M/S. LA OPALA RG LTD., Kolkata V. ACIT, Range - 12, Kolkata, Kolkata

ITA 559/KOL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7253 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: A K TULSYAN; SHIKHA AGA RWAL ACA
• Keywords: Business income; Depreciation; Rectification of order; Question of law; Set aside
• Section: 143(3); 142(1); 80HHC; 14A; 80IB; 143(1); 80IA; 201; 80IC; 143(2); 64; 263; 154; 11; 139

Judgement Text

1 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA () . . , . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, AM ] I.T.A. NO. 5 5 9 /KOL/201 8 ASSESSMENT YEAR: 20 1 3 - 1 4 M/S. LA OPALA R. G. LTD. (PAN: AAACL5569J) VS. ASSISTANT COMMISSIONER OF INCOME - TAX, RANGE - 12 , KOLKATA APP ELLANT RESPONDENT DATE OF HEARING 1 8 .0 9 .201 9 DATE OF PRONOUNCEMENT 31 . 1 0 .201 9 FOR THE APP ELLANT SHRI A. K. TULSYAN, FCA & MS. SHIKHA AGARWAL, ACA FOR THE RESPONDENT DR. P. K. SRIHARI, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST THEREVISION ORDER OF THE LD. PR. CIT(A), KOLKATA - 4, KOLKATA PASSED U/S. 263 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 28.02.2018FOR AY 2013 - 14. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF OPAL & CR YSTAL GLASSWARE AND GENERATION AND SALE OF ELECTRICITY GENERATED FROM WIND MILL. THE AO NOTES THAT FOR ASSESSMENT YEAR 2013 - 14, THE ASSESSEE FILED ITS RETURN OF INCOME U/S 139 OF THE ACT ON 29.09.2013 DECLARING TOTAL INCOME OF RS. 22,55,40,450/ - . THE RETURN WAS REVISED BY THE ASSESSEE ON 3 0.11.2013 AT A TOTAL INCOME OF RS. 22 , 55 , 40,450/ - AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT ON 04.09.2014. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY U/S. 143(2) OF THE ACT. IN THE RETURN OF INCOME, THE ASSESSEE COMPANY HAD CL AIMED DEDUCTION U/S. 80IC AND 80IA OF THE ACT OF RS.3,48,57,221/ - AND RS.26,08,253/ - RESPECTIVELY. IN THE COURSE OF ASSESSMENT THE AO HAD ISSUED SEVERAL REQUISITIONS U/S 142(1) ASKING THE ASSESSEE TO FURNISH THE DETAILS ON VARIOUS ISSUES, WHICH WAS FURNISHED BY THE ASSESSEE FROM TIME TO TIME. AFTER EXAMINING THE REPLIES FURNISHED, THE AO FINALLY SHOW CAUSED THE ASSESSEE ON SEVERAL OTHER ISSUES VIZ. DISALLOWANCE OF FORWARD CONTRACT LOSS OF RS.39,19,130/ - , EMPLOYEES CONTRIBUTION TOWARDS PF/ESIC OF RS .1,91,996/ - AND DISALLOWANCE OF EXPENSES U/S. 14A OF THE ACT, REQUIRING IT TO 2 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 EXPLAIN AS TO WHY THESE ITEMS OF EXPENDITURE SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE SAME THE ASSESSEE FILED ITS WRITTEN REPLY DATED 14.03.2016. THEREAFTER, THE AO COMPLET ED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 28.03.2016 DETERMINING TOTAL INCOME OF RS.22,96,82,980/ - . 3. SUBSEQUENTLY, THE LD. PR. CIT IN EXERCISE OF HIS POWERS U/S. 263 OF THE ACT WAS OF THE VIEW THAT ORDER OF THE AO DATED 28.03.2016 PASSED U/S. 143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HE WAS PLEASED TO SET ASIDE THE ASSESSMENT ORDER BY PASSING THE IMPUGNED ORDER AS UNDER: 4. THE SUBMISSION OF THE ASSESSEE IS CONSIDERED. THE ASSESSEE CONTENDED THAT THE ISSUE OF ELIGIBILITY U/S. 80IC WAS RAISED AT THE TIME OF ASSESSMENT AND THE ASSESSEE HAS FURNISHED REPLY ON THIS POINT. HOWEVER, ON PERUSAL OF RELEVANT RECORD IT APPEARS THAT THE RELEVANT QUESTIONNAIRE OF THE AO REFERS TO QUERY PERTAINING TO DEDUCTION U/S. 80LA AN D NOT 80IC. THE POSSIBLE PLEA THAT THERE COULD BE TYPOGRAPHICAL ERROR APPEARS TO BE FAR FETCHED. IT IS ALSO RELEVANT TO POINT OUT THAT THE ASSESSEE HAS SEPARATELY CLAIMED DEDUCTION U/S. 80IA AND PRIMA FACIE, THE PLEA OF THE LD. AR THAT THE QUERY REGARDING DEDUCTION U/S. 80IC HAS BEEN RAISED BY THE AO IS NOT SUPPORTED BY THE FACT ON RECORD CLEARLY SUGGESTS THAT THIS IS A CASE OF LACK OF ENQUIRY ON THE GROUND OF DEDUCTION U/S. 80IC. THE PLEA OF THE ASSESSEE THAT IN ITS REPLY BEFORE THE ASSESSING OFFICER THER E IS REFERENCE TO FULFILLMENT OF CONDITION OF PROVISION U/S. 80IC, IT IS OBSERVED THAT REFERENCE IS OF NO CONSEQUENCE BECAUSE THE AO HAS NEITHER RAISED THE QUERY AND EVEN IF IT IS PRESUMED THAT THE ASSESSEE MADE SUBMISSION IN RESPECT OF ITS FULFILLING COND ITIONS FOR CLAIM U/S. 80IC, THE AO NEITHER EXAMINED IT NOR CONDUCTED ANY ENQUIRY REGARDING THE GENUINENESS OF THE CLAIM OF THE ASSESSEE ON THIS COUNT. THERE IS NO EVIDENCE TO SUGGEST THAT THERE IS APPLICATION OF MIND ON THE PART OF THE AO AND HENCE THE ISS UE HAS NOT BEEN JUDICIALLY EXAMINED BY THE AO. IN FACT THE PROVISION U/S. 80IC ENVISAGES THAT THE DEDUCTION IS ALLOWABLE FROM INCOME WHICH IS DERIVED FROM ELIGIBLE BUSINESS AND THERE ARE PRIMA FACIE MANY ITEMS WHICH HAVE BEEN SPECIFICALLY MENTIONED IN PA RA 2 OF THIS ORDER WHICH APPEAR TO BE NOT INCLUDIBLE IN INCOME WHICH IS DERIVED FROM ELIGIBLE BUSINESS. THE APPLICABILITY OF CASE LAW RELIED UPON BY THE ASSESSEE COULD BE EXAMINED ONLY AFTER ASCERTAINING THE NATURE OF INTEREST INCOME. IN ABSENCE OF THE REL EVANT MATERIAL FACT THE APPLICABILITY OF THE CASE LAW RELIED UPON BY THE LD. AR CANNOT BE EXAMINED. SIMILARLY, THE LD. AR HAS PLACED RELIANCE' ON VARIOUS CASE LAW IN SUPPORT OF ASSESSEE'S CLAIM THAT EXCHANGE FLUCTUATION IS INCLUDIBLE IN THE INCOME DERIVE D FROM ELIGIBLE BUSINESS AND HENCE DEDUCTIBLE U/S. 80IC. HOWEVER, WITHOUT ENQUIRING AND EXAMINING THE TRANSACTION DETAILS THE ISSUE. CANNOT BE JUDICIALLY EXAMINED AND APPLICABILITY OF CASE LAW CANNOT BE DECIDED. SIMILARLY NO ENQUIRY HAS BEEN MADE BY THE AO UNDER THE HEAD PROVISION FOR DOUBTFUL RECEIVABLE/ADVANCES RECOVERED/WRITTEN BACK TO DETERMINE WHETHER THE SAME IS ELIGIBLE FOR DEDUCTION U/S. 80IC. THE AMOUNT UNDER THE HEAD UNCLAIMED BALANCE ADJUSTED ALSO CALL FOR FURTHER ENQUIRY TO DETERMINE ITS NATUR E AND DETERMINE ITS ALLOWABILITY/INCLUDIBILITY IN THE INCOME ELIGIBLE FOR DEDUCTION U/S. 80IC. SIMILARLY THE TREATMENT FOR 'UNCLAIMED BALANCE ADJUSTED ALSO NEEDS FURTHER ENQUIRY AND EXAMINATION TO ASCERTAIN WHETHER THE SAME IS INCLUDIBLE IN THE INCOME D ERIVED FROM ELIGIBLE BUSINESS IN TERMS OF PROVISION U/S. 80IC. NEEDLESS TO SAY THE ISSUE OF APPLICABILITY OF VARIOUS CASE LAW RELIED UPON BY THE LD. AIR COULD BE EXAMINED ONLY AFTER ENQUIRING THE NATURE OF THE TRANSACTION UNDER THE HEAD 'UNCLAIMED BALANCE ADJUSTED'. 3 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 THE OTHER ITEMS UNDER THE HEAD 'INSURANCE AND OTHER CLAIMS' AND 'EXPORT INCENTIVES ALSO NEED TO BE EXAMINED AND ENQUIRED INTO IN ORDER TO DETERMINE THE EXACT NATURE OF RECEIPT AND TO CHECK WHETHER THE SAME IS INCLUDIBLE IN. THE INCOME DERIVED FROM ELIGIBLE BUSINESS IN TERMS OF PROVISION U/S. 80IC. THE JUDICIAL PRONOUNCEMENT RELIED UPON BY THE LD. A/R COULD BE EXAMINED AND ITS APPLICATION' OR OTHERWISE COULD' BE SEEN ONLY AFTER ASCERTAINING THE RELEVANT FACTS. ACCORDINGLY ON THIS ISSUE ALSO THE ASSESSMENT ORDER SUFFERS INFIRMITY ON THE GROUND OF LACK OF ENQUIRY. FINALLY AS REGARDS VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE IN SUPPORT OF ITS CLAIM, IT IS OBSERVED THAT APPLICATION OF LAW WILL COME INTO PLAY ONLY AFTER ASCERTAINING THE FULL FAC TS AND IN THE INSTANT CASE FULL FACTS REMAINED TO BE ASCERTAINED. ON THE WHOLE I WISH TO OBSERVE THAT WHILE EXAMINING THE ISSUE RAISED BY THE AO AND THE REPLY OF THE ASSESSEE IT IS SEEN THAT THE AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE WITHOUT CALLING FOR RELEVANT ENQUIRY/VERIFICATION OF EVIDENCES FURNISHED BY THE ASSESSEE. IT IS ALSO RELEVANT TO POINT OUT THAT THE JUDICIAL PRONOUNCEMENT RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE FOR THE REASON THAT IN THE INSTANT CASE THE A.O HAS EITHER NOR SPECIFICALLY RAISED THE QUERY OR EXAMIN ED IT BY CALLING THE RELEVANT MATERIAL/EVIDENCE WHICH WAS NECESSARY FOR EXAMINING THE ISSUE JUDICIALLY. THE A.O HAS NEITHER MADE ANY INDEPENDENT ENQUIRY/VERIFICATION REGARDING THE EVIDENCE FURNISHED BY THE ASSESSEE NOR RAISED/CALLED FOR SPECIFIC DETAILS IN ORDER TO CONCLUSIVELY DETERMINE THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE. NO DETAILS REGARDING SETTING UP OF THE UNIT, PURCHASE OF PLANT & MACHINERY ETC. HAVE BEEN EXAMINED. AS 'REGARDS THE REPLY OF THE ASSESSEE BEFORE THE A.O IT IS SEEN THAT THE REP LY IS LARGELY GENERAL IN NATURE. IT HAS NOT BEEN EXAMINED BY THE A.O WHETHER THE IMPUGNED INCOME IS DERIVED FROM BUSINESS' AS ENVISAGED IN PROVISIONS U/S 801C. I AM OF THE OPINION THAT THE PLEA OF THE LD. AR COULD BE JUDICIALLY EXAMINED ONLY AFTER EXAMIN ATION/VERIFICATION OF RELEVANT MATERIAL FACTS. THUS, THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 28 03 2016 SUFFERS FROM LACK OF ENQUIRY/INADEQUATE VERIFICATION MAKING THE ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ERRONEOUS SO FA R AS PREJUDICIAL TO THE INTEREST OF REVENUE. 5. THE POWER OF REVISION BY THE CIT U/S 263 OF THE ACT IS VERY WIDE AND IT IS IN THE NATURE OF SUPERVISORY JURISDICTION. THE POWER U/S 263 CAN BE EXERCISED EVEN IN CASES WHERE THE ISSUE IS DEBATABLE AND SUCH P OWER IS NOT COMPARABLE WITH THE POWER OF RECTIFICATION OF MISTAKE U/S 154 OF THE INCOME TAX ACT. IT IS WELL SETTLED THAT INCORRECT ASSUMPTION OF FACTS OR APPLICATION OF LAW SATISFIES THE REQUIREMENT OF LAW I.E. ORDER BEING ERRONEOUS & PREJUDICIAL TO THE ' INTEREST OF REVENUE. THE ORDER PASSED BY THE A.O. WITHOUT APPLICATION OF MIND OR ORDER SHOWING APPARENT ERROR OF REASONING OR THE ORDER WHERE THE A.O. SIMPLY ACCEPTS WHERE THE ASSESSEE STATED IN HIS RETURN OF INCOME AND FAILS TO MAKE THE ENQUIRIES WHICH AR E CALLED FOR IN THE FACTS AND CIRCUMSTANCES OF THE CASE WILL ALSO CALL FOR INTERVENTION U/S 263 OF THE ACT BY THE CIT/PR. CIT. IT IS A TRITE LAW THAT THE DISCLOSURE OF FACTS BY THE ASSESSEE IN THE RETURN OF INCOME AND FOR IN THE COURSE OF ASSESSMENT PROCEE DINGS CANNOT GIVE IMMUNITY FROM REVISIONAL JURISDICTION OF THE CIT/PR. CIT U/S. 263. IN THIS CONTEXT, IT MAY BE 'MENTIONED HERE THAT IN THE' CASE OF COMMISSIONER OF INCOME TAX, CENTRAL L KOLKATA VS MAITHAN INTERNATIONAL, IT WAS HELD BY CALCUTTA HIGH COURT [2015] 56 TAXMANN.COM 283(CALCUTTA) THAT 'IT IS NOT THE LAW THAT THE ASSESSING. OFFICER OCCUPYING THE POSITION OF AN INVESTIGATOR AND ADJUDICATOR CAN DISCHARGE HIS FUNCTION BY PERFUNCTORY OR INADEQUATE INVESTIGATION. SUCH A COURSE IS BOUND TO RESULT IN ERRONEOUS AND PREJUDICIAL ORDER. WHERE THE RELEVANT ENQUIRY WAS NOT UNDERTAKEN, AS IN THE CASE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TOO AND THERE/WE 'REVISABLE. INVESTIGATION SHOULD ALWAYS BE FAITHFUL AND FRUITFUL. UNLESS ALL FRUITFUL AREAS OR ENQUIRY A RE PURSUED THE ENQUIRY CANNOT BE SAID TO HAVE BEEN FAITHFULLY CONDUCTED. 4 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 THE HONBLE SUPREME COURT, FURTHER, IN THE CASE OF RAMPYARI DEVI SARAOGI VS CIT (1968) 67 ITR 87(SC) AND SMT. TARA DEVI AGGARWAL VS CIT(1973)8B ITR323(SC) HAS HELD THAT IN ABSENCE OF PROPER ENQUIRIES; THE ASSESSMENT ORDER WOULD BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISE VS ADDL. C IT(L975) 99 ITR 375 HAS ALSO HELD AS UNDER. 'THE REASON IS OBVIOUS . THE POSITION AND FUNCTION OF THE INCOME TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIVIL COURT IN THE ABSENCE OF REBUTTAL. THE CIVIL COURT IS N EUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF CASE ARE SUCH AS TO PROVOKE AN ENQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. IT IS BEC AUSE IT IS INCUMBENT ON THE INCOME TAX OFFICER TO FURTHER SUCH AN ENQUIRY PRUDENT THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN ENQUIRY HAS NOT BEEN AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. ' IN VIEW OF THE FACTS AND THE LEGAL POSITION STATED ABOVE, I AM OF THE VIEW THAT THE ORDER PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR .INCORRECT APPLICATION O F LAW AND WITHOUT MAKING REQUISITE INQUIRIES WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING AND SCOPE OF SECTION 263 OF THE INCOME TAX ACT, 1961. THE AFORESTATED DECISIONS POSTU LATE THAT WHEN THE OFFICER IS EXPECTED TO MAKE AN INQUIRY OF A PARTICULAR ITEM OF INCOME AND IF HE DOES NOT MAKE AN INQUIRY AS EXPECTED, THAT WOULD BE A GROUND FOR THE COMMISSIONER TO INTERFERE WITH THE ORDER PASSED BY THE OFFICER SINCE SUCH AN ORDER PASSE D BY THE OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE (K.A. RAMASWAMYCHETTIAR V. CIT, (1996) 220 ITR 657). 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FOUND THAT THE ISSUES POINTED OUT IN THE SHOW CAUSE NEEDS VERIFICATION AS MERELY ACCEPTING' SUBMISSION WITHOUT CALLING FOR RELEVANT MATERIAL/EVIDENCES DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. FAILED TO EXAMINE THE ABOVE REFERRED ISSUE. AFT ER HAVING CONSIDERED THE POSITION OF LAW AND FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, I AM OF THE. CONSIDERED OPINION THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE IN ACCORDANCE WITH THE EXPLANATION 2(C ) BELOW SECTION 263 (1) OF THE ACT. ACCORDINGLY, THE ISSUE IS SET ASIDE TO THE TABLE OF A.O ON SPECIFIC POINT MENTIONED IN PARA 2 ABOVE. THE A.O. IS DIRECTED TO PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE COMPANY TO PRODUCE DOCUMENT S & EVIDENCES WHICH IT MAY CHOOSE TO RELY UPON FOR SUBSTANTIATING ITS OWN CLAIM. THEREAFTER A FRESH ASSESSMENT ORDER MAY BE PASSED IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF LAW. AGGRIEVED BY THE ORDER OF LD. PR. CIT THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. PR. CIT ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATED 04.12.2017 WHICH READS AS UNDER: 5 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 6 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 IT WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT THERE WAS NO FAILURE ON THE PART OF THE AO TO CONDUCT ENQUIRY IN RESPECT OF THE DEDUCTION CLAIMED U/S 80IC OF THE ACT. HE DREW OUR ATTENTION TO PAGE 25 OF THE PAPER BOOK WHICH CONTAINED THE REQUISITION ISSUED BY THE AO U/S 1(1), PARTICULAR THE QUERY NO. 14 WHEREIN THE AO HAD ASKED THE ASSESSEE TO EXPLAIN THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80 - IC OF THE ACT. THE REPLY GIVEN BY THE ASSESSEE TO THE AO IS AVAILABLE FROM PAGE 29 OF THE PAPER BOOK, WHEREIN THE ASSESSEE HAS GIVEN DETAILS OF DEDUCTION CLAIMED UNDER SECTION 80 - IC OF THE ACT. THE LD. AR ALSO DREW OUR ATTENTION TO PAGE 39 OF THE PAPER BOOK WHICH CONTAINED THE STAND - ALONE ACCOUNTS OF THE EL IGIBLE UNIT, WHEREIN UNDER NOTE 20, COMPLETE DETAILS OF OTHER INCOME HAD BEEN GIVEN AND NOTE 19 CONTAINED FURTHER DETAILS OF THE EXPORT INCENTIVE. IT IS THEREFORE NOTED THAT THIS REPLY AND RELEVANT FACTS CONCERNING THE DEDUCTION CLAIMED U/S 80IC WERE F ILED BEFORE AO, PURSUANT TO NOTICE U/S 142(1) OF THE ACT. 5. WE FURTHER NOTE THAT THE ASSESSEE VIDE ITS LETTER DATED 13.10.2015 HAD FURNISHED A DETAILED EXPLANATION REGARDING ITS CLAIM OF ALLOWABILITY OF DEDUCTION U/S 80IC IN RESPONSE TO QUERY NO. 14 RAISE D BY THE AO IN HIS NOTICE U/S 142(1) AND SUBMITTED ALL THE RELEVANT DETAILS IN SUPPORT DEDUCTION CLAIMED UNDER SECTION 80 - IC VIDE ANNEXURE - D/1 TO D/7 OF THE SAID LETTER. THESE DOCUMENTS ARE FOUND AVAILABLE AT PAPER BOOK PAGES 5 TO 41. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ASSESSEES REP LY TO AO IN RESPONSE TO HIS NOTICE U/S 142(1) IS AS UNDER: POINT NO. 14 I) CONDITIONS FOR DEDUCTION CLAIMED UNDER SECTION 80IC THE COMPANY IS CLAIMING DEDUCTION UNDER THIS SECTION AS IT MANUFACTURE OPAL GLASS IN ELDECOSIDCUL INDUSTRIAL PARK OF UTTARANCHAL. THE CONDITIONS AS PER SECTION 80 - IC 2(A) IS THAT ANY UNDERTAKING OR ENTERPRISE BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING NOT BEING ARTICLE OR THING SPECIFIED IN THE 13TH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING - ON THE 7TH DAY OF JANUARY AND ENDING BEFORE THE 1ST DAY OF APRIL 2012 IN ANY INDUSTRIAL PARK AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE 'CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF UTTRANCHAL. [ SEC.80 - IC 2(A)(II)]. IN RELATION TO THIS WE ARE ATTACHING HEREWITH THE APPROVAL CERTIFICATE OF D IC BEARING NUMBER 1163 - 64 DATED 21 - 08 - 2008 AND MARKED AS ANNEXURE - D/L. 7 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 MOREOVER UNDERTAKING ALSO FULFILS THE CONDITIONS MENTIONED IN SECTION 80 - IC(4). II) CONDI TIONS - FOR DEDUCTION CLAIM UNDER SECTION 80IA THE COMPANY CLAIMING DEDUCTION UNDER SECTION 80 - IA (7) AS IT OPERATES WIND MILL GENERATING WIND POWER BY SATISFYING CONDITIONS MENTIONED IN THE SECTION 80 - IA(2) I.E. GENERATES POWER AND CONDITIONS MENTIO NED IN SECTION 8 0 - IA(4)(IV) I.E. UNDERTAKING SET UP IN ANY PART OF INDIA FOR GENERATION OR GENERATION AND DISTRIBUTION OF POWER D URING THE PERIOD BEGINNING ON TH E 1ST DAY OF APRIL 1993 AND ENDING ON THE 31ST DAY OF MARCH 201 7 IN RELATION TO THIS WE ATTACHING HEREWITH COMMISSIONING CERTIFIED ISSUED BY EXECUTIVE ENGINEER - III(TCC - IV) RAJ RAJYAVIDYUTPRASARAN NIGAM LIMITED, BARMER AND MARKED AS ANNEXURE D/L/L. II) WE ARE ALSO ATTACHING AUDITED AND SIGNED BALANCE SHEET AND PROFI T 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 ATTACHING AUDITED AND SIGNED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE PE RI OD ENDED 31ST MARCH, 2013 FOR THE SITARGANJ UNIT AND MARKED AS ANNEXURE D/3. III) YES ADDITI O NAL DEPRECIATION IN RESPECT OF UNDERTAKING ELIGIB L E FOR DEDUCTION IS CLAIMED. PLEASE REFER THE ANNEXURE A3 OF THE TAX AUDIT REPORT SUBMITTED YOU EARLIER VIDE O UR LETTER DATED 29 - 06 - 2015. FOR YOUR READY REFERENCE WE AGAIN ATTACHED HEREWITH PLEASE REFER ANNEXURE D/4. IV) YES, LOSSES OF ELIGIBLE UNDERTAKING ARE BEING SET - OFF AGAINST THE PROFITS OF THE ELIGIBLE UNIT ONLY. V) THE EVIDENCE FOR ESTABLISH FIRST YEAR OF COMMENCEMENT OF BUSINESS IS ATTACHED HEREWITH AND MARKED AS ANNEXURE D/1 FOR SITARGUNJ UNIT AND ANNEXURE D/1/1 FOR WINDMILL UNIT. VI) NO WIDE VARIATION IN PROFITS OF ELIGIBLE BUSINESS AND OTHER BUSINESS HAVING TRANSACTIONS WITH ELIGIBLE UNDERTAKING. PLEASE FIND THE REPORT ISSUED BY CHARTERED ACCOUNTANT FILED IN FORM NO. 3CEB ANNEXED HEREWITH AND MARKED AS ANNEXURE D/5. VII) THE CERTIFICATE ISSUED BY CHARTERED ACCOUNTANT IS SUBMITTED HEREWITH FOR BOTH UNIT AND MARKED AS ANNEXURE D/6 FOR SITARGANJ UNI T AND D/7 FOR WINDMILL UNIT. 6. THUS, WE NOTE THAT PURSUANT TO THE NOTICE ISSUED U/S 142(1) BY THE AO , THE RELEVANT DETAILS AND DOCUMENTS WERE FILED BY THE ASSESSEE AS IS EVIDEN T FROM THE ABOVE REPLY AND THE 8 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 ANNEXURES ANNEXED TO THE REPLY . SINCE ALL THE D ETAILS WERE SUBMITTED BEFORE THE AO DURING THE ASSESSMENT, THE PRESUMPTION IS THAT THE AO HAS DULY EXAMINED THE SAME AND THE CLAIMS RAISED BY THE ASSESSEE WERE ALLOWED BY THE AO WHILE FRAMING THE ASSESSMENT ORDER AFTER DUE APPLICATION OF MIND. WE ALSO NOT E THAT WHEN THERE IS AN APPLICATION OF MIND AND A DECISION HAS BEEN TAKEN BY THE A.O., THE ORDER CANNOT BE SAID TO BE ERRONE OUS UNLESS THE SAME IS PATENT LY WRONG OR THE VIEW TAKEN IS UNSUSTAINABLE IN LAW. IN THIS CONN ECTION, WE WOULD LIKE TO NOTE THE OBSER VATION MADE BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. MALABAR INDUSTRIAL CO. LTD. VS CIT {2000} 243 ITR 83 (SC). THE HONBLE APEX COURT WHILE EXPLAINING THE JURISDICTIONAL CONDITION PRECEDENT FOR INVOKING REVISIONAL JURISDICTION UNDER SECTION 263 0F THE ACT, THE EXPRESSION 'ERRONEOUS & PREJUDICIAL TO THE INTEREST OF REVENUE' HAS OBSERVED AS UNDER: - 'THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. 'UNDERSTOOD IN ITS ORDINARY MEANING 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 R EVENUE 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 COMMISS IONER 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 V S. SUNBEAM AUTO LTD. (227 CTR 133) DREW THE THIN LINE OF DIFFERENCE BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY' AND HELD THAT IN THE CASE OF INADEQUATE INQUIRY THERE CANNOT BE 263 ORDER. THEREFORE, ACCORDING TO LD AR, FOR ARGUMENT SAKE , EVEN IF IT I S HELD THAT THE AO HAD MADE INADEQUATE INQUIRY , THEN ALSO POWERS UNDER SECTION 263 OF THE ACT CANNOT BE INVOKED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS POSITION IS FURTHER SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS; - CITV S . ANIL KUMAR SHARMA, 335 ITR 83 (DEL HC); - CIT VS. DEVELOPEMENT CREDIT BANK LTD. 3 23 ITR 206 (2010); - CIT VS GABRIEL INDIA LTD. 203 ITR 108 (1993); 9 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 - CIT VS. VIKASH POLYMERS 341 ITR 537 (DEL); 8. IN THIS REGARD, THE LD AR ALSO PLACE D RELIANCE ON THE JUDGMENT OF DELHI HIG H COURT IN THE CASE OF FAB INDIA OVERSEAS (P) LTD. VS. CIT, 201 TAXMAN 173 WHEREIN UNDER THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE , THE HON'BLE COURT QUASHED THE ORDER PASSED U/S 263 BY THE CIT, BY OBSERV ING AS UNDER: ''IN VIEW OF AFORESAID, IT IS REITERATED THAT THE ASSESSING OFFICER CALLED FOR CERTAIN CLARIFICATIONS THROUGH THE QUESTIONNAIRE OF THE ASSESSEE AND THAT THE SAME WERE FURNISHED WITH THE REQUIRED DETAILS. THIS FACT IS EVEN TAKEN NOTE OF BY THE COMMISSIONER HIMSELF IN HIS ORDER. THE ONLY GRIEVANCE OF THE COMMISSIONER WAS THAT THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIES RATHER THAN ACCEPTING THE EXPLANATION GIVEN BY THE ASSESSEE. IT CANNOT BE SAID TO BE A CASE OF LACK OF ENQUIRY. WE ACCORDINGLY, ANSWER QUESTION NO. 2 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ' (EMPHASIS SUPPLIED).' 9. WE OBSERVE THAT IN THE PRESENT CASE THAT THE AO HAD SPECIFICALLY ENQUIRED ABOUT THE ALLOWABILITY OF THE DEDUCTION CLAIMED U/S 80 - IC IN RESPECT OF THE PROFITS DERIVED FROM MANUFACTURING UNIT SITUATED IN ELDECOSIDCUL INDUSTRIAL PARK OF STATE OF UTTARANCHAL , AND UPON EXAMINING THE REPLY FURNISHED BY THE ASSESSEE (REFER PARA 5 SUPRA), THE AO FRAMED THE ASSESSMENT ORDER U/S. 143(3) DATED 28.03.2016. IN VIEW OF JUDICIAL PRONOUNCEMENTS DISCUSSED SU PRA , W E THUS NOTE THAT THE AO HAS PASSED THE ASSESSMENT ORDER AFTER CALLING FOR DETAILS ON THE ISSUES FOUND FAULT BY THE PCIT AND AFTER CONSIDERING THE REPLY AND DOCUMENTS FILED BEFORE HIM PASSED THE ASSESSMENT ORDER, SO IT CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SO, THE LD. CITS FINDING FAULT WITH THE ORDER OF THE A O 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 I TEMS 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: 10 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 PARTICULARS AMOUNT (RS.) INTEREST EXCHANGE DIFFERENCES (NET) PROVISION FOR DOUBTFUL RECEIVABLES/ADVANCES RECOVERED/WRITTEN BACK UNCLAIMED BALANCE ADJUSTED INSURANCE & OTHER CLAIMS EXPORT INCENTIVES RS. 4,64,496/ - RS.24,66,086/ - RS. 6,25,198/ - RS. 2,18,752/ - RS. 1,18,406/ - RS.96,51,611/ - 11. T HE PROVISIONS AS CONTAINED IN SEC 80 - I C(1) IS REPRODUCED HEREUNDER; 80 IC( 1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALL OWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB SECTION (3).' THE PR OVISIONS AS CONTAINED IN SEC 80 - I C(1) DOES NOT DEFINE THE WORDS 'PROFITS AND GAINS DERIVED BY ANY UNDERTAKING '. WE NOTE T HAT THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS CIT (317 ITR 218) HAS HELD THAT ITEMS OF INCOME WHICH HAVE FIRST DEGREE NEXUS WITH THE BUSINES S OF THE INDUSTRIAL UNDERTAKING CAN BE HELD TO BE PROFITS & GAINS DERIVED FROM THE UNDERTAKING IN OR DER TO AVAIL THE PROFIT - LINKED DEDUCTION U/S 80IA OF THE ACT. IN THIS BACKGROUND, IT IS NOW PERTINENT TO EXAMINE THE NATURE OF EACH ITEM CREDITED UNDER THE HEAD 'OTHER INCOME' , WHICH IS THE MATTER IN DISPUTE HERE. THE SAME IS DISCUSSED INDIVIDUALLY HEREUND ER; (A) INTEREST: IT IS NOTED THAT I NTEREST INCOME SOLELY COMPRISED OF INTEREST RECEIVED FROM SECURITY DEPOSITS KEPT WITH ELECTRICITY DEP ARTMENT. THE LD. AR OF THE ASSESSEE HAS CONTENDED THAT THESE ARE OPERATIONAL RECEIPTS OF ASSESSEE AS THE COMPANY IS REQUIR ED TO COMPULSORILY DEPLOY FUNDS BY WAY OF SECURITY DEPOSIT S WITH THE ELECTRICITY BOARDS IN ORDER TO OBTAIN SUPPLY OF POWER FOR ITS UNIT. HE THUS POINTED OUT THAT IT IS NOT A CASE WHERE THE ASSESSEE HAS KEPT DEPOSIT WITH THE DOMINANT INTENTION TO EARN INTEREST INCOME BUT IN THIS CASE THE ASSESSEE WAS UNDER COMPULSION TO MAINTAIN DEPOSIT WITH THE ELECTRICITY BOARD TO ENSURE SUPPLY OF POWER TO THE UNIT . HE THUS CONTENDED THAT SUCH INTEREST INCOME HAD FIRST DEGREE NEXUS WITH THE ELIGIBLE UNDERTAKING OF THE ASSESSEE AND ACCORDINGLY THE SAME WOULD EQUALLY QUALIFY FOR THE DEDUCTION U/S 80IC OF THE ACT. WE NOTE THAT THIS CLAIM OF THE ASSESSEE IS SUPPORTED BY THE FOLLOWING DECISION S: 11 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 (I) CIT VS. NAGREEKA FOILS LTD. IN ITA NO.99 OF 2007 HON'B L E HIGH COURT O F C ALCUTTA DT.21.07.2014; 'BOTH, IN THE CASE OF CIT VS. STERLING FOODS (SUPRA) AND IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA), THEIR LORDSHIPS HAVE LAID EMPHASIS TO FIND OUT WHETHER THERE IS A DIRECT NEXUS BETWEEN THE MONEY EARNED AND THE ACTIVITY PURSU ED BY 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 DI RECT 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 TH E BUSINESS OF THE ASSESSEE. SIMILARLY, THE INTEREST RECEIVED BY THE ASSESSEE ON ACCOUNT OF FIXED DEPOSITS MADE FOR THE PURPOSE OF PROVIDING MARGIN MONEY TO THE LENDING BANK ALSO HAS A DIRECT NEXUS BECAUSE THE FINDING OF THE CIT (A) IS, WHICH IS NOT DISPUTE D BEFORE US, THAT FOR THE PURPOSE OF MAKING SUCH DEPOSIT THE ASSESSEE HAD ALSO BORROWED MONEY FROM THE BANK. THE RESULTANT EFFECT IS THAT IF A DEPOSIT OF RS.L0/ IS TO BE MADE BY WAY OF MARGIN MONEY FOR BORROWING RS.L00/ , THE ASSESSEE HAS TO BORROW 6 RS.L L0/ OUT OF WHICH RS.L00/ CAN BE USED FOR HIS BUSINESS AND RS.L0/ CAN BE INVESTED BY WAY OF MARGIN MONEY. WHEN HE IS PAYING INTEREST FOR RS.LL0/ AND RECEIVING INTEREST ON THE AMOUNT OF RS.L0/ , IT CAN ONLY BE SAID THAT HE IS REALLY PAYING INTEREST FOR R S.L00/ WHICH HE ORIGINALLY NEEDED FOR THE BUSINESS. THE INCOME ARISING OUT OF THE DEPOSIT MADE BY HIM IS, THEREFORE, HIS BUSINESS INCOME. IN THE CASE REFERRED ABOVE, THAT ASSESSEE WAS IN COMPULSION TO MAINTAIN DEPOSIT WITH BANK IN ORDER TO PROVIDE MARGIN MONEY REQUIREMENTS FOR ITS ELIGIBLE UNIT. LIKEWISE, IN THE PRESENT CASE ALSO THE ASSESSEE IS REQUIRED TO MAINTAIN SECURITY DEPOSIT WITH THE ELECTRICITY DEPARTMENT FOR SUPPLY OF POWER TO ITS ELIGIBLE UNIT . WE FURTHER NOTE THAT ON SIMILAR FACTS THIS TRIBUNA L ON 08 .07.2016 HAS UPHELD THE SAME VIEW IN FAVOUR OF THE ASSESSEE IN ITA 2073/KOL/2014. WE THEREFORE HOLD THAT THE ELIGIBILITY OF THE INTEREST INCOME EARNED ON DEPOSIT U/S 80IC, WAS CLEARLY A PLAUSIBLE VIEW IN LAW. WE ALSO FIND MERIT IN THE ALTERNATE CON TENTION OF THE LD. AR THAT EVEN IF SUCH INTEREST IS HELD TO BE NOT ELIGIBLE F OR DEDUCTION U/ S 80 IC OF THE ACT , THEN IT IS THE NET INTEREST WHICH SHOULD BE CONSIDERED FOR THE PURPOSES OF COMPUTING DEDUCTION U/S 80IC OF THE ACT . G OING BY THE FIGURES AS SET O UT IN THE STANDALONE ACCOUNTS OF THE ELIGIBLE UNIT, THE FOLLOWING POSITION EMERGES: PARTICULARS AMOUNT (RS.) INTEREST PAID RS. 3,12,66,009/ - 12 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 INTEREST RECEIVED NET INTEREST PAID RS. 4,64,496/ - RS.3,08,01,513/ - THIS ALTERNATIVE PLEA OF THE ASSESSEE IS FOUND TO BE SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS , WHICH ARE AS UNDER; (I) ACG ASSOCIATED CAPSULES (P) LTD. VS. CIT , HON'BLE SUPREME COURT IN (2012) 343 ITR 89(SC) 'WHETHER THEREFORE, NINETY PER CENT OF NO T GROSS RENT OR GROSS INTEREST BUT ONLY NET INTEREST OR NET RENT, WHICH HAS BEEN INCLUDED IN PROFITS OF BUSINESS OF ASSESSEE AS COMPUTED UNDER HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO SEC TION 80HHC FOR DETERMINING PROFITS 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 80 IA OF THE INCOME TAX ACT 1961 DEDUCTIONS PROFIT AND GAINS FROM INF RASTRUCTURE UNDERTAKINGS ASSESSMENT YEAR 1997 98 WHETHER FOR PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80 IA INTEREST INCOME EARNED BY ASSESSEE AFTER DEDUCTING INTEREST PAYMENTS ON BORROWED TUNAS SHOULD BE TAKEN INTO ACCOUNT HELD, YES [IN FAV OUR 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 BUS INESS 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, FIRSTLY BEING DUE TO RATE FLUCTUATION IN EXPORT/IMPORT TRANSACTIONS OF SALES OF FINISHED GOODS AND PURCHASE OF RAW MATERIALS AND SECONDLY WHEN THE OUTSTANDING DUES/RECEIVABLES WERE TRANSLATED INTO INDIAN CURRENCY IN TERMS OF AS - 11 ISSUED BY ICAI. ACCORDING TO THE LD. AR OF THE ASSESSEE, T HE FOREX FLUCTUATION I S DIRECTLY LINKED TO THE BUSINESS ACTIVITY OF THE ASSESSEE OF SALES OF FINISHED GOODS AND PURCHASE OF RAW MATERIALS AND THUS FORMS PART OF PROFITS & GAINS OF THE ELIGIBLE UNDERTAKING. WE FIND SUFFICIENT FORCE IN THE ARGUMENT OF THE LD. AR. T HE GAIN ON FLUC TUATION IN FOREIGN EXCHANGE REPRESENTS THE GAIN RELATING TO THE BUSINESS ACTIVITY OF THE ASSESSEE . THE MANUFACTURED GOODS ARE EXPORTED AND THE SALE CONSIDERATION IS RECEIVED IN FOREIGN EXCHANGE. EXCHANGE RATE 13 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 DIFFERENCE ARISES OUT OF , AND IS DIRECTLY RELAT ED TO THE SALE TRANSACTION INVOLVING EXPORT OF GOODS OF THE SPECIFIED ELIGIBLE UNIT OF THE ASSESSEE AND THE SAME LOGIC EQUALLY APPLIES FOR PURCHASE OF IMPORTED RAW MATERIALS. IN OUR CONSIDERED VIEW THEREFORE THE EXCHANGE RATE FLUCTUATION GAIN/LOSS IS PART & PA R CEL OF THE PROFITS AND GAINS OF THE ELIGIBLE UNIT AND IS THEREFORE ENTITLED FOR DEDUCTION UNDER S ECTION 80 - IC OF THE ACT. IN THIS REGARD , WE RELY ON THE FOLLOWING DECISIONS; (I) CIT VS. RACHNAUDYO G IN (2010) 35 DTR 65 HON'BLE BOMBAY HIGH COURT; 'DEDUCTION UNDER SEC. 80IB PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING EXCHANGE RATE DIFFERENCE EXCHANGE RATE DIFFERENCE ARISES OUT OF AND IS DIRECTLY RELATED TO SALE TRANSACTION INVOLVING EXPORT OF GOODS OF THE INDUSTRIAL UNDERTAKING DIFFERENCE ARISES PURELY AS A RESULT OF FLUCTUATION IN THE RATE OF EXCHANGE BETWEEN THE DATE OF EXPORT AND THE DATE OF RECEIPT OF PROCEEDS THEREFORE, THE DIFFERENCE ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IS ENTITLED TO DEDUCTION UNDER SEC. 80 ID.' (II) J CBL INDI A PVT. LTD. VS. ACIT IN ITA 368/CHD/2012 HON'BLE ITAT CHANDIGARH; '12. FROM THE ABOVE, IT IS CLEAR THAT THE HON'BLE HIGH COURT HAS CATEGORICALLY HELD THAT THE EXCHANGE RATE FLUCTUATION ARISES OUT OF AND IS DIRECTLY RELATED TO THE SALE TRANSACTION INVOLVIN G THE EXPORT OF GOODS OF THE INDUSTRIAL UNDER TAKING AND, THEREFORE, DIFFERENCE ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IS ENTITLED TO DEDUCTION UNDER SECTION 80 IB OF THE ACT. NO CONTRARY DECISION WAS BROUGHT TO MY NOTICE. RESPECTFULLY FOLLOWING THE JUDG MENT 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 /S A NSYSCO 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 INI TA 798/CHD/2012 HON BLE ITAT CHANDIGARH ; '61. AS FAR AS THE AMOUNT RECEIVED ON FOREIGN EXCHANGE FLUCTU ATION 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 ASSES SMENT ORDER OR IN THE IMPUGNED ORDER, THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT IF THE SAME RELATES TO THE BUSINESS TRANSACTION ON REVENUE ACCOUNT, THEN DEDUCTION MAY BE ALLOWED ON THIS AMOUNT, OTHERWISE THE ISSUE MAY BE DECIDED IN ACCORDANCE WITH LAW. 14 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 (C) PRO VISION FOR DOUBTFUL RECEIVABLE/ ADVANCES RECOVERED / WRITTEN BACK: THE ASSESSEE IN EARLIER YEARS HAD PROVIDED FOR PROVISION FOR DOUBTFUL RECEIVABLES/ADVANCES. SINCE THE PROVISION FOR DIMINUTION IN VALUE OF ASSET IS NOT ALLOWABLE AS DEDUCTION, SUCH PROVISIONS WERE DISALLOWED IN EARLIER YEARS I.E. THE YEARS IN WHICH THEY WERE CREATED . DURING THE YEAR THE ASSESSEE WAS ABLE TO REALIZE THE DUES FROM THOSE PARTIES , AGAINST WHOM SUCH PROVISION WAS ACCOUNTED FOR . HENCE , THE PR OVISIONS MADE IN THE EARLIER YEAR S WERE REVERSED IN THE YEAR UNDER CONSIDERATION . SINCE THE PROVISION WAS NOT CLAIMED AS DEDUCTION FROM THE BUSINESS PROFIT, AS A COROLLARY THE WRITE BACK OUT OF SUCH PROVISION WAS ALSO EXCLUDED FROM THE COMPUTATION OF ELIGIBLE PROFITS . WE NOTE THAT THE PROVISIONS WRITTEN BACK WERE INDEED DEDUCTED FROM THE COMPUTATION OF THE ELIGIBLE PROFITS U/S 80IC OF THE ACT. THIS FACT IS VERIFIED FROM THE COMPUTATION OF INCOME OF TH E ASSESSEE. IN THE CIRCUMSTANCES SINCE THE ASSESSEE HAS ALREADY DISALLOWED AND EXCLUDED SUCH ITEM OF INCOME IN THE COMPUTATION OF ELIGIBLE PROFIT U/S 80 - IC, THE QUESTION OF ITS DEDUCTIBILITY U/S 80IC DOES NOT ARISE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. (D) UNCLAIMED BALANCES ADJUSTED: THIS HEAD INCLUDES AMOUNT OF SUNDRY BALANCE WRITTEN BACK IN RESPECT OF SUNDRY CREDITOR S . THE ASSESSEE HAD ACCOUNT FOR CESSATION / REMISSION OF TRADING LIABILITIES WHICH CONSTITUTED INCOME U/S 41(1) OF THE ACT. THE LIABILITIES WERE ACCOUNTED AS EXPENSES OF THE ELIGIBLE UNDERTAKING IN THE EARLIER YEARS AND THEREFORE IN ARRIVING AT PROFITS ELIGIBLE FOR DEDUCTION U/S 80IE OF THE EARLIER YEARS, DEDUCTION FOR SUCH TRADING LIABILITIES WERE ALLOWED. IN THE YEAR UNDER CONSID ERATION , THE UNPAID BALANCES/ LIABILITIES WHICH WERE FOUND TO BE NOT PAYABLE WERE WRITTEN BACK IN THE PROFIT & LOSS ACCOUNT . WE THEREFORE FIND THAT THE UNPAID BALANCES WRITTEN BACK RELATED ONLY TO THE BUSINESS FOR WHICH DEDUCTION WAS ALLOWED WHILE COMPUTING THE ELIGIBLE PROFITS U/S 80IC IN EARLIER YEARS . SUCH WRITE BACK OF LIABILITIES IS THEREFORE HELD TO BE E LIGIBLE FOR DEDUCTION U/S .80IC OF THE ACT. SOME OF THE RELEVANT DECISIONS IN THIS REGARD IS DISCUSSED HEREUNDER: - (I) CIT VS. METALMAN AUTO (P ) LTD. I N (20 11 ) 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. 80 IB 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. 15 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 (II) M /S. ANSYSCO VS. ACIT IN ITA 89 5 /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 RE VENUE 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 I NSURANCE CLAIM RECEIVED PERTAINED TO BREAKAGE LOSSES IN TRANSIT OF FINISHED GOODS (TRANSIT BETWEEN FACTORY TO PARTY PLACE). THE ASSESSEE DEALS IN CROCKERY ITEMS WHICH ARE OF FRAGILE NATU RE AND REQUIRE UTMOST CAR E. ACCORDINGLY THERE ARE POS SIBILITY THAT THERE IS SOME BREAKAGE OR DAMAGE DURING THE TRANSPORT OF GOODS, FOR WHICH THE ASSESSEE HAS TAKEN INSURANCE COVER. T HE COST OF PRODUCTION OF GOODS WHICH WAS LOST UPON DAMAGE AND BREAKAGE AS WELL THE INSURANCE PREMIUM PAID ON SUCH GOODS ARE DEB ITED TO THE STAND - ALONE ACCOUNTS OF THE ELIGIBLE UNIT. THE PROCEEDS RECEIVED FROM INSURANCE COMPANY THEREFORE EFFECTIVELY REDUCE COST OF PRODUCTION OF THE GOODS/STOCK WHICH WAS MANUFACTURED AT THE UNIT BUT GOT DAMAGED OR DESTROYED. IN THE CIRCUMSTANCES WE FIND FORCE IN THE LD. ARS ARGUMENT THAT THE INSURANCE RECEIPT HAS A FIRST DEGREE NEXUS WITH THE BUSINESS OF THE ELIGIBLE UNDERTAKING . SOME OF JUDICIAL REFERENCES ARE DISCUSSED HEREUNDER: - (I) ACIT VS. M /S. ANSVSCO IN ITA 910/CHD/2012 HON'BLE ITAT CHAN D IG ARH; '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 ..... III) DCIT VS. M /S. VMT SPINNING CO. LTD. IN ITA 12/CHD/2014 HON'BLE ITAT CHANDIGARH; ''26( I) THE REVENUE ALSO CHALLENGED ORDER OF ID. CIT(APPEALS) IN INCREASING ELIGIBLE PROFIT UNDER SECTION 80IC OF THE ACT ON INSURANCE CLAIM RECEIVED FOR R S.2,50,125/ REGARDING INCOME FROM INSURANCE CLAIM. REGARDING THE INCOME FROM INSURANCE CLAIM, ASSESSING OFFICER REFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF STERLING FOODS 237 ITR 597 AND DISALLOWED CLAIM OF ASSESSEE. THE ID. CIT(A PPEALS) CONSIDERING THE ISSUE DIRECTED THE ASSESSING OFFICER TO EXAMINE WHETHER THE ASSESSEE HAD RECEIVED ANY REAL INCOME ON THIS ACCOUNT AND TO RESTRICT DISALLOWANCE ACCORDINGLY.. . ... 27 AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF ID. CIT(APPEALS) . THE ID. CIT(APPEAL,) CORRECTLY CONSIDERING THE DECISIONS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT AND THE DELHI HIGH COURT (SUPRA) RIGHTLY DIRECTED ASSESSING OFFICER TO EXAMINE WHETHER ASSESSEE HAD RECEIVED ANY REAL INCOME ON THIS ACCOUNT AND TO RESTRICT THE DISALLOWANCE ACCORDINGLY. NO INFIRMITY HAS BEEN POINTED OUT IN THE ORDER OF THE 16 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 ID. CIT(APPEALS), THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF ID. CIT(APPEALS). THIS GROUND IS ACCORDI NGLY, 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) D EPB 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 IM PORT OF RAW MATERIAL. THUS, ON THE COST OF DEPB LICENSE, CUSTOM DUTY GETS REBATED ON IMPORT OF R AW 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 LICENS E INCENTIVE IS RECEIVED FROM THE GOVERNMENT FOR INCENTIVISE EXPORT OF SUCH PRODUCTS WH I CH HAVE HIGH EXPORT INTENSITY / EMPLOYMENT POTENTIAL, SO AS TO OFFSET INFRASTRUCTURE INEFFICIENCIES AND OTHER ASSOCIATED COSTS INVOLVED IN MARKETING OF THESE PRODUCTS. THE SAME WAS RECEIVED AS 2% OF THE FOB VALUE UPTO 31ST MAY AND THEREAFTER @ 5% OF THE FOB VALUE FROM 1ST JUNE AS PER THE GOVERNMENT POLICIES NOTIFIED FROM TIME TO TIME. FOCUS PRODUCT LICENSE IS USED FOR THE PAYMENT OF CUSTOM DUTY ON IMPORT OF RAW MATERIALS. T HEREFORE, IT IS BASICALLY SUBSIDISING THE COST OF THE ASSESSEE. THERE IS NO SALE OF FOCUS PRODUCT LI CENSE MADE BY THE ASSES S EE AND THERE IS NO PROFIT ELEMENT INVOLVED SINCE THE SAME IS REIMBURSED AT THE ACTUAL COST ONLY. IT IS LIKE DEPB LICENSE WHICH IS TO SUBSIDISE THE COST OF EXPORT SALES SO THAT IT CAN BE COMPETITIVE IN THE MARKET. ( III) STATUS HOLDER LICENSE IS GIVEN WITH THE OBJECTIVE TO PROMOTE INVESTMENT IN UP - GRADATION OF TECHNOLOGY OF SOME SPECIFIED SECTORS AT 1% OF THE FOB VALUE OF THE EXPORTS IN THE FORM OF DUTY CREDIT. THE SAME IS RECEIVED OVER & ABOVE THE DUTY CREDIT CLAIMED UNDER OTHER PROVISIONS. STATUS HOLDER LICENSE IS BASED ON ACTUAL USER 17 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 CONDITION AND SHALL ONLY BE USED FOR THE IMPORT OF CAPITAL GOODS FOR PAYMENT OF CUSTOM DUTY. AGAIN, THERE IS NO SALE OF STATUS HOLDER LICENSE MADE BY THE ASSES S EE AND THERE IS NO PROFIT ELEMENT INVOLVED SINCE THE SAME IS REIMBURSED AT THE ACTUAL COST ONLY. IT IS ALSO LIKE DEPB LICENSE WHICH IS TO SUBSIDISE THE COST OF EXPORT SALES SO THAT IT CAN BE COMPE TITIVE IN THE MARKET. F ROM THE ABOVE DISCUSSION IT IS CLEAR THAT THESE EXPORT INCENTIVES , BY WHATEVER NAME CALLED , GIVEN BY THE GOVERNMENT IS WITH A VIEW TO INCENTIVIZE AND REDUCE THE EFFECTIVE COST OF PRODUCTION OF THE ASSESSEE. THERE IS ESSENTIALLY N O ELEMENT OF PROFIT DERIVED FROM EXPORT INCENTIVES , BUT IT IS MEANT TO REDUCE THE COST OF PRODUCTION. THE LD. AR INVITED OUR ATTENTION TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS MEGH ALAYA STEELS LTD (384 ITR 217) WHEREIN ONE OF THE QU ESTIONS BEFORE THE APEX COURT WAS WHETHER INSURANCE SUBSIDY RECEIVED FROM THE GOVERNMENT COULD BE SAID TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING AND HENCE CONSIDERED FOR THE PURPOSES OF COMPUTING DEDUCTION U/S 80IC OF THE ACT. THE SUPREME COURT OBSERVE D THAT THE INSURANCE SUBSIDY WAS GIVEN TO SUBSIDIZE THE COST OF 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(III D) OF THE INCOME TAX ACT 1961 BUSINESS INCOME CASH ASSISTANCE ASSESSMENT YEAR 2002 03 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 SU BSEQUENT 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 , W E ARE OF THE CONSIDERED OPINION THAT WHILE PASSING THE ASSESSMENT ORDER ALLOWING THE DEDUCTION U/S 80IC IN RESPECT OF ITEMS OF OTHER INCOME AND EXPORT INCENTIVES, THE AO DID NOT FOLLOW A VIEW WHICH CAN BE SAID TO BE UNSUSTAINABLE IN LAW. IN THE CIRCUMSTANCES THEREFORE, THE JURISDICTIONAL FACTS FOR USURPING THE JURISDICTION, BEING ABSENT, WE HOLD THAT THE ACTION OF LD. PR. CIT WAS WITHOUT 18 ITA NO. 559/KOL /2018 LA OPALA RG LTD.., AY - 2013 - 14 JURISDICTION AND ALL SUBSEQUENT ACTIONS ARE 'NULL' IN THE EYES OF LAW. WE THEREFORE QUASH THE ORDER IMPUGNED BEFORE US. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 OCTOBER, 2019 . SD/ - SD/ - ( DR. A. L. SAINI ) ( ABY. T. VARKEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. LA OPALA RG LTD., FLAT NO. 105, 10 TH FLOOR, CHITRAKOOT, 230A, A.J.C. BOSE ROAD, KOLKATA - 700 020. 2 RESPONDENT ACIT, RANGE - 12 , KOLKATA. 3. 4. PR. CIT , KOL - 4 , KOLKATA . DR, ITAT, KOLKATA. (SENT THROUGH E - MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR