2007 (8) TMI 321 - HC - Income Tax

Deduction u/s 80I- Order passed by Commissioner u/s 263 in favour of revenue was cancelled by the Tribunal holding that assessee has not commenced his production in the year 1986-87 - That order has admittedly attained finality as the Revenue has not challenged it any further - once an order u/s 263 passed has been reversed by the Tribunal then the Revenue cannot claim that in respect of the same year different numbers of years are required to be counted for the purposes of granting benefit of section 80-I - principle of consistency would not permit the Revenue to take a stand contrary to the one accepted by it

Issues:
1. Appeal under section 260A of the Income-tax Act, 1961 challenging the order of the Income-tax Appellate Tribunal for the assessment year 1994-95.
2. Disallowance under section 80-I of the Act based on the Commissioner's order under section 263 for the assessment year 1996-97.
3. Tribunal's decision on the first year of production and entitlement to deductions under sections 80-I and 80HH.
4. Substantial question of law raised by the Revenue regarding deduction under section 80-I.
5. Principle of consistency in tax matters as per Supreme Court precedents.
6. Finality of Tribunal's order on the commencement of production in the year 1986-87.

Analysis:
1. The High Court addressed an appeal filed by the Revenue challenging the Income-tax Appellate Tribunal's order for the assessment year 1994-95 under section 260A of the Income-tax Act, 1961. The Assessing Officer initially disallowed the claim under section 80-I of the Act based on the Commissioner's order under section 263 for the assessment year 1996-97, which stated that the year 1986-87 was the first year of production. However, the Tribunal later overturned this decision, emphasizing that commercial production commencement determines the first year of production, not trial production. This decision was in line with the law established by the High Court of Delhi in a previous case.

2. The Tribunal's ruling was based on the fact that the Assessing Officer had acknowledged in 1986-87 that it was not the first year of production. As the Commissioner's order under section 263 was reversed by the Tribunal, the High Court found no legal flaw in the Commissioner of Income-tax (Appeals) allowing the claim of the assessee. The Tribunal's decision on the first year of production and entitlement to deductions under sections 80-I and 80HH favored the assessee, leading to the dismissal of the Revenue's claim.

3. The Revenue presented a substantial question of law regarding the deduction under section 80-I, arguing that it was claimed beyond the permissible period of eight years. However, the High Court concluded that once the Tribunal had reversed the Commissioner's order in favor of the Revenue, the principle of consistency, as established by the Supreme Court in previous cases, prevented the Revenue from challenging the same issue again. The Tribunal's final decision on the commencement of production in 1986-87 was upheld, and the High Court found no grounds for admitting the Revenue's appeal.

In summary, the High Court rejected the Revenue's appeal, emphasizing the importance of consistency in tax matters and upholding the Tribunal's decision regarding the first year of production and the entitlement to deductions under the relevant sections of the Income-tax Act.

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