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2016 (10) TMI 541 - AT - Income TaxRevision u/s 263 - CIT(A) held the order of the AO as erroneous & prejudicial to the interest of Revenue on the ground that the AO failed to examine the issue of interest income whether it is eligible for exemption u/s 10AA - Held that - From the facts, we find that the AO while allowing the exemption u/s 10AA of the Act objected that the certain expenses and interest income on FD claimed by the assessee have been wrongly apportioned to the different units of the assessee. From the above order of Ld. CIT(A) we find that the issue of income on FD has been duly dealt in the order of AO and subsequently by ld. CIT(A). The AO has not accepted the plea of the assessee for allocation of the interest income on FD & interest expenses. This observation of the Assessing Officer, in our considered view, shows that the AO has admitted that the interest income on FD has direct link with the business and accordingly the same is eligible for deduction u/s 10AA of the Act. In the instant case, the impugned order passed by ld. CIT u/s 263 of the Act looks to the issue from different angle and therefore holding the order of the AO erroneous and prejudicial to the interest of Revenue. If that is allowed then there can be several dimensions to view the issue which has been overlooked by the AO at the time of assessment. Accordingly, the impugned order passed by AO after application of mind cannot be regarded as erroneous in so far prejudicial to the interest of revenue because the Ld. CIT will look the issue at different angle. The impugned order passed by AO is neither erroneous nor prejudicial to the interest of revenue. Therefore we find the impugned revision order unsustainable in law, and we, therefore, quash the same. The issue gets the relief accordingly. - Decided in favour of assessee.
Issues Involved:
1. Assessment under Section 263 of the Income Tax Act, 1961 regarding interest income and its eligibility for exemption under Section 10AA. Detailed Analysis: Issue 1: Assessment under Section 263 of the Income Tax Act The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax-3, Kolkata under Section 263 of the Income Tax Act, 1961. The Assessing Officer (AO) had assessed the income of the assessee at a higher amount under Section 143(3) of the Act. The Commissioner opined that the interest income earned by the assessee from its units in the Special Economic Zone (SEZ) did not have a direct nexus with the business undertaking, thus affecting the exemption claimed under Section 10AA of the Act. The Commissioner directed the AO to re-examine the issue. The assessee contended that the order of the AO had merged with the order of the CIT(A) and, therefore, the revision order was not sustainable. The Tribunal found that the issue of interest income had been adequately considered by the AO and CIT(A), and the impugned revision order was deemed unsustainable in law. The appeal was allowed, and the revision order was quashed. Judgments Cited: 1. CIT v. Shalimar Housing & Finance Ltd. (2010) 320 ITR 157 (MP): The order cannot be regarded as prejudicial to the interest of Revenue if the issues have already been dealt with by the CIT(A). 2. General Beopar Co (P) Ltd. v. CIT (1987) 31 taxmann 108 (Cal): The assessment order merges with the appellate order, and the CIT cannot revise such orders. 3. J.K. Synthetics Ltd. v. ACIT (1976) 105 ITR (344) (All): The appellate authority can adjudicate on findings in favor of the assessee, and the entire assessment order merges in the appellate order. This detailed analysis provides a comprehensive overview of the legal judgment, highlighting the key issues, arguments, and conclusions reached by the Tribunal.
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