La Opala Rg. Ltd. Vs DCIT (ITAT Kolkata)
The assessee was under compulsion to maintain a deposit with the electricity board to ensure supply of power to the unit and 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.
Facts- The assessee company is engaged in the business of manufacturing Opal & Crystal Glassware and the sale of electricity generated from the wind farm. AO notes that for AY 2015-16 the assessee filed its return of income u/s. 139 of the Act declaring a total income of Rs.43,63,19,250/-. The case was selected for scrutiny and notice u/s. 143(2) was issued.
During the course of the hearing, the assessee was asked to furnish the details on the issues and the assessee submitted the same from time to time. AO assessed the total income at Rs.43,63,19,250/- u/s. 143(3) of the Act and issued a demand notice.
The assessee submitted its reply to the above observation on explaining the case that the issue relating to deduction u/s. 80IC as already been decided in their favour. However, CIT proceeded to conclude the revisional proceedings u/s. 263 of the Act by giving his direction to the AO to prepare the assessment afresh. CIT in the exercise of his powers u/s. 263 of the Act was of the view that the order of the AO was erroneous and prejudicial to the interest of the revenue and he was pleased to set aside the assessment order. Aggrieved by the said order the assessee filed an appeal before ITAT.
Conclusion- Issue is covered in favour of the assessee by its own case for AY 2013-2014, wherein, ITAT Kolkata has held that interest income solely comprised of interest received from security deposits kept with electricity department. The operational receipts of the assessee as the company are required to compulsorily deploy funds by way of security deposits with the electricity boards in order to obtain the supply of power for its unit and 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 a deposit with the electricity board to ensure supply of power to the unit and 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.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of Ld. Pr.CIT, Kolkata-2 dated 30.03.2021 for AY 2015-16 vide order No. ITBA/REV/F/REV5/2020-21/1031942258(1) against the assessment order passed by DCIT, Circle-12(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 30.05.2018.
2. The sole issue involved in the appeal relates to assumption of jurisdiction by the Ld. Pr. CIT u/s. 263 of the Act for revision of the order of the AO by holding that deduction claimed by the assessee u/s. 80IC of the Act has been wrongly allowed.
3. Brief facts of the case are that the assessee company is engaged in the business of manufacturing of Opal & Crystal Glassware and sale of electricity generated from wind farm. The AO notes that for AY 2015-16 the assessee filed its return of income u/s. 139 of the Act on 28.11.2015 declaring total income of Rs.43,63,19,250/-. The case was selected for scrutiny and notice u/s. 143(2) was issued on 21.09.2016. During the course of hearing the assessee was asked to furnish the details on the issues and the assessee submitted the same from time to time. Considering the facts and circumstances of the case, the total income of the assessee company and tax thereupon for the relevant assessment year was computed by the AO as under:
