2018 (3) TMI 1167 - HC - Income Tax

Profits for the purposes of deduction under Section 80 HHC - compensation paid under the Voluntary Retirement Scheme (VRS) to the workers of its Bhandup Unit, would be costs which is includable in traded export goods - Held that - We note that the AO had considered the detailed written submission, inter alia, on the issue of deduction under Section 80HHC of the Act. On consideration of the submissions, the Assessing Officer came to view that the costs incurred for payment of VRS to its Bhandup Unit workers, cannot be considered as an indirect cost to determine the profits of its traded export goods for allowing deduction under Section 80HHC of the Act. This view is a possible view as it is not the case of the Revenue that in law, it is an impossible view. Therefore, in the above facts, the exercise of powers of Revision by the CITwas in the face of the decision of the Apex Court in CIT v/s. Max India Ltd. 2007 (11) TMI 12 - Supreme Court of India . In the above case, it has been held that where two views are possible, a power of Revision is not to be exercised by the Commissioner only because he does not agree with the view of the Assessing Officer, unless, of course, the view of the Assessing Officer is untenable in law. This is not even urged by the Revenue before the Tribunal or before us. Therefor, admittedly a possible view. No substantial questions of law.

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal dated 18th June, 2014 for Assessment Year 1994-95.
2. Interpretation of whether VRS compensation is includable in traded export goods for the purpose of deduction under Section 80HHC of the Income Tax Act, 1961.
3. Exercise of Revision powers under Section 263 of the Act by the Commissioner of Income Tax.
4. Assessment of the view taken by the Assessing Officer regarding VRS compensation as a possible view.

Analysis:
1. The High Court of Bombay heard an appeal challenging the order of the Income Tax Appellate Tribunal dated 18th June, 2014, pertaining to the Assessment Year 1994-95. The primary issue raised was whether the Tribunal was justified in holding that the Assessing Officer's view on VRS compensation was one of the possible views, thus not erroneous prejudicial to the revenue.

2. The dispute centered around the treatment of VRS compensation paid to workers under the Voluntary Retirement Scheme (VRS) at the Bhandup Unit concerning its inclusion in traded export goods for the purpose of deduction under Section 80HHC of the Act. The Assessing Officer had initially excluded the VRS costs from the computation of profits eligible for deduction under Section 80HHC.

3. The Commissioner of Income Tax exercised Revision powers under Section 263 of the Act and set aside the Assessing Officer's order, directing the inclusion of indirect costs related to VRS in determining the deduction under Section 80HHC. This decision was based on the premise that the initial Assessment Order was erroneous and prejudicial to revenue.

4. The Tribunal, upon appeal, overturned the Commissioner's decision, emphasizing that the Assessing Officer had considered detailed submissions regarding the VRS compensation issue. The Tribunal concluded that the Assessing Officer's view was a possible one, and since it was not untenable in law, the Revision under Section 263 was deemed unwarranted. The High Court concurred with this assessment, citing the principle that Revision should not be exercised merely due to a disagreement with the Assessing Officer's view if it is a possible interpretation.

In conclusion, the High Court dismissed the appeal, stating that the question raised did not present any substantial legal issues. No costs were awarded in the case.