER HA ND, THE STAND OF THE REVENUE IS THAT THE INCOME UNDER THESE HEADS WAS NO T EARNED BY THE ASSESSEE DIRECTLY FROM THE MANUFACTURING PROCESS, A ND THEREFORE, THEY DESERVES TO BE EXCLUDED. 22. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND G ONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITION THAT DEDUCTION UNDER SECTION 80IC IS ADMISSIBLE WHERE TH E GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVE D BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN S UB-SECTION (2) OF SECTION 80IC OF THE ACT; SUB-SECTION (2) FURTHER CO NTEMPLATES THAT THIS SECTION APPLIES TO AN UNDERTAKING OR ENTERPRISE WHI CH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THI NGS. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEGUN TO MANUFACTURE ANY ARTICLE OR THING. THE QUESTION WHETHER THE ALLEGED INCOME SUB -DIVIDED BY THE AO HAS NEXUS WITH THE MANUFACTURING ACTIVITY OR NOT. AS FAR AS INTEREST INCOME ON FIXED DEPOSITS MADE WITH ELECTRICITY DEPA RTMENT IS CONCERNED, IT HAS DIRECT NEXUS WITH THE MANUFACTURING ACTIVITY . UNLESS AN ELECTRICITY CONNECTION IS THERE, NO MANUFACTURING ACTIVITY WOUL D COMMENCE AND FOR TAKING ELECTRICITY CONNECTION, IT IS MANDATORY TO G IVE DEPOSITS. SIMILARLY, THE ASSESSEE HAD MADE RECOVERIES FROM TRANSPORTERS ON ACCOUNT OF LOSS OF MATERIAL ON TRANSIT. THEREFORE, IT HAS A DIRECT NEXUS WITH THE MANUFACTURING PROCESS. THE GOODS MANUFACTURED OR R AW-MATERIALS PURCHASED BY IT WERE LOST IN TRANSIT, WHICH WERE CO MPENSATED BY THE TRANSPORTER. IT HAS A DIRECT NEXUS. SIMILARLY, IF THE ASSESSEE GET CERTAIN DISCOUNT FROM THE SUPPLIER, THEN IT WOULD REDUCE TH E PURCHASE PRICE OF THE MATERIAL, WHICH WILL ENHANCE THE PROFIT, AND TH EREFORE, DEDUCTION ON ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 30 SUCH HIGHER PROFIT WILL BE ADMISSIBLE. THE LD.CIT( A) HAS RIGHTLY APPRECIATED THIS ASPECT AND GRANTED THE DEDUCTION T O THE ASSESSEE. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) , AND THEREFORE, THIS GROUND OF APPEAL IS REJECTED IN BOTH THE YEARS. CO NO.220/AHD/2015 IN ITA NO.3233/AHD/2015 (ASSTT.Y EAR 2012-13) 23. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.C IT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,53,156/- WHICH WAS DISALLOWED BY THE AO WITH THE AID OF SECTION 36(1)(VA) OF THE ACT . 24. BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT EMPLOYEES CONTRIBUTION TOWA RDS PF AND ESI WAS NOT DEPOSITED BY THE ASSESSEE WITHIN TIME PERIOD CO NTEMPLATED IN THOSE ACTS. THEREFORE, HE DISALLOWED THE CLAIM OF THE AS SESSEE TO THE EXTENT OF RS.7,53,156/-. ON APPEAL, THE LD.CIT(A) HAS CON FIRMED THIS DISALLOWANCE BY FOLLOWING THE JUDGMENT OF CIT VS. G UJARAT STATE ROAD TRANSPORT CORPORATION LTD., 366 ITR 170 (GUJ. THE LD.COUNSEL FOR THE ASSESSEE IN PRINCIPLE DID NOT DISPUTE WITH REGARD T O THE PROPOSITION LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION LTD. (SUPRA). HE RELIED UPON THE ORDER OF THE ITAT TO CONTEND THAT IN THE CASE OF SU ZLON ENGERGY LTD. VS. DCIT, ITA NOS.764 & 765/AHD/2018 THE DUE DATE F OR PAYMENT OF PF AND ESI IS TO BE RECKONED FROM THE PAYMENT OF SA LARY AND NOT FROM THE MONTH OF SALARY. 25. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION LTD., (SUP RA). IN OTHER WORDS, IF THE ASSESSEE DID NOT PAY SALARY TO ITS EM PLOYEES, THEN ITA NO.2490/AHD/2014 AND 3 OTHERS DCIT VS. GUJARAT AMBUJA EXPORTS LTD. 31 WOULD IT GET AN ENHANCED PERIOD OF LIMITATION FOR D EPOSITING THE PF DUES IN THE PF ACCOUNT ? IF THAT BE ACCEPTED, THEN THERE WILL BE NO RELEVANCY OF DUE DATE PROVIDED UNDER THE RESPECTI VE ACTS. FOR THIS PROPOSITION WE FIND SUPPORT FROM THE SUBSEQUENT DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.CHECKM ATE FACILITY AND ELECTRONICS SOLUTIONS P.LTD. VS.DCIT, DATED 15.10.2 018 IN R/TAX APPEAL NO.1256 OF 2018 ON THIS SIMILAR ISSUE. THERE FORE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF CO. IT IS DISMISS ED. 26. IN THE RESULT, APPEALS OF THE REVENUE AND CO OF THE ASSESSEE; ALL ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 23 RD AUGUST, 2019. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER