M/S LA OPALA RG LTD,KOLKATA vs. ACIT, CIR. 11(1), KOLKATA

During the course of revisionary proceedings, so far as the first issue raised in the showcause notice raised u/s 263 of the Act for the correctness of the claim of tax u/s 80IC Act, it was stated by the assessee that similar revisionary proceedings were carried out on the very same ground for the Assessment Year 2013-14 and this Hon’ble Tribunal in its own case in ITA No. 559/Kol/2018, order dt. 31/10/2019, quashed the order u/s 263 of the Act and since the issue is well settled in earlier years, the question of lack of enquiry does not arise. As regards the second issue in the show-cause notice it was submitted that the assessee has followed the guidance note of ICAI and the provisions of Excise Duty and debited under the head “administrative selling and other expenses” have equally been added under the head closing stock. Therefore, there is no impact on the income of the assessee. The arguments put forth by the assessee did not find any favour from the ld. Pr. CIT and the assessment order dt. 21/12/2019 was set aside Assessment Year: 2017-18 M/s. La Opala RG Ltd. 3 to be framed afresh by the Assessing Officer after conducting proper enquiries and verification.

Aggrieved the assessee is in appeal before this Tribunal challenging the invoking the juri iction u/s 263 of the Act raising the following grounds of appeal:- “1. That the Ld. Pr. CIT, Kol-2, erred in setting aside the assessment order dt. 21.12.2019 passed u/s 143(3) of the Act holding that the issues involved in the instant case have not been properly examined by the AO and thus the impugned order was found to be erroneous as well as prejudicial to the interest of the revenue. The Ld. Pr. CIT, Kol-2 failed to take cognizance of the submission filed during the course of proceedings u/s 263 wherein it has been mentioned that the issues involved are decided in favour of the assessee by the Hon'ble ITAT in its own case for AY 2013-14 bearing ITA No. 559/Kol/2018 dated 31.10.2019. It was also submitted that the Ld. AO after due examination has allowed the claim of the assessee. The Ld. PCIT did not pointed out any defect in the submission but adhocly set aside the assessment order and directed the AO to pass a fresh assessment order. Thus, the order passed u/s 263 of the Act setting aside the assessment order dt. 21.12.2019 passed u/s 143(3) of the Act is bad in law and the same needs to be quashed.

That the Ld. PCIT was wrong in setting aside the assessment order passed u/s 143(3) of the Act alleging that the deduction of Rs. 14,72,44,452/- i.e. 30% of Rs. 49,08,14,480/- u/s 80IC of the Act has been wrongly allowed to the assessee. The assessee has correctly claimed deduction u/s 801C of the Act on the Other Income i.e. Interest income received from security deposit made to electricity dept., Exchange fluctuation difference, Insurance other claims and Export incentives etc. All these incomes are having direct nexus with the business activity carried on by the assessee, hence eligible for deduction u/s Assessment Year: 2017-18 M/s. La Opala RG Ltd. 4 80IC of the Act. Also, all the issues are covered and decided in favour of the assessee by the Hon'ble ITAT in its own case for AY 2013-14 bearing ITA No. 559/Kol/2018 dated 31.10.2019 and for AY 2015-16 ITA No. 153/Kol/2021 dated 18.05.2022. Thus, the bearing action of the Ld. Pr. CIT in setting aside the assessment order passed u/s 143(3) of the Act is bad in law and needs to be quashed.

That the Ld. PCIT - 2, Kolkata erred in disallowing Rs. 38,74,306/- on account of provision for excise duty, made in the books of accounts as per the Guidance Note issued by ICAI. The Ld. PCIT tailed to consider that the "Provision for Excise Duty on Finished Goods" was created by increasing the value of Closing Stock of Finished Goods with the same amount of provision. As such, there is no impact on the P & L Account due to creation of "Provision for Excise Duty on Finished Goods" as the said provision has been added back in the Closing Stock of Finished Goods. Hence, the said treatment is not affecting the P & L Account and is revenue neutral. The Closing Stock on Finished Goods is sold subsequently before filing of return and excise duty was paid and hence proceedings u/s 263 has been wrongly initiated.

That the assessee craves to leave or add, alter, amend or withdraw any or all of the ground(s) of appeal before or at the time of hearing.”

At the outset, the ld. Counsel for the assessee requested for not pressing Ground No. 3 and we, therefore, dismiss Ground No. 3 is not pressed.

Now, the effective Grounds of appeal are Ground Nos. 1 & 2 for which it was submitted by the ld. Counsel for the assessee that finding of the ld. Pr. CIT deserves to be reversed in view of the decision of the Tribunal in the assessee’s own case for the Assessment Year 2013-14. On the Assessment Year: 2017-18 M/s. La Opala RG Ltd. 5 other hand, the ld. D/R, vehemently argued supporting the order of the ld. Pr. CIT.

We have heard rival contentions and perused the record placed before us. Revisionary proceedings carried out u/s 263 of the Act are in challenge before us.

The impugned order u/s 263 of the Act contains two reasons of which one relates to correctness of claim of deduction u/s 80IC of the Act and secondly regarding the provision for excise duty made in the profit and loss account. So far as the second issue is concerned, the assessee has not pressed the same and, therefore, to this extent, the finding given by the ld. Pr. CIT is confirmed and thus Ground No. 3 raised by assessee is dismissed as not pressed.

So far as the first issue is concerned, regarding the correctness of claim of deduction u/s 80IC of the Act, the ld. Pr. CIT observed that the assessee credited an amount of Rs.2,43,75,193/- from export incentive and also other non-operating income of Rs.25,39,952/-, which is mainly obtained from interest, sundry balance written off, insurance claim received, rent received etc. Further it is observed by the ld. Pr. CIT that while calculating the deduction u/s 80IC of the Act, the assessee has taken into consideration the above mentioned income totaling to Rs.2,69,15,145/- which violates the provisions of Section 80IC(2) of the Act.

We, however, find that similar issue was raised in the revisionary proceedings u/s 263 of the Act in the assessee’s own case for Assessment Year 2013-14 and this Tribunal in ITA No. 559/Kol/2018 dated 31.10.2019, quashed the order and the relevant finding of this Tribunal are reproduced below:-

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: Assessment Year: 2017-18 M/s. La Opala RG Ltd. 6

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 raised 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 assessee's reply to AO in response to his notice u/s 142(1) is as under: i) Conditions for Deduction claimed under section 80IC The Company is claiming deduction under this section as it manufacture opal glass in Eldeco Sidcul 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 DIC bearing number 1163-64 dated 21-08-2008 and marked as Annexure-D/l. Moreover undertaking also fulfils the conditions mentioned in section 80- IC(4). ii) Conditions - 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 mentioned in section 80- IA(4)(iv) i.e. undertaking set up in any part of India for generation or generation and distribution of power during the period beginning on the 1st day of April 1993 and ending on the 31st day of March 2017" Assessment Year: 2017-18 M/s. La Opala RG Ltd. 7 In relation to this we attaching herewith commissioning certified issued by Executive Engineer - III(TCC-IV) Raj Rajya Vidyut Prasaran Nigam Limited, Barmer and marked as Annexure D/l/l. ii) We are also attaching audited and signed Balance Sheet and Profit and Loss account for the period ended 31st March, 2013 for the Sitarganj unit and marked as Annexure D/2. The common expenses have been apportioned properly. We are also attaching audited and signed Balance Sheet and Profit and Loss account for the period ended 31st March, 2013 for the Sitarganj unit and marked as Annexure D/3. iii) Yes additional depreciation in respect of undertaking eligible for deduction is claimed. Please refer the Annexure A3 of the Tax Audit report submitted you earlier vide our 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 unit and D/7 for Windmill unit."

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 evident from the above reply and the annexures annexed to the reply. Since all the details 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 note 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 erroneous unless the same is patently wrong or the view taken is unsustainable in law. In this connection, we would like to note the observation 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 Hon'ble Apex court while explaining the juri ictional condition precedent for invoking revisional juri iction 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 Assessment Year: 2017-18 M/s. La Opala RG Ltd. 8 order of the incometax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the Revenue. The phrase "prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Incometax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Incometax Officer is unsustainable in law".

Further, we note that the Hon'ble Delhi High Court in the case of CIT Vs. 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 is 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; - CITVs. Anil Kumar Sharma, 335 ITR 83 (Del HC); - CIT Vs. Developement Credit Bank Ltd. 323 ITR 206 (2010); - CIT vs Gabriel India Ltd. 203 ITR 108 (1993); ITA No. 559/Kol/2018 La Opala RG Ltd.., AY- 2013-14 - CIT Vs. Vikash Polymers 341 ITR 537 (Del);

In this regard, the ld AR also placed reliance on the judgment of Delhi High 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 observing 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)."

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 supra, we 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 Assessment Year: 2017-18 M/s. La Opala RG Ltd. 9 erroneous and prejudicial to the interest of the revenue. So, the Ld. CIT's finding fault with the order of the AO as erroneous as well as prejudicial to the interest of revenue on account of lack of inquiry has to fail.

Now we proceed to answer the question as to whether the decision of the AO, after perusal of the reply of the assessee in respect of deduction u/s. 80IC of the Act, can be held to be unsustainable in law or whether can it be said to be a plausible view. We note that in the notice issued u/s. 263, the Ld. CIT has alleged that the assessee has claimed excess deduction u/s. 80IC of the Act on certain items of 'other income' which were not derived from the eligible business of the assessee and hence were required to be disallowed for working out the sum eligible for deduction u/s 80IC of the Act. We note the details of other income and export incentive are as under: Particulars Amount (Rs.) Interest Rs. 4,64,496/- Exchange Differences (Net) Rs.24,66,086/- Provision for doubtful Receivables/Advances Recovered/Written back Rs. 6,25,198/- Unclaimed balance adjusted Rs. 2,18,752/- Insurance & other claims Rs. 1,18,406/- Export Incentives Rs.96,51,611/-

The provisions as contained in sec 80-IC(1) is reproduced hereunder; "80IC(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 subsection (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in subsection (3)." The provisions as contained in sec 80-IC(1) does not define the words 'profits and gains derived by any undertaking'. We note that the Hon'ble 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 business of the industrial undertaking can be held to be profits & gains derived from the undertaking in order 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 hereunder; (a) Interest: It is noted that interest income solely comprised of interest received from security deposits kept with electricity department. The Ld. AR of the assessee has contended that these are operational receipts of assessee as the company is required to compulsorily deploy funds by way of security deposits 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 Assessment Year: 2017-18 M/s. La Opala RG Ltd. 10 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 decisions: (i) CIT Vs. Nagreeka Foils Ltd. in ITA No.99 of 2007 Hon'ble High Court of Calcutta 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 pursued 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 direct nexus with the export made by the assessee. But, in the present case it is difficult to say that the interest earned by the assessee from the buyers of the goods on account of delayed payment of the sale proceeds does not have any direct nexus with the business of the assessee. Similarly, the interest received by the assessee on account of fixed deposits made for the purpose of providing margin money to the lending bank also has a direct nexus because the finding of the CIT (A) is, which is not disputed 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.ll0/ 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 Rs.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 Tribunal 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 contention of the Ld. AR that even if such interest is held to be not eligible for deduction u/s 80IC 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. Going by the figures as set out in the standalone accounts of the eligible unit, the following position emerges: Assessment Year: 2017-18 M/s. La Opala RG Ltd. 11 Particulars Amount (Rs.) Interest paid Rs. 3,12,66,009/- Interest Received Rs. 4,64,496/- Net Interest Paid Rs.3,08,01,513/-

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 involving the export of goods of the industrial under taking and, therefore, difference on account of exchange rate fluctuation is entitled to deduction under section 80IB of the Act. No contrary decision was brought to my notice.

As far as the amount received on foreign exchange fluctuation is concerned, though in case of Ansysco (supra) it was held that gain from Foreign Exchange Fluctuations was directly related to the business activity therefore assessee was entitled to deduction. However the details are not incorporated in the assessment order or in the impugned order, therefore, we set aside the order of Ld. CIT(A) and remit the matter back to the file of Assessing 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." (c) Provision for Doubtful Receivable/Advances recovered/Written back: The assessee in earlier years had provided for Provision for doubtful Receivables/Advances. Since the Assessment Year: 2017-18 M/s. La Opala RG Ltd. 13 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 provisions made in the earlier years 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 the 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 creditors. 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 consideration, 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 eligible 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. in (2011) 336 ITR 434 Punjab &. Haryana High Court; ''Appeal (High Court) Substantial question of law Deduction under s. 80IB Tribunal is justified in law in allowing deduction under s. 80IB on labour job receipts Miscellaneous receipts from rebate, discount and balances written off are incidental to the profits and gains derived from eligible business under s. 80IB No substantial question of law arises CIT vs. Impel Forge & Allied Industries Ltd. (IT Appeal No. 543 of 2008, dt. 5th Dec., 2008) followed." (ii) M/s.Ansysco Vs. ACIT in ITA 895/Chd/20l2 Hon'ble ITAT Chandigarh; ''However, the claim of the assessee was allowed on the amount received on scrap sales, credit balances written off the parties and insurance claim received towards material damage. We have already in the paras herein above, while deciding appeal of the revenue upheld the order of Commissioner of Income Tax (Appeals) in allowing deduction under sec 80IC of the Act on Miscellaneous Income, Insurance Claim, and income from sale of scrap ..... " (e) Insurance & other claims: From the details on record, it is noted that the Insurance claim received pertained to breakage losses in transit of finished goods (transit between factory to party place). The assessee deals in crockery items which are of fragile nature and require utmost care. Accordingly there are possibility that there is some breakage or damage during the transport of goods, for which the assessee has taken insurance cover. Assessment Year: 2017-18 M/s. La Opala RG Ltd. 14 The cost of production of goods which was lost upon damage and breakage as well the insurance premium paid on such goods are debited 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. AR's 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 Chandigarh; "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 Rs.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(Appeals) 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 infirmity 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 Id. CIT(Appeals), therefore, we do not find any justification to interfere with the order of Id. CIT(Appeals). This ground is accordingly, dismissed.

In the result, departmental appeal is dismissed." (f) Export Incentive: It is noted that the assessee had received export incentives from the Government in the form of Duty drawback, Focus product license and Status holder license etc. in respect of the export sales made by the eligible unit. The nature of each of the export incentive as explained by the Ld. AR of the assessee is discussed as under: (i) DEPB License is received for the export of the goods and the same is used for subsidising the cost of Raw Material as payment of the custom duty. There is sale of DEPB License and the same is used only for the payment of custom duty on Import of Raw Material. Thus, on the cost of DEPB License, custom duty gets rebated on import of Raw Materials. As such, there is no profit element is involved Assessment Year: 2017-18 M/s. La Opala RG Ltd. 15 in DEPB License received by the assessee and the same is nothing but subsiding the cost of the products exported, so that it can be competitive in the export market. (ii) Focus Product License incentive is received from the Government for incentivise export of such products which 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. Therefore, it is basically subsidising the cost of the assessee. There is no sale of Focus Product license made by the assessee 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 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 assessee 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 competitive in the market. From 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 no 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 Hon'ble Supreme Court in the case of CIT Vs Meghalaya Steels Ltd (384 ITR 217) wherein one of the questions 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 observed 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; Assessment Year: 2017-18 M/s. La Opala RG Ltd. 16 "Section 28(iiib), read with section 28(iiid) of the Incometax Act 1961 Business income Cash assistance Assessment year 200203 Whether DEPB is a 'cash assistance' receivable by assessee and is covered under clause (iiib) of section 28, whereas profit on transfer of DEPB takes place on a subsequent date when DEPB is sold by assessee and is covered under clause (iiid) of section 28 Held, yes"

In view of the discussion made in the preceding paras, we 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 juri ictional facts for usurping the juri iction, being absent, we hold that the action of Ld. Pr. CIT was without juri iction and all subsequent actions are 'null' in the eyes of law. We therefore quash the order impugned before us.

In the result, the appeal of the assessee is allowed.”

On perusal of the above finding we observe that the issue raised by the ld. Pr. CIT in the impugned order u/s 263 of the Act was adjudicated by this Tribunal in the assessee’s own case for the Assessment Year 2013-14 and the ld. D/R being unable to bring any contrary fact on this aspect, we, therefore, following the order of this Tribunal hold that the ld. Pr. CIT erred in invoking the revisionary powers u/s 263 of the Act on the said issue of deduction u/s 80IC of the Act since the ld. AO while allowing the assessee’s claim adopted one of the permissible view as held by Hon’ble Courts, and to this extent, we find that the assessment order u/s 143(3) dt. 21/12/2019 is neither erroneous nor prejudicial to the interest of the revenue. Hence, Ground No. 1 & 2 raised by the assessee are allowed.

Ground No. 4 is general in nature.

In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 24th November, 2022 at Kolkata. (SANJAY GARG) ACCOUNTANT MEMBER Kolkata, Dated /11/2022 *SC SrPs Assessment Year: 2017-18 M/s. La Opala RG Ltd. 17

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील / The CIT(A)- ( ) िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण "ायपीठ,कोलकाता/DR,ITAT,

Kolkata, 6. गाड" फाईल /Guard file.