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2013 (5) TMI 16 - AT - Income TaxDeduction claimed under section 80IA - CIT(A) passed order u/s 263 as the assessment made by the AO is erroneous inasmuch as it is prejudicial as the deduction claimed u/s 80IA has wrongly being allowed - assessee had set-up a Wind mill and commencement of its operation was started on 29th September 2006 i.e., assessment year 2007-08 - Held that - Decision heavily relied upon by the DR of Hyderabad Chemical Supplies Ltd. (2011 (1) TMI 173 - ITAT HYDERABAD) will not apply to the facts of the present case, as in that case, the wind mill started its operation on 31st March 1999 and the first year of operation was assessment year 1999-2000. Thus, in the assessment year 1999-2000, the definition of initial assessment year was already there in the Act and there was no provision through which the assessee could have chosen its initial assessment year. This provision was brought in statute w.e.f. 1st April 2000, by virtue of section 80IA. In assessee s case, as specifically stated is for initial assessment year i.e., assessment year 2008-09 and its claim for deduction under section 80IA made for the first time from assessment year 2008-09, has not been disputed. Claim of deduction u/s 80IA was based on possible legal view which has been allowed by the AO, therefore, it cannot be held erroneous. Merely because the AO in the subsequent assessment year has followed Special Bench decision of ACIT v/s Goldmine Shares 2008 (4) TMI 405 - ITAT AHMEDABAD which admittedly was rendered with regard to the claim of deduction starting from the assessment year 1996-97 wherein there was no concept of assessee choosing his option of initial assessment year in view of the provisions prior to the amendment, it cannot be held that the assessee s claim of initial assessment year being assessment year 2008-09 and its claim for deduction allowed by the AO under section 80IA is erroneous in law. In favour of assessee. Disallowance of foreign travel expenses has been made on fixed percentage of 4% of the expenses despite that the AO has noted that the desired details / documentary evidences were not submitted - Held that - Such a view taken by the AO cannot be disturbed without any difference in the facts and circumstances of the case. Thus, no merits in the impugned order passed under section 263 by CIT for cancelling the assessment and to re- examine the same. In favour of assessee.
Issues Involved:
1. Deduction under section 80IA of the Income Tax Act. 2. Disallowance of foreign travel expenses. 3. Examination of generator guarantee claim receivable and other receivables. Issue-wise Detailed Analysis: 1. Deduction under section 80IA of the Income Tax Act: The assessee, a partnership firm engaged in the export business and power generation through wind mills, claimed a deduction under section 80IA for the assessment year 2008-09, treating it as the initial assessment year. The Commissioner of Income Tax (CIT) issued a show cause notice under section 263, arguing that the assessment was erroneous and prejudicial to the interests of the Revenue because the assessee had not set off the loss from the wind mill division incurred in the assessment year 2007-08 against the profit claimed in 2008-09. The CIT relied on the Special Bench decision in ACIT v/s Goldmine Shares And Finance Pvt. Ltd. to support this view. The assessee contended that the initial assessment year for claiming the deduction was 2008-09, and the loss from prior years, which had already been set off, should not be brought forward. The CIT, however, held that the Assessing Officer (AO) had failed to apply the correct provisions of law, thus invoking section 263. The Tribunal analyzed section 80IA, particularly sub-section (5), which states that the profits and gains of an eligible business should be computed as if it were the only source of income from the initial assessment year. The Tribunal concluded that losses prior to the initial assessment year, which had already been set off, should not be carried forward. This interpretation was supported by the Madras High Court's decisions in Velayudhaswamy Spinning Mills Pvt. Ltd. and CIT v/s Emerald Jewel Industry Pvt. Ltd. The Tribunal found that the AO's decision to allow the deduction based on the initial assessment year 2008-09 was a possible view under the law and not erroneous or prejudicial to the Revenue's interests. 2. Disallowance of Foreign Travel Expenses: The CIT also questioned the AO's disallowance of foreign travel expenses, arguing that the AO had made a negligible disallowance despite the lack of documentary evidence. The assessee argued that the AO had followed a consistent method of disallowing 4% of the expenses based on the ratio of export sales, which had been accepted in previous years. The Tribunal found that the AO's disallowance was based on a consistent and reasonable method, and there was no new evidence or change in circumstances to warrant a different view. Therefore, the Tribunal held that the AO's decision on foreign travel expenses was not erroneous or prejudicial to the Revenue's interests. 3. Examination of Generator Guarantee Claim Receivable and Other Receivables: The CIT had raised concerns about the AO's failure to examine the generator guarantee claim receivable of Rs. 28,00,000 and other receivables of Rs. 30,41,000. The assessee argued that these amounts were already credited to the revenue account in the Profit & Loss Account, and there was no need for further examination. The Tribunal did not find any specific findings or directions from the CIT on this issue in the impugned order and focused primarily on the first two issues. Therefore, the Tribunal did not delve into this matter in detail. Conclusion: The Tribunal set aside the CIT's order under section 263, upholding the AO's assessment order. The Tribunal concluded that the AO's decisions regarding the deduction under section 80IA and the disallowance of foreign travel expenses were based on possible legal views and consistent methods, and thus, were not erroneous or prejudicial to the interests of the Revenue. Consequently, the assessee's appeal was allowed.
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