2013 (3) TMI 843 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction exercised by CIT u/s 263.
2. Deduction u/s 80-O.
3. Deduction u/s 80HHC.
4. Inclusion of excise duty and sales tax in total turnover.

Summary:

Issue 1: Jurisdiction exercised by CIT u/s 263

The assessee contended that the jurisdiction exercised by CIT u/s 263 was wrongly exercised and should be quashed. The CIT noted that the assessee claimed deductions u/s 80-O and 80HHC incorrectly, leading to erroneous and prejudicial assessments. The Tribunal upheld the CIT's jurisdiction u/s 263, stating that the assessment order was erroneous and prejudicial to the revenue's interest due to lack of proper inquiry by the A.O.

Issue 2: Deduction u/s 80-O

The CIT objected to the deduction u/s 80-O, arguing that the consideration must be for use, not sale, of technical know-how outside India. The Tribunal found that the assessee failed to establish that the technical know-how was exclusively used outside India. Thus, the CIT's exercise of jurisdiction u/s 263 was upheld. The Tribunal also noted that the sale agreement did not restrict the buyer from using the technical know-how in India, making the deduction u/s 80-O inapplicable.

Issue 3: Deduction u/s 80HHC

The CIT objected to the exclusion of excise duty and sales tax from the total turnover for deduction u/s 80HHC. The Tribunal, referencing the Supreme Court judgment in Laxmi Machines, held that excise duty and sales tax should not be included in the total turnover for computing deduction u/s 80HHC. Thus, the CIT's objection on this point was invalid, but the overall order u/s 263 was upheld due to the erroneous deduction u/s 80-O.

Issue 4: Inclusion of excise duty and sales tax in total turnover

The revenue's appeal argued that excise duty and sales tax should be included in the total turnover for deduction u/s 80HHC. The Tribunal rejected this, citing the Supreme Court's decision in Laxmi Machines. However, the Tribunal remanded the issue of deduction u/s 80-O back to the CIT(A) for fresh decision, allowing the assessee to provide evidence that the technical know-how could not be used in India.

Conclusion:

The assessee's appeal and cross-objection were dismissed. The revenue's appeal was partly allowed for statistical purposes, with the matter of deduction u/s 80-O remanded for further examination.