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2018 (3) TMI 937 - AT - Income TaxRevision u/s 263 - claim of the assessee under section 80RR - availability of the benefit of DTAA - Held that - CIT has correctly assumed jurisdiction under section 263 of the Income Tax Act on the observation of the ld. Assessing officer, with respect to the claim of the assessee under Double Taxation Avoidance Agreement. Though identical issue arose in the case of the assessee for earlier assessment year wherein while deciding the issue under section 263 of the Income Tax Act, it was held by the coordinate bench that this issue is academic in nature and therefore the issue was decided for non-prosecution as assesses did not advance any argument. Before us substantial arguments were advanced by both the patties, therefore, we uphold the action of the ld. CIT as the observation made by the ld. Assessing Officer are erroneous. With respect to the issue of deduction under section 80-G ld. CIT(A) has already allowed the claim of the assessee in appeal wherein the addition was made by the ld. Assessing Officer in passing an assessment order passed u/s 143(3) read with section 148 read with section 263 of the Income Tax Act. The above deletion of the addition has not been challenged by the revenue further and hence, it is apparent that there is no error in the order of the ld. Assessing Officer in allowing the claim under section 80-G of the Income Tax Act. In view of this, the order of the ld. CIT is not sustainable so for as it relates to the deduction under section 80-G of the Income Tax Act claimed by the assessee on this point. With respect to the capital loss suffered by the assesses on sale of the property and source of the funds for acquisition of the new property, no addition has been made by the ld. Assessing Officer while passing an order under section 143(3). pursuant to the order under section 263 of the Act. hence, it cannot be said that there was an error in the order of the Ld assessing officer. In view of this, the assumption of jurisdiction by the ld. CIT for revision under section 263 is not sustainable on these points. AO passed u/s. 143 (3) read with section 148 of The Income Tax Act read with section 263 of the Act, in the return of income filed originally, the assessee has not claimed any benefit of Double Taxation Avoidance Agreement. Further the return in response to notice under section 148 also does not show any such claim made by the assessee. The action u/s 147 was taken for the purpose of verification of the claim of the assessee under section 80RR and not for the claim of benefit under Double Taxation Avoidance Agreement. Therefore, it is apparent that in reopened assessment proceedings, the assessee has made a fresh claim. As held in CIT v. Sun Engg. Works (P.) Ltd. 1992 (9) TMI 1 - SUPREME Court a matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as escaped income . Therefore, we do not find any merit in the cross objection filed by the assessee for this year because of the reason that the reassessment proceedings were initiated for the purpose of working out the deduction under section 80RR of the Income Tax Act and not about the claim of benefit of the DTAA to the assessee. In the result cross objection filed by the assessee is dismissed. Benefit of Double Taxation Avoidance Agreement is not available to the assessee for assessment year 2004-05 and income earned by the assessee from stage shows performed outside India shall be included in the total income chargeable to tax in India. In accordance with he provisions of the Income-tax Act, 1961 and relief shall be granted to the assessee in accordance with the method for elimination or avoidance of double taxation provided in those agreements. In view of above, the cross objection filed by the assessee is set aside to the file of the ld. Assessing Officer to consider the income of the assessee earned from foreign stage and grant necessary relief in accordance with the method for elimination or avoidance of double taxation provided in those agreements.
Issues Involved:
1. Legality of the order passed under section 263 of the Income Tax Act. 2. Allocation of expenses for deduction under section 80RR. 3. Taxation of income earned from foreign stage shows under Double Taxation Avoidance Agreements (DTAA). 4. Validity of deduction under section 80G. 5. Examination of capital loss and source of funds for property acquisition. 6. Condonation of delay for filing cross objections. Detailed Analysis: 1. Legality of the order passed under section 263 of the Income Tax Act: - The assessee contested the order passed by the Commissioner of Income Tax (CIT) under section 263, which revised the assessment order on multiple grounds. The CIT deemed the original assessment order as erroneous and prejudicial to the interest of the revenue. The Tribunal upheld the CIT's jurisdiction under section 263, particularly on the issues of allocation of expenses for deduction under section 80RR and the applicability of DTAA. The Tribunal found that the Assessing Officer (AO) had not conducted adequate inquiries into these matters, making the original order erroneous. 2. Allocation of expenses for deduction under section 80RR: - The Tribunal examined whether the AO appropriately allocated expenses for the purpose of calculating the deduction under section 80RR. The CIT had argued that the AO failed to allocate expenses correctly, which led to an excessive deduction claim by the assessee. The Tribunal upheld the CIT's view, stating that the AO did not conduct a thorough inquiry into the allocation of expenses, leading to an erroneous order. The Tribunal referred to previous judgments which supported the CIT's approach to allocate expenses based on revenue from different streams. 3. Taxation of income earned from foreign stage shows under DTAA: - The Tribunal addressed the applicability of DTAA provisions for income earned from foreign stage shows. The CIT had argued that the AO misinterpreted the DTAA provisions, leading to an incorrect tax exemption for the assessee. The Tribunal upheld the CIT's view, stating that the AO's interpretation was erroneous. The Tribunal also noted that similar issues had been decided in favor of the revenue in previous years. For assessment years up to 2003-04, the Tribunal ruled in favor of the assessee, allowing the benefit of DTAA. However, for the assessment year 2004-05 onwards, the Tribunal referred to the amendment in section 90(3) and the subsequent notification, which clarified that income "may be taxed" in the other country should still be included in the total income chargeable to tax in India. 4. Validity of deduction under section 80G: - The Tribunal examined the CIT's revision of the AO's allowance of deduction under section 80G. The CIT had argued that the AO did not make necessary inquiries before allowing the deduction. The Tribunal noted that the CIT (A) had allowed the deduction, and the revenue did not challenge this decision. Therefore, the Tribunal concluded that there was no error in the AO's original order regarding the section 80G deduction. 5. Examination of capital loss and source of funds for property acquisition: - The Tribunal reviewed the CIT's concerns about the AO's failure to examine the capital loss on the sale of property and the source of funds for acquiring a new property. The Tribunal noted that no addition was made by the AO in the reassessment order pursuant to the section 263 order. Therefore, the Tribunal concluded that the CIT's assumption of jurisdiction on these points was not sustainable. 6. Condonation of delay for filing cross objections: - The Tribunal considered the assessee's application for condonation of delay in filing cross objections. The assessee argued that the delay was due to recent advice based on a Supreme Court decision. The Tribunal condoned the delay, citing the need for substantial advancement of justice. Conclusion: - The Tribunal upheld the CIT's order under section 263 on the issues of allocation of expenses for deduction under section 80RR and the applicability of DTAA. The Tribunal dismissed the appeal regarding the section 80G deduction and the examination of capital loss and property acquisition. The Tribunal allowed the cross objections for earlier years based on DTAA provisions but denied the benefit for the assessment year 2004-05 onwards due to the amendment in section 90(3) and the subsequent notification.
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