2022 (9) TMI 1185 - AT - Income Tax

Revision u/s 263 by CIT - write off of the investment in subsidiary under the Normal provisions and under the computation of Book Profits u/s 115JB - main reason for filing of the revised return was the claim of the write off of business investment - HELD THAT - We do not find any merits in observations of the PCIT for simple reason that the PCIT has not applied his mind to the facts of the case before coming to the conclusion. All the details about the investment and the reason why it is considered as for the purpose of business was explained to AO. The investments have been approved by Government of India/ RBI. The ITAT in Assessee's own case for the AY 2000-01 has held that the investment in the subsidiary in Dubai is for the purpose of business. Submissions before the AO were also submitted before the PCIT. It is apparent that the decision of the AO was based on application of his mind on the submissions of the Appellant. Merely because the AO, after calling for explanation and satisfying himself, has not mentioned the same in his Assessment order would not mean that he has not applied his mind on the specific submissions of the Appellant - we are of the considered view that the PCIT erred in assuming jurisdiction in an issue which has been considered by the AO and his decision is one of the possible views and is not unsustainable in law. Further on merits also, the claim of investment written off to the tune of Rs.184,53,62,000/- is an allowable deduction on the facts of the case and applying the ratio of the decisions referred to supra. Therefore, on this issue assumption of jurisdiction by the PICT fails. Amount debited in the P L A/c towards the winding up of the subsidiary company - Though in the years of making provision the same was disallowed in the memo of computation for the respective years, but in the year under appeal the amount was written off by adjusting the provision against the receivable, but the same was not claimed as deduction in the Memo of income. Therefore, the PCIT's observation in dealing with disallowance of Rs.205.47 Crores is infructuous as (i) claim for deduction of Rs.184.53 Crores has been dealt with by the PCIT separately (earlier point) and the balance of Rs.20.94 Crores was not at all claimed by the Appellant or allowed in the Assessment. In fact, the AR made a feeble attempt that the additional amount of Rs.20.94 Crores being an eligible deduction the appellate authority may allow the additional deduction Rs.20.94 Crores. As this is an appeal against the order of PCIT dealing with erroneous and prejudicial orders, it is not permissible to grant additional benefit while disposing an order of revision u/s 263. Hence, this issue does not arise separately as the claim for Rs.184.53 Crores has been dealt with above and the additional deduction of Rs.20.54 Crores was not claimed by the Appellant in their return. Hence, revision power of the PCIT on this issue is also fails. Deduction claimed while computing book profit under section 115JB for the amount of Rs.138,40,21,000/- which is for diminution in the value of investments - In this view of the matter and settled cases referred above it is clear beyond doubt that the deduction claimed is permissible deduction under regular computation as well as under MAT. The main reason for the PCIT to come to above conclusion is that there is difference between provisions of section 115JA and 115JB. But, fact remains that the Appellant was claiming deduction only under sec 115JB and sec 115JB has similar provision as sec 115JA in so far as provision of diminution in value of assets and withdrawal of provisions. For the reasons stated above, the Appellant had rightly claimed deduction under Book Profits on the write off of assets and exclusion of amounts withdrawn from Provision created earlier. Therefore, we are of the considered view that in the course of Assessment and also the legal provisions and decisions of the Appellate authorities, there is no error in the order of the Assessing Officer or in any event the AO has taken one possible view and hence, the PCIT is precluded from imposing his opinion by resorting to revision u/s 263. Thus, we are of the considered view that the power of revision of PCIT on this issue is also failed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961.
2. Write-off of investment in subsidiary (SFCL, Dubai) as a business loss.
3. Deduction claimed while computing book profit under section 115JB for the diminution in the value of investments.
4. Expenses debited in the Profit and Loss Account towards the winding up of the subsidiary company.

Detailed Analysis:

1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under section 263:
The assessee contended that the Pr. CIT erred in assuming jurisdiction under section 263, arguing that the assessment order passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the revenue. The AO had examined the books of account and considered various details before completing the assessment. The Pr. CIT, however, believed that the AO had not carried out adequate inquiries, rendering the assessment order erroneous and prejudicial to the revenue. The Tribunal concluded that the AO had taken a permissible view based on the facts and submissions provided by the assessee and that the Pr. CIT cannot substitute his opinion for that of the AO. The Tribunal cited the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. CIT, emphasizing that an order cannot be considered erroneous if the AO has adopted one of the possible views permissible in law.

2. Write-off of investment in subsidiary (SFCL, Dubai) as a business loss:
The assessee claimed a deduction for the write-off of investment in SFCL, Dubai, arguing that the investment was made for the purpose of its business. The AO accepted this claim during the original assessment. The Pr. CIT, however, questioned the direct nexus between the investment and the assessee's business in India. The Tribunal found that the investment was indeed for the purpose of the assessee's business, supported by approvals from the Government of India and the Reserve Bank of India. The Tribunal also referred to its earlier decision in the assessee's own case for AY 2000-01, where it was held that the investment in the subsidiary was for the purpose of business. The Tribunal concluded that the write-off of the investment was allowable as a business loss, and the Pr. CIT erred in assuming jurisdiction under section 263 on this issue.

3. Deduction claimed while computing book profit under section 115JB for the diminution in the value of investments:
The assessee had made a provision for the diminution in the value of investments in AY 2009-10, which was disallowed while computing book profit under section 115JB. In the current year, the investment was written off, and the provision was reversed and credited to the Profit and Loss Account. The assessee excluded this reversal from book profit computation under section 115JB, citing clause (i) of Explanation 1 to section 115JB. The Pr. CIT argued that the AO had not examined this issue in detail. The Tribunal found that the assessee had rightly excluded the reversal while computing book profit, as the provision was added back in AY 2009-10. The Tribunal cited relevant case laws supporting the assessee's claim and concluded that the Pr. CIT's assumption of jurisdiction under section 263 on this issue was erroneous.

4. Expenses debited in the Profit and Loss Account towards the winding up of the subsidiary company:
The Pr. CIT observed that the AO had not examined the issue of expenses debited towards the winding up of the subsidiary in detail. The Tribunal found that the amount of Rs. 205.47 crores included the write-off of investment in SFCL and advances receivable from SFCL. The Tribunal held that the write-off of investment was allowable as a business expenditure, and the remaining amount was not claimed by the assessee in the return. Therefore, the Pr. CIT's observation on this issue was infructuous, and the assumption of jurisdiction under section 263 was not justified.

Conclusion:
The Tribunal quashed the order passed by the Pr. CIT under section 263, holding that the AO had taken a permissible view based on the facts and submissions provided by the assessee. The Tribunal allowed the appeal filed by the assessee, concluding that the Pr. CIT erred in assuming jurisdiction and setting aside the assessment order.