2017 (10) TMI 872 - HC - Income Tax

Entitlement to benefit of Section 10A - issue raised for the first time before the tribunal - Only when the Commissioner was seized of the proceedings under Section 263, the assessee raised an alternative claim for the benefit of Section 10A - Tribunal illegality by directing the Assessing Officer to decide the matter afresh duly adverting to the claim of the assessee for the benefit of Section 10A - Held that - Admittedly, the assessee initially claimed the benefit of Section 10B which was allowed by the Assessing Officer. Only when the Commissioner was seized of the proceedings under Section 263, the assessee raised an alternative claim for the benefit of Section 10A. The Commissioner did not examine that plea and on the other hand, directed the Assessing Officer to withdraw the exemption under Section 10B. It was this order which was challenged by the assessees in the appeals filed by them before the Tribunal. Such an appeal filed by the assessee is liable to be considered by the Tribunal exercising its power under Section 254 of the Act which obliged the Tribunal to consider the appeal and pass such orders thereon as it thinks fit. It was this power of the Tribunal which was considered by the Apex Court in NTPC s case 1996 (12) TMI 7 - SUPREME Court which held that where the Tribunal is only required to consider the questions of law arising from the facts which are on record, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Even if the contention raised by the learned Senior Counsel for the revenue that the power conferred on the appellants under Section 263 only authorised him to examine whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue, that restriction of power cannot affect the powers of the Tribunal which is bound to exercise under Section 254 of the Act. No reason to think that the Tribunal has committed an illegality by directing the Assessing Officer to decide the matter afresh duly adverting to the claim of the assessee for the benefit of Section 10A. - Decided in favour of the assessee

Summary

Issues:
Challenge to common order by revenue regarding Section 10A benefit claim.

Analysis:
The appeals were filed by the revenue challenging the common order passed by the Income Tax Appellate Tribunal concerning the assessment year 2010-2011, directing the Assessing Officer to consider the claim of the assessee for the benefit of Section 10A of the Income Tax Act. The key issue revolved around whether the assessee was entitled to raise an alternative claim before the Commissioner under Section 263 of the Act. The Commissioner had invoked jurisdiction under Section 263, finding the assessment orders erroneous and prejudicial to revenue's interest, leading to a direction to withdraw the exemption under Section 10B. However, the Commissioner did not consider the claim for Section 10A benefit. The Tribunal, in its order, directed to decide the issue afresh, including the claim for Section 10A benefit, which was challenged by the revenue in the appeals. The questions of law framed included whether the assessee could claim Section 10A benefit after the rejection of Section 10B benefit, and whether the Tribunal's interference with the Commissioner's order was lawful.

The learned Senior Counsel for the revenue argued that once the benefit under Section 10B was found to be erroneous, the assessee could not claim Section 10A benefit. However, the learned senior counsel for the assessee contended that the statutory benefit under Section 10A could not be denied based on a wrong claim under Section 10B. The Tribunal, citing the Apex Court's judgment in National Thermal Power Co. Ltd. v Commissioner of Income Tax, held that parties could raise questions affecting tax liability before the Tribunal, even if raised for the first time. The Tribunal's power under Section 254 obligated it to consider the appeal and make appropriate orders. The Tribunal's decision to direct the Assessing Officer to reconsider the claim for Section 10A benefit was deemed lawful, following the interpretation of Section 254 by the Apex Court.

The judgment of the Delhi High Court in Regency Creations Ltd. was referenced by the revenue's counsel, but a subsequent order by the Delhi High Court supported the assessee's claim for Section 10A benefit. The High Court directed the Tribunal to examine the claim for Section 10A benefit upon reconsideration. Consequently, the High Court found no illegality in the Tribunal's order and ruled in favor of the assessee, dismissing the revenue's appeals.