DCIT, JAIPUR vs. OMIL-JSC (JV), KAMENG, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 1114/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Deputy Commissioner of M/s OMIL-JSC (JV), Vs. Income Tax, Kameng, Om Tower, Church Circle-2, Jaipur. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAJO 0083 B vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Smt. Poonam Rai (DCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri B.B. Maheshwari (CA) lquokbZ dh rkjh[k@ Date of Hearing : 16/03/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/04/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the revenue emanates from the order dated 18/10/2016 passed by the ld CIT(A)-I, Jaipur for the A.Y. 2012-13, wherein the revenue has taken following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing deduction U/s 80IE of the Act in respect of foreign currency fluctuation gain of Rs. 31,50,972/-. 2. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing deduction U/s

ITA 1114/JP/2016_ 2 DCIT Vs M/s OMIL-JSC(JV), Kameng

80IE of the Act in respect of income of Rs. 68,397/- earned by way of excess provision written back.”

against allowing the deduction U/s 80IE of the Income Tax Act, 1961 (in

short the Act). The brief facts of the case are that the assessee is a joint

venture firm between Om Metals Infra project Ltd. and JSC(JV), Ukrain. It

has been awarded a work of manufacturing, fabrication, erection and

commissioning of Penstock, Steel Liners, steel Radial gates of Hydro

mechanical work/equipments in the State of Arunachal Pradesh. The work

was awarded by NIPCO. The assessee has carried out the manufacturing

work in Arunachal Pradesh. The assessee is eligible for deduction U/s 80IE

of the Act.

Officer. At the outset of hearing, the ld AR of the assessee has submitted

that the issue raised in this appeal has already been decided by the Hon’ble

ITAT in assessee’s own case in ITA No. 160/JP/2015 for the A.Y. 2011-12

order dated 16/6/2016, then the ld CIT(A) has granted relief by considering

the order of the Hon’ble ITAT.

both the issues by holding as under:-

ITA 1114/JP/2016_ 3 DCIT Vs M/s OMIL-JSC(JV), Kameng

“(i) The brief facts of the case are that the appellant is a joint venture firm between M/s Om Metals Infra Project Ltd and JSC (JV) Ukrain. It has been awarded a work of manufacturing, fabrication, erection and commissioning of Penstock, Steel Liners, Steel Radial gates of Hydro- mechanical work/equipment in the State of Arunachal Pradesh. The work was awarded by NIPCO. The AO has allowed deduction U/s 80IE of Income Tax Act to the appellant, but excluded the miscellaneous income and foreign currency gain by observing that for claiming deduction u/s 80IE of the Act:

(i) the profit and gain should be derived by an undertaking to which this section applies

(ii) the undertaking should manufacture or produce for eligible articles or things.

Consequently, the AO did not consider miscellaneous income on account (ii) of excess provision written back : Rs. 68,397/-, currency fluctuation : Rs. 31,50,972/- as a part of manufacturing income and thereby made the additions and determined the total income at Rs. 32,19,369/- against returned income of Rs. Nil.

(iii) During the appellate proceedings, it was submitted by the appellant that the provisions were made for the expenses incurred in that year, but not paid due to same technical reasons. In its case, the deduction U/s 80IE has been allowed since its inception, hence the provision made in earlier year was made for some expenses and in that year net income even after this provisions was not taxable. As such, this is the expenditure which has been booked in excess in earlier year and by this amount the deduction U/s 80IE has been reduced in the said year since the deduction is available for the unit for consecutive 10 year. The AO has wrongly interpreted the same and

ITA 1114/JP/2016_ 4 DCIT Vs M/s OMIL-JSC(JV), Kameng

taken out from the eligible income and that too without any observation. It was further submitted that the provision written back is the part and parcel of income of the unit and, hence it cannot be separated.

(iv) Regarding the action of the AO in not allowing deduction u/s 80IE of the Act on foreign currency fluctuation of Rs. 31,50,972/-, it was submitted that for manufacturing, it has to purchase the raw materials within the country as well has to import and whatever price it paid for the import, is claimed against the receipt. The imported raw material was purchased on the basis of letter of credit (L/C), and while making the payment of L/C, the rate of foreign currency (US$) was reduced and, therefore, the payment was made a little less than the billed amount, and, therefore, the difference was created as income in fluctuation of foreign currency standards. However the AO treated it as income from other sources which is totally wrong since it is very much a part and parcel of the manufacturing unit of the JV. It was further submitted that the for the AY 2011-12, the Ld. CIT(A) has allowed deduction u/s 80IE of the Act in respect of both of the above issues, which was also confirmed by the Hon’ble ITAT, Jaipur.

(v) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted that for the AY 2011-12, in the case of the appellant itself in ITA No. 459/13-14, vide order dated 29.12.2014, the Ld. CIT(A) has allowed deduction u/s 80IE of the Act in respect of excess provision written back and gain on foreign currency fluctuation, which was upheld by the Hon’ble ITAT, Jaipur vide its order dated 16.06.2016 in ITA No. 160/JP/2015. The relevant extracts of the above referred order of Hon’ble ITAT are reproduced as under:

ITA 1114/JP/2016_ 5 DCIT Vs M/s OMIL-JSC(JV), Kameng

“4.3. We have heard rival contentions and perused the material on record. The Id. CIT (A) in para 3.3.2. has given the finding of fact as under:

“I have duly considered AO’s contention and appellant's submission, perused the materials on record, duly considered factual matrix of the case as also applicable legal position. Assessee is a JV concern, which sources its raw materials locally and also imports a substantial part from international market. For imported raw materials, payments are being made in foreign currencies, which are quite volatile, there is no dispute in this regard. The foreign currency gain is the part of raw material as assessee contends that raw materials have been booked by less amount of Rs. 22,41,619/- there is nothing wrong in this claim. Assessee is entitled for deduction u/s 80IE of the Act, on this also. In view of these facts and circumstances as discussed above, AO is directed to allow deduction u/s 80IE in this regard and also to delete the addition of Rs. 22,41,619/-."

The revenue has not rebutted these findings by placing any contrary material on record. It is also not the case of the revenue that the raw material as imported by the assessee was not utilized in the manufacturing process. Therefore, we do not see any reason to interfere into the order of Id. CIT (A). The ground of the revenue is rejected.

"5.3. We have heard the rival contentions and perused the material on record. The Id. CIT (A) has given the finding of facts as under:

"3.2.2. I have duly considered AO's contention and appellant’s submission, perused the materials on record, duly considered factual matrix of the case and also applicable legal position. The amount written off pertains to sundry creditors. It's an excess provision made for some expenses, not made in the current year but booked excess in earlier years and once it is reversed i.e. written back, assessee has to offer for taxation. This is perfectly correct as per accountancy principle. As such, this is the expenditure, which has been booked in excess in earlier year and by this amount the deduction u/s 80IE has been reduced in the said year since the deduction is available for the unit for consecutive 10 years. In view of facts and circumstances discussed above, AO’s action in treating the excess provision written back as income of Rs. 63,899/- cannot be justified, hence deleted.”

The above finding of the Id. CIT (A) is not rebutted by the revenue by placing any contrary material on record. Therefore, we do not see any

ITA 1114/JP/2016_ 6 DCIT Vs M/s OMIL-JSC(JV), Kameng reason to interfere into the order of Id. CIT (A). The ground of the revenue is rejected."

(vi) As the facts of the case apparently remains the same, I do not find any reason to differ the findings of Ld. CIT (A) and the Hon’ble ITAT for the AY 2011-12, therefore, respectfully following the decision of Hon’ble ITAT, as discussed above, it is held that the AO was not justified in not allowing deduction u/s 80IE of the Act in respect of excess provision written back of Rs. 68,397/- and foreign currency fluctuation gain amounting to Rs. 31,50,972/- and thus, the AO is hereby directed to allow deduction u/s 80IE of the Act in respect of excess provision written back and foreign currency fluctuation.”

Since both the issues are covered in favour of the assessee by the order of

the ITAT dated 16/06/2016 passed in assessee’s own case for the

assessment year 2011-12 and the ld. CIT(A) has given relief relying on the

decision of the ITAT. Therefore, by respectfully following the order of the

ld. CIT(A), I dismiss both the grounds of the revenue’s appeal.

Order pronounced in the open court on 24/04/2017.

Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 24th April, 2017 *Ranjan

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