2015 (8) TMI 307 - AT - Income Tax

Revision proceedings u/s. 263 - the assessee had claimed set off of carried forward un-absorbed depreciation relating to assessment year 1999-2000 against the income in the financial year 2007-08, which was not allowable as the same had to be dealt with in line with the provisions of section 32(2) of the Act, applicable to the said year - Held that - Applying the ratio laid down by the Hon ble Gujarat High Court in General Motors India Pvt. Ltd. Vs. DCIT (2012 (8) TMI 714 - GUJARAT HIGH COURT ) to the facts of the present case, the issue of allowability of unabsorbed depreciation relating assessment year 1999-2000 against the income arising in assessment year 2008-09 is to be set off and consequently, the order passed by the Assessing Officer in this regard cannot be said to be prejudicial to the interest of Revenue. Consequently, the revisionary powers exercised by the Commissioner against the order of assessment which is not prejudicial to the interest of Revenue, even where the order passed by the Assessing Officer was erroneous, cannot be exercised, since the twin conditions have not been fulfilled in the case. In view thereof, we reverse the directions of the Commissioner in this regard and uphold the order of Assessing Officer in allowing the set off of unabsorbed depreciation relating to assessment year 1999-2000 amounting to ₹ 5,41,84,430/- claimed against the business income for assessment year 2008-09 in computation of income. The directions of the Commissioner in this regard are thus, reversed and the order of Assessing Officer is restored. We find merit in the alternate plea raised by the assessee that in view of the information being available on record though in the proceedings under section 154 of the Act, the Commissioner could not exercise the jurisdiction under section 263 of the Act. We set-aside the order of Commissioner on this ground also. - Decided in favour of assessee. Proceedings under section 263 in relation to the management / license fees paid - The said issue was restored back to the file of Assessing Officer to decide the same after verifying the submissions of the assessee and due verification of the books of account and other details - The learned Authorized Representative for the assessee pointed out that in the set-aside proceedings, the Assessing Officer had allowed the claim of the assessee in the order passed under section 143(3) r.w.s. 263 of the Act and no addition has been made on this account. In view of the order of Assessing Officer in allowing the claim of assessee in set-aside proceedings and passing the order under section 143(3) r.w.s. 263 of the Act, the issue raised in the present appeal against the exercise of jurisdiction of Commissioner under section 263 of the Act has become infructuous and the same is dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of jurisdiction exercised under section 263 of the Income-tax Act, 1961.
2. Denial of carry forward of unabsorbed depreciation pertaining to assessment year 1999-00.
3. Deduction of management license fees.

Detailed Analysis:

1. Validity of Jurisdiction Exercised Under Section 263 of the Income-tax Act, 1961:

The primary issue in the appeal is the exercise of jurisdiction by the Commissioner of Income Tax (CIT) under section 263 of the Income-tax Act, 1961. The assessee contends that the CIT erred in invoking section 263, arguing that the requisite assumptions of jurisdiction were lacking. The CIT had issued a show cause notice under section 263, alleging that the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interests of Revenue. The CIT's basis for this included the set-off of unabsorbed depreciation from the assessment year 1999-2000 and the deduction of management license fees. The Tribunal emphasized that both conditions of the order being erroneous and prejudicial to the interests of Revenue must be fulfilled for the CIT to exercise jurisdiction under section 263.

2. Denial of Carry Forward of Unabsorbed Depreciation Pertaining to Assessment Year 1999-00:

The CIT challenged the AO's allowance of unabsorbed depreciation from the assessment year 1999-2000 against the income for the assessment year 2008-09. The CIT relied on the decision of the Special Bench of the Mumbai Tribunal in DCIT Vs. Times Guarantee Ltd., which held that unabsorbed depreciation for the assessment year 1999-2000 could not be set off against the income for the assessment year 2008-09. However, the Tribunal referred to the decision of the Hon'ble Gujarat High Court in General Motors India Pvt. Ltd. Vs. DCIT, which held that unabsorbed depreciation from assessment years 1997-98 to 2001-02 could be carried forward indefinitely and set off against the income of subsequent years, including the assessment year 2008-09. The Tribunal concluded that the AO's order allowing the set-off of unabsorbed depreciation was not prejudicial to the interests of Revenue, and thus, the CIT's exercise of jurisdiction under section 263 was not justified.

3. Deduction of Management License Fees:

The CIT also questioned the AO's allowance of management license fees paid by the assessee to SABMiller Management (IN) BV Netherlands, directing the AO to re-verify the issue. The assessee argued that the AO had already made due inquiries and allowed the deduction in the original assessment. The Tribunal noted that the AO had indeed called for details and applied his mind during the original assessment proceedings. Additionally, in the set-aside proceedings, the AO again allowed the deduction of management license fees. Consequently, the Tribunal held that the issue had become infructuous and dismissed the CIT's directions for re-verification.

Conclusion:

The Tribunal allowed the appeal of the assessee, setting aside the CIT's order under section 263 of the Income-tax Act, 1961. The Tribunal upheld the AO's order allowing the set-off of unabsorbed depreciation from the assessment year 1999-2000 against the income for the assessment year 2008-09 and dismissed the CIT's directions regarding the re-verification of management license fees. The Tribunal emphasized the necessity for both conditions of an order being erroneous and prejudicial to the interests of Revenue to be fulfilled for the CIT to exercise jurisdiction under section 263.