2010 (10) TMI 388 - AT - Income Tax

Revision - Business Expenditure - loss was determined at Rs. NIL and under section 115JB book loss was determined - this was considered by the CIT as erroneous and prejudicial to the interests of the Revenue - assessee was eligible for deduction under section 10B - Once when deduction under section 10B has to be allowed, the total income of the undertaking will enter the computation and then only deduction will be given to the assessee - Assessing Officer is directed to consider the set off of unabsorbed business losses and depreciation after availing deduction under section 10B - Section 10B(6) is applicable only for the last year of deduction and not for the earlier years of deduction - claim of the assessee allowed

Summary

Issues:
Revision under section 263 - Error in order and prejudice to Revenue

Detailed Analysis:

1. Revision under Section 263: The appeal was against the order of the ld. CIT under section 263 of the Income-tax Act, 1961. The assessment for the year 2002-03 was completed earlier, and the ld. CIT considered the treatment of losses from the accounting service division as erroneous and prejudicial to revenue. The main ground for revision was the set off of brought forward losses against business income, which the CIT deemed incorrect under section 10B(6).

2. Grounds Raised by the Assessee: The appellant raised several grounds challenging the jurisdiction and application of section 263 by the CIT. The grounds included contentions that the CIT's order was without jurisdiction, contrary to law, and opposed to principles of equity and natural justice. The appellant argued that the provisions of section 10B(6) were not applicable to their case for the relevant assessment year.

3. Legal Principles for Revision under Section 263: The judgment highlighted key legal principles governing the revisional power under section 263. It emphasized that the CIT must establish both error and prejudice in the order to invoke section 263. The CIT's power to revise an order is not unfettered, and he must have material to form a prima facie opinion of error prejudicial to revenue. The judgment outlined various scenarios where an order could be deemed erroneous or prejudicial.

4. Analysis of Assessing Officer's Decision: The Tribunal analyzed the Assessing Officer's decision in allowing the set off of losses based on a previous Tribunal decision. The Tribunal found that the Assessing Officer acted in accordance with law by following the jurisdictional Tribunal's decision. As the decision was based on legal precedent, the Tribunal concluded that the order was not erroneous. The Tribunal cited the specific Tribunal decision supporting the allowance of set off under section 10B.

5. Conclusion and Decision: Considering the legal position and the Assessing Officer's reliance on a valid precedent, the Tribunal reversed the CIT's order under section 263 and reinstated the Assessing Officer's decision. The appeal filed by the assessee was allowed, emphasizing that the Assessing Officer's decision was not erroneous based on the legal interpretation and precedent followed.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the legal principles applied, and the Tribunal's decision in the case.