2003 (2) TMI 511 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the order u/s 263 of the Act.
2. Applicability of the Supreme Court decision in T.V. Sundaram Iyengar & Sons Ltd. to the renunciation of a loan.
3. Jurisdiction of the Commissioner to revise the assessment order.

Summary:

1. Validity of the order u/s 263 of the Act:
The appeal was filed by the assessee against the order of the CIT, A.P.-I, Hyderabad, dated 25-3-1998, passed u/s 263 of the Act for the assessment year 1994-95. The CIT considered the assessment order erroneous and prejudicial to the interests of the Revenue due to non-inclusion of the renounced loan amount of Rs. 70,54,725 as income. The Tribunal noted that the loan was received as part of a rehabilitation package approved by BIFR and was not a trading receipt.

2. Applicability of the Supreme Court decision in T.V. Sundaram Iyengar & Sons Ltd.:
The CIT applied the Supreme Court decision in T.V. Sundaram Iyengar & Sons Ltd. to the renunciation of the loan, treating it as a trade surplus. The Tribunal disagreed, stating that the loan was not received in the course of a trading transaction but as a capital receipt. The Tribunal emphasized that the character of the loan did not change upon renunciation and remained a capital receipt, thus not taxable as income.

3. Jurisdiction of the Commissioner to revise the assessment order:
The Tribunal referenced the decisions in CIT v. Gabriel India Ltd. and Malabar Industrial Co. Ltd., asserting that the Commissioner cannot revise an assessment order merely due to a difference in opinion. The Tribunal held that the view taken by the Assessing Officer was a plausible one and thus, the revisionary powers u/s 263 were not justified.

Conclusion:
The Tribunal concluded that the order of the Commissioner u/s 263 was not sustainable and canceled the same, allowing the assessee's appeal.