2016 (3) TMI 371 - ITAT DELHI

Revision u/s 263 - Held that:- Having regard to the legal position emerging from various cases including Hon'ble Jurisdictional High Court case, we are of the view that lack of opportunity on some of the issues in the show cause notice, vitiates the proceedings u/ s.263 and consequently the order u/s. 263 passed by the learned PCIT is also rendered bad in law.

Further, we find that the same very issue on which the show cause notice was issued by the learned PCIT was not only thoroughly examined during the course of scrutiny assessment proceedings in respect of the assessment year under appeal, but the same was consistently examined during the preceding assessment years starting from the assessment year 2006-07. As a matter of fact, in the assessment order passed u/s. 143(3) for the A.Y. 2006-07, there is a detailed discussion on this point and after proper and thorough application of mind the Assessing Officer allowed credit for deemed dividend tax. The same view was adopted upto the assessment year 2009-10. Thus, the view adopted by the Assessing Officer during the assessment year under appeal is in consonance with the consistent view adopted by the Department itself in the preceding assessment years. Further, the Assessing Officer has not blindly followed the view adopted in the preceding assessment years but has also independently examined this issue by raising detailed inquiries and after considering the replies filed by the assessee-society. Thus, the view adopted by the Assessing Officer is a possible and plausible view and the Assessing Officer has adopted this view having regard to the well established principles of consistency of approach and also after considering the merits of the claim. In view of the legal position which emerges from the various cases cited above, it is an undisputed legal position that the learned PCIT cannot substitute his view for the view of the Assessing Officer by invoking jurisdiction u/s.263 of the I.T. Act. Therefore, for these reasons also the order passed by the learned PCIT u/s. 263 totally fails to meet the jurisdictional requirements of section 263 of the I.T. Act - Decided in favour of assessee

Allowing credit for deemed dividend tax which would have been payable in Oman - whether the dividend income was granted exemption in Oman with the purpose of promoting economic development - Held that:- As find from the factual position discussed, it is seen that the annual accounts of the PE are prepared in accordance with the International Financial Reporting Standards (IFRS). As per IFRS-28 the share of PE in the profit / loss in OMIFCO at 25% has to be accounted as income in the Profit and Loss account of the PE even though such income received is only to the extent of dividend declared and distributed. Out of the total distributable profit, OMIFCO is required to transfer a specified amount to reserves under the Omani law and only the remaining profits are distributed to the shareholders. Therefore, even under the Omani Tax Laws, the PE offers for taxation only the dividend income actually received and not the total share of the PE in the profits of OMIFCO. On the other hand, books of account of the assessee in India are required to be prepared in consonance with the Indian Accounting Standards. Obviously, the undistributed share of profit reflected in the books of P.E. cannot be said to partake the character of income under the provisions of the Income-tax Act. It is settled position that accounting entries are not determinative of taxability under the Income-tax Act and further only the real income can be brought to the charge of tax. In the present case even the undistributed profits reflected in the books of the P.E. are not brought to the charge of tax under the Omani Tax Laws. In our view having regard to the above mentioned facts the said income by assuming undistributed profit cannot be taxed under the I.T. Act. Therefore, on merits also the directions issued by the learned PCIT on this issue are not justified and the same are hereby vacated. Thus we hold that the impugned order passed by the learned PCIT u/s.263 of the I.T. Act is without jurisdiction and not sustainable in law. - Decided in favour of assessee