2015 (3) TMI 611 - AT - Income Tax

Revision u/s 263 - CIT had observed that, firstly, the Tribunal has not accepted the computation of deduction u/s 80-I on the profits of CPP and has mainly directed to allow the deduction u/s 80- IA in accordance with law - Held that - In the original assessment order, the AO did not allow the claim of deduction u/s 80-IA in respect of the CPP unit. Finally, the said deduction has been allowed by the Tribunal following the earlier year order of the Tribunal in assessee s own case. How the computation of profit of CPP has to be worked out, has been discussed by him in detail. In our opinion, such an observation and the finding of the CIT is not tenable in law and on facts, because the assessee s claim for deduction u/s 80-I on CPP has been specifically allowed by the Tribunal and secondly, the ratio and method of determination of profit of CPP unit has already been decided in the earlier years and it was also not a subject matter of dispute or difference by the department. Thus, the issue of claim of deduction u/s 80-I including the determination of ratio of CPP stands merged with the order of the Tribunal. The AO has mainly followed the direction of the Tribunal and allowed the deduction as per the profit determined. Such a variation of deduction u/s 80- I, now cannot be disturbed by examining the claim of deduction of expenses denovo as held by him. The ratio of asset of gross block of fixed assets has been worked out in the manner, which has been determined and upheld in the earlier years. The same now cannot be disturbed on an entirely different footing specially when the AO has simply carried out the computation to allow the deduction u/s 80-I as per the order of the Tribunal. Such an observation of the CIT with regard to the adjustment of expenses is neither borne out from the original assessment order nor from the first appellate order. If at all, some mistake has occurred on the ratio of determination of profit, then the same would relate to the original assessment order dated 30.11.2000 and not in the second order. Such an order, now cannot be revised u/s 263, as it is clearly barred by limitation. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality and authorization of the CIT's order dated 26.03.2007.
2. Applicability of Section 263 of the Income Tax Act, 1961.
3. Conditions for invoking Section 263.
4. Validity of the CIT's order under Section 263 based on limitation grounds.
5. Computation and allowance of deductions under Sections 80-I and 80-IA.
6. Revisionary jurisdiction of the CIT under Section 263.

Issue-wise Detailed Analysis:

1. Legality and Authorization of the CIT's Order:
The assessee challenged the CIT's order dated 26.03.2007, claiming it to be "illegal, arbitrary and unauthorized." The CIT had invoked Section 263, which allows for revision of orders considered erroneous and prejudicial to the interests of the Revenue.

2. Applicability of Section 263 of the Income Tax Act, 1961:
The assessee argued that the CIT's order did not attract the provisions of Section 263 since the Assessing Officer (AO) had already given effect to the orders passed by the Income Tax Appellate Tribunal (ITAT). The assessee contended that invoking Section 263 was "bad in law."

3. Conditions for Invoking Section 263:
The assessee submitted that for Section 263 to be invoked, two conditions must be satisfied: the order must be erroneous and prejudicial to the interest of the Revenue. The assessee argued that both conditions must exist simultaneously and that the AO had merely followed the ITAT's final orders, making the CIT's invocation of Section 263 inappropriate.

4. Validity of the CIT's Order under Section 263 Based on Limitation Grounds:
The assessee raised additional grounds challenging the validity of the CIT's order on the basis of limitation, arguing that the order was passed beyond the time limit specified in Section 263. The assessee contended that the time limit should begin from the date of the original assessment order, not the order giving effect to the ITAT's order.

5. Computation and Allowance of Deductions under Sections 80-I and 80-IA:
The CIT sought to set aside the AO's order on the grounds that the aggregate profit of eligible units exceeded the gross business income, violating Sections 80AB and 80B(5). The AO had allowed deductions under Sections 80-I and 80-IA, but the CIT argued that these deductions should be restricted to the business income and should not exceed the gross total income. The CIT directed the AO to recompute the deductions accordingly.

6. Revisionary Jurisdiction of the CIT under Section 263:
The CIT used revisionary jurisdiction under Section 263, arguing that the AO's order was erroneous and prejudicial to the Revenue's interests. The CIT emphasized that deductions under Chapter VI-A should be computed in relation to the net income of the eligible unit included in the gross total income. The CIT's direction was to ensure compliance with Sections 80A(2), 80AB, and 80B(5).

Judgment Analysis:

Assessment Year 1997-98:
The Tribunal dismissed the appeal for the assessment year 1997-98. It affirmed the CIT's order, stating that the CIT had correctly directed the AO to compute deductions under Chapter VI-A in accordance with the provisions of the law. The Tribunal found no infirmity in the CIT's direction and held that the CIT had not transgressed his jurisdiction.

Assessment Year 1998-99:
For the assessment year 1998-99, the Tribunal allowed the appeal. It noted that the Tribunal had already allowed the claim for deduction under Section 80-I for the Captive Power Plant (CPP) in earlier years. The CIT's observation that the Tribunal had not accepted the computation method was found untenable. The Tribunal held that the CIT could not revise the order under Section 263 since the issue had already been decided by the Tribunal, making the CIT's order barred by limitation.

Conclusion:
The Tribunal dismissed the appeal for the assessment year 1997-98, affirming the CIT's order. However, it allowed the appeal for the assessment year 1998-99, stating that the CIT's order was barred by limitation and that the issue had already been decided by the Tribunal in earlier years. The Tribunal emphasized the importance of computing deductions in accordance with the law and upheld the CIT's directions where applicable.