1983 (12) TMI 116 - AT - Income Tax

Summary

Issues:
1. Barred by limitation - Revision of assessment order.
2. Jurisdiction of Commissioner to revise assessment order.
3. Treatment of subsidy as taxable income.

Analysis:
1. The appeal involved the contestation of the Commissioner's decision under section 263 of the Income-tax Act, 1961, directing the modification of the assessment for the year 1976-77 by including a subsidy amount in the assessee's total income. The original assessment by the ITO allowed depreciation after the assessee deducted a portion of the subsidy from the cost of assets. The Commissioner's order sought to revise the assessment made by the ITO on 29-1-1981, which was within the two-year limitation period from the date of the order sought to be revised, as per the provisions of section 263.

2. The issue of jurisdiction arose concerning the Commissioner's power to revise the assessment order. The Commissioner (Appeals) had set aside the original assessment order for specific considerations related to section 80J relief and advertisement charges, without addressing the subsidy issue. The ITO's subsequent order on 29-1-1981 implemented the directions of the Commissioner (Appeals) and did not separately address the subsidy matter. The Tribunal held that the Commissioner's direction to assess the subsidy as income exceeded his jurisdiction, as the ITO had implicitly considered the taxability of the subsidy in allowing depreciation based on the assessee's treatment.

3. The Tribunal relied on legal precedents to determine that the ITO, in giving effect to the appellate order, was still acting under section 143 to assess the total income. The Tribunal found that the Commissioner's direction to assess the subsidy as income and rework depreciation was beyond his jurisdiction, as the ITO had already considered the taxability of the subsidy by accepting the assessee's treatment. The Tribunal ruled in favor of the assessee, holding that the Commissioner's direction was in excess of his powers under section 263. The appeal was allowed based on this analysis.

4. The Tribunal also noted the assessee's submission that if the decision had been adverse, the direction to include the subsidy as taxable income would have been appropriate based on a recent pronouncement by the Andhra Pradesh High Court. However, since the Tribunal ruled in favor of the assessee on the jurisdictional issue, the direction to include the subsidy as income was not upheld. The Tribunal concluded by allowing the appeal in favor of the assessee.