2017 (1) TMI 1526 - AT - Income Tax

Revision u/s.263 - not to allow deduction u/s. 80IB(10) while computing book profit u/s.115JB - Held that - In the instant case assessee was undisputedly entitled for deduction u/s.80IB(10) in respect of housing profit. Accordingly AO while framing scrutiny assessment order allowed the same out of normal income as well as while computing book profit. However according to the Ld. CIT the assessee is liable to pay the MAT on the profit earned u/s.80IB(10). In terms of the decision of Supreme Court in case of Max India (2007 (11) TMI 12 - Supreme Court of India) whenever two views are possible and the AO has taken one view with which the CIT does not agree it cannot be treated as an erroneous order prejudicial to the interests of the Revenue. In this regards explanation 2(d) under section 263 specifically states that revision is possible only due to judgments of the jurisdictional High Court or supreme court. Further the assessee has placed the reliance on the various decision where the ratio was laid down were in favour of the assessee. The considerable favourable view was available. Therefore as there were two views were available the Ld. CIT should not be allowed to invoke the powers u/s.263. If the answer of the above refereed question held as yes then the Ld. CIT will invoke power in each and every cases and will create a huge mess. Therefore the power of CIT is restricted to the decision of the jurisdiction high court or Supreme Court which were overlooked by the assessing authority. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction of CIT to invoke powers under section 263 based on non-jurisdictional high court decision.
2. Whether the CIT's order under section 263 was erroneous and prejudicial to the interest of revenue.

Analysis:

Issue 1: Jurisdiction of CIT
The case involved an appeal by the assessee against the order of CIT-13, Mumbai under section 263 of the IT Act for A.Y. 2011-12. The CIT invoked powers under section 263 and directed the AO not to allow deduction u/s. 80IB(10) while computing book profit u/s. 115JB of the IT Act. The key contention was whether the CIT could invoke powers under section 263 based on a non-jurisdictional high court decision. The Tribunal observed that explanation 2(d) under section 263 specifies that revision is possible only due to judgments of the jurisdictional or supreme court. As the decision relied on by the CIT was not from the jurisdictional High Court, the Tribunal found that the CIT's reliance on a non-jurisdictional high court decision was not valid.

Issue 2: Erroneous and Prejudicial Order
The crux of the dispute was whether the AO's assessment order reducing the profit eligible for deduction u/s. 80IB while computing book profit u/s. 115JB was erroneous and prejudicial to the interest of revenue. The Tribunal analyzed the provisions of section 115JB, which relate to the special provision for payment of tax by certain companies. It noted that if any income is not taxable due to a specific provision of the Act, it should not form part of book profit u/s. 115JB. The Tribunal also referred to judicial pronouncements and legal precedents to support the contention that when two views are possible and the AO has taken one plausible view, the order cannot be deemed erroneous and prejudicial to the interest of revenue. Therefore, the Tribunal concluded that the AO's order was rightly passed, and the CIT's invocation of powers under section 263 was unwarranted.

In conclusion, the Tribunal found no merit in the CIT's action under section 263 and allowed the appeal of the assessee. The judgment emphasized the importance of adherence to jurisdictional court decisions for invoking revisionary powers and highlighted the significance of considering multiple plausible views in assessing the correctness of an order under the IT Act.