2018 (1) TMI 1552 - AT - Income Tax

Revision u/s 263 - MAT Computation - higher depreciation on the Energy Saving Equipments as well as pollution control equipments - HELD THAT - Addition on account of excess stock found during the course of survey proceedings in the normal computation of income. However, the tax was charged on the book profit u/s 115JB of the Act computed and therefore, even if the claim of higher/additional depreciation is disallowed there will be no effect on the tax liability as the AO has computed the total income as per the provisions of Section 115JB and charged MAT on the same. Therefore, we find that the claim of higher depreciation on the Energy Saving Equipments as well as pollution control equipments is not going to effect the Revenue when the income of the assessee was assessed u/s 115JB and MAT was charged. Even if the claim was disallowed if the higher depreciation claim was disallowed the tax liability under MAT was still higher than the normal computation. It is settled proposition of law the Commissioner can invoked the provision of Section 263 only when the twin conditions being the order of the AO is erroneous as well as prejudicial to the interest of the Revenue are satisfied. In the case in hand for the sake of argument even if the order of the AO is considered as erroneous but the same is not prejudicial to the interest of the Revenue so far as the claim of higher depreciation is concerned as the income of the assessee would be computed u/s 115JB and the tax liability under MAT is still more than the normal computation of income. DR has fairly admitted this fact that even after disallowance of the claim of higher depreciation the tax liability under MAT would be higher than the normal computation. Further, this issue of higher/additional depreciation is not recurring in nature and limited to the year under consideration. We set aside the impugned order passed u/s 263 - Decided in favour of assessee.

Summary

Issues Involved:
1. Revision order passed under section 263 of the Income Tax Act for the A.Y. 2012-13.
2. Claim of higher depreciation on Energy Saving Equipments and 100% depreciation on pollution control equipments.
3. Assessment under section 115JB and its impact on tax liability.
4. Application of Section 263 - Error and prejudice to the interest of Revenue.

Detailed Analysis:

1. Revision Order under Section 263:
The appeal challenges the revision order dated 29.02.2016 of CIT (A), Jaipur passed under section 263 of the Income Tax Act for the A.Y. 2012-13. The grounds raised by the assessee include contentions about the legality and arbitrariness of the order, as well as the assessment being prejudicial to the interest of revenue.

2. Claim of Higher Depreciation:
The Commissioner observed that the assessee had claimed higher depreciation on "Energy Saving Equipments" and 100% depreciation on pollution control equipments during the assessment. The Commissioner proposed to revise the order as the nature of equipments and purchases were not fully verified by the Assessing Officer. However, the assessee argued that all relevant records were furnished, and the AO allowed the claims after inquiry. The Commissioner, nevertheless, held the assessment order as erroneous and prejudicial to the interest of Revenue, directing a reexamination of the depreciation issues.

3. Assessment under Section 115JB:
The assessment was completed under section 143(3) with the total income computed at ?9,01,53,202. Despite an addition on account of excess stock in the normal computation, tax was charged under section 115JB at the computed income. Disallowing the higher depreciation claims would not impact the tax liability significantly, as the MAT was charged based on the 115JB computation. The Tribunal noted that even if the claims were disallowed, the tax liability under MAT would still be higher than the normal computation, rendering the revision order unnecessary.

4. Application of Section 263 - Error and Prejudice:
The Tribunal emphasized that for invoking Section 263, the order must be both erroneous and prejudicial to the interest of Revenue. In this case, while the order might be considered erroneous, it was not prejudicial as the tax liability under MAT remained higher than the normal computation even after disallowing the higher depreciation claims. The issue was limited to the year under consideration and did not have a significant impact on the Revenue's interest. Therefore, the Tribunal set aside the revision order under Section 263, allowing the appeal of the assessee.

In conclusion, the Tribunal's detailed analysis focused on the specific issues of higher depreciation claims, assessment under section 115JB, and the application of Section 263, ultimately leading to the setting aside of the revision order in favor of the assessee.