2019 (5) TMI 947 - AT - Income Tax

Revision u/s 263 - claim of deduction under section 10A(lA) - as per Pr. CIT the benefit of Section 10A/10B should be allowed after setting off losses as per the provisions of Section 71 72 from eligible units run by the tax payer - assessee relying on Circular No.1/2013 dated 17.1.2013 - HELD THAT - We observe that during the course of proceedings u/s 143(3) of the Act specific query was raised by A.O by way of questionnaire dated 9.2.2015 regarding the justification of deduction/ exemption claimed u/s 10A. From perusal of the extract of the questionnaire issued by Ld. A.O dated 9.2.2015 and specific reply dated 3.3.2015 clearly shows that this is not the case of NO ENQUIRY rather the Ld. A.O has made a PROPER AND DETAILED ENQUIRY and accepted the claim of the assessee by interpreting the provisions of law, judicial pronouncements as well as the Circular issued by Central Board of Direct Taxes. From perusal of the judgments in CIT ANR V/s M/s. Yokogawa India Ltd 2016 (12) TMI 881 - SUPREME COURT Decision Craft Analytics Ltd V/s DCIT 2019 (4) TMI 191 - ITAT AHMEDABAD it is well established that in the instant case the assessee made correct claim by firstly taking the benefit of Section 10A for the profits earned from SEZ units and remaining profits of other units including SEZ unit were utilised for setoff of current and brought forward losses. It remains an undisputed fact that the Assessing Officer had made adequate enquires as noted herein above adopting one of permissible view for allowing the assessee s claim for exemption u/s 10A before the claim of set off of brought forward and current year loss. Pr. CIT took a different view of the matter. However that would not be sufficient to permit Ld. Pr. CIT to exercise the power u/s 263 of the Act because when two views are possible and Ld. Pr.CIT does not agree with the view taken by the Assessing Officer, assessment order cannot be treated as erroneous and prejudicial to the interest of the revenue unless the view taken by the Assessing Officer not unacceptable in law. We therefore set aside the finding of Pr. CIT on this issue as it was a mere change of opinion which would not enable Ld. Pr. CIT to exercise jurisdiction u/s 263 as the A.O had considered the details and the explanation offered by the assessee before accepting the claim. - Decided in favour of assessee. Revision u/s 263 - computing the book profit u/s 115JB - non inclusion the disallowance of interest paid to Income Tax and also directing the Ld. A.O for verifying the claim of additional depreciation on the alleged purchase of old and used plant and machinery - HELD THAT - Ld. Counsel for the assessee fairly accepted that this finding of Pr. CIT is correct and the directions given to the Ld. A.O to examine these issues two afresh is valid. We therefore uphold the order of Pr. CIT assuming jurisdiction u/s 263 only to the extent of direction given for computation of book profit u/s 115JB after considering the interest paid on income tax and direction to verify claim of additional depreciation on old and used machineries. - Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Invocation of power of revision under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (Pr. CIT).
2. Claim of exemption under Section 10A of the Income Tax Act.
3. Computation of book profit under Section 115JB of the Income Tax Act.
4. Claim of additional depreciation on old and used plant and machinery.

Issue-Wise Detailed Analysis:

1. Invocation of Power of Revision under Section 263:
The Pr. CIT invoked the power of revision under Section 263, arguing that the assessment order passed by the Assessing Officer (A.O) was erroneous and prejudicial to the interest of the revenue due to lack of proper enquiry and application of mind. The assessee contested this, arguing that the A.O had conducted a detailed enquiry and had applied his mind before passing the order. The Tribunal noted that for Section 263 to be invoked, the order must be both erroneous and prejudicial to the interest of the revenue. The Tribunal found that the A.O had conducted a detailed enquiry and had made a permissible interpretation of the law, thus the invocation of Section 263 on this ground was not justified.

2. Claim of Exemption under Section 10A:
The assessee claimed exemption under Section 10A for profits earned from its SEZ unit before setting off losses from other units. The Pr. CIT argued that this was against the CBDT Circular No. 07/2013, which mandates setting off losses before claiming exemption. The Tribunal referred to the Supreme Court judgment in CIT & Anr V/s Yokogawa India Ltd, which clarified that the deduction under Section 10A should be computed independently before setting off losses. The Tribunal found that the A.O had made a detailed enquiry and had followed a permissible view supported by the Supreme Court judgment. Therefore, the A.O's order allowing the exemption under Section 10A was not erroneous or prejudicial to the revenue, and the Pr. CIT's revision on this ground was set aside.

3. Computation of Book Profit under Section 115JB:
The Pr. CIT noted that the A.O had failed to add back the interest paid on income tax while computing the book profit under Section 115JB. The assessee conceded this point. The Tribunal upheld the Pr. CIT's direction to the A.O to recompute the book profit by including the interest paid on income tax, as the A.O had not applied his mind to this issue.

4. Claim of Additional Depreciation on Old and Used Plant and Machinery:
The Pr. CIT observed that the A.O had allowed additional depreciation on old and used plant and machinery, which was not permissible under Section 32. The assessee conceded this point as well. The Tribunal upheld the Pr. CIT's direction to the A.O to verify and correct the claim of additional depreciation, as the A.O had not properly examined this issue.

Conclusion:
The Tribunal partly allowed the assessee's appeal. It set aside the Pr. CIT's order regarding the exemption under Section 10A, finding that the A.O had made a detailed enquiry and followed a permissible view. However, it upheld the Pr. CIT's directions regarding the computation of book profit under Section 115JB and the claim of additional depreciation on old and used machinery, as the A.O had not adequately addressed these issues.