2024 (10) TMI 488 - HC - Income Tax

Validity of Revision u/s 263 - scope of Section 13(8) of the Income Tax Act, 1961 in relation to the applicability of Section 2(15) - ITAT holding that, CIT(E) has erred in passing order u/s 263 as the issue of applicability of Section 13 (8) read with provision of Section 2 (15) of Income Tax Act, 1961, was covered in favour of assessee - HELD THAT - Considering such findings of facts recorded by the Tribunal to the effect that when the PCIT initiated the proceedings u/s 263 of the Act, this Court 2017 (5) TMI 1468 - GUJARAT HIGH COURT had already decided the issue in favour of the assessee holding that the assessee-Society constituted under the Gujarat Town Planning and Urban Development Act, 1976 would be providing general public utility services within the meaning of Section 2 (15) of the Act. The Hon ble Supreme Court has also upheld the view of this Court 2022 (10) TMI 948 - SUPREME COURT . It was therefore, rightly held by the Tribunal that the PCIT could not have initiated the proceedings u/s 263 of the Act as the Assessment Order cannot be said to be erroneous or prejudicial to the interest of Revenue. No substantial question of law would arise from the impugned order of the Tribunal.

Summary

Issues:
1. Interpretation of Section 13(8) of the Income Tax Act, 1961 in relation to the applicability of Section 2(15) and the decision of the High Court and Supreme Court.
2. Validity of the order passed under Section 263 of the Act by the Principal Commissioner of Income Tax (PCIT) regarding disallowance of capital expenditure.

Analysis:

Issue 1: Interpretation of Section 13(8) in relation to Section 2(15) and Court decisions
The Tax Appeal involved questions regarding the correctness of the ITAT's decision and the PCIT's order under Section 263 of the Income Tax Act. The PCIT observed that the Assessing Officer allowed the claim of capital expenditures despite the withdrawal of exemption claim by the assessee under Section 13(8) of the Act. The PCIT held that the Assessment Order was erroneous and prejudicial to the Revenue's interest. However, the Tribunal considered the Gujarat High Court's decision in favor of the assessee, stating that the assessee was providing general public utility services under Section 2(15) of the Act. The Tribunal also noted that the Supreme Court upheld the High Court's view. Consequently, the Tribunal dismissed the PCIT's order under Section 263, emphasizing that the Assessment Order was not erroneous or prejudicial to Revenue.

Issue 2: Validity of the order passed under Section 263 by PCIT
The PCIT passed an order under Section 263 directing the Assessing Officer to disallow the capital expenditure claimed by the assessee. The assessee contended that the Gujarat High Court's decision had already favored them, considering them a charitable organization under Section 2(15) of the Act. The Tribunal agreed with the assessee's argument, emphasizing that the High Court and Supreme Court decisions supported the assessee's position. Therefore, the Tribunal dismissed the PCIT's order under Section 263, stating that the Assessment Order was not erroneous or prejudicial to Revenue. The High Court upheld the Tribunal's decision, concluding that no substantial question of law arose from the Tribunal's order.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision that the PCIT's order under Section 263 was unwarranted due to the favorable court decisions in favor of the assessee regarding the applicability of Section 2(15) and Section 13(8) of the Income Tax Act.