2014 (11) TMI 349 - AT - Income Tax

Justification to invoke section 263 Erroneous or prejudicial to interest of revenue or not Held that - Assessee is receiving incomes from rentals as well as service income from its industrial park - assessee was offering the income from rentals under the head Income from House Property and service income under the head Business - the time limit for reopening the assessment actually on this issue starts from this date and ends on or before 31.03.2011 - The assessment can be revised i.e., two years from the end of A.Y. in which the order was passed - As far as A.Y. 2007-08 is concerned, there was no order u/s 143(3) but there is an intimation u/s 143(1) dated 30.09.2008 - the issue which was decided in those years in later order was with reference to the subsidy received in A.Y. 2006-07 and subsidy and short term capital gain in A.Y. 2007-08 - The issue of assessing the correct income under the head Business or Profession or House Property was not an issue at all in those orders - exercising the jurisdiction by CIT to revise the orders u/s 263 on an issue which was already concluded by earlier order cannot be justified relying upon CWT vs. Darshan Singh 2004 (8) TMI 74 - PUNJAB AND HARYANA High Court - the additional grounds raised by assessee in these two years that CIT order u/s 263 revising a subsequent order u/s 147 on an issue which did not arise in that order was barred by limitation. The re-computation under the head Business would result in granting more depreciation and as rightly demonstrated by assessee in respective years, the computation will result in carrying forward more unabsorbed depreciation to the assessee not only in the impugned years but also in later years upto A.Y. 2012- 2013 - the incomes in the A.Ys. 2007-2008 and 2009-2010 were ultimately assessed under section 115JB on book profits as the normal computation resulted in losses or NIL income - the orders are not prejudicial to the interests of Revenue in any of the AYs - When this was pointed out by assessee in the course of proceedings u/s 263 by giving a detailed workings, CIT not only ignored them but even rejected them on the reason that assessee was entitled for 10% depreciation, whereas, 30% was claimed under the head house property towards repairs, on wrong presumption that the basis for those two claims per se are same - depreciation was claimed on assets which are valued more than ₹ 300 crores whereas 30% on rentals is only a small percentage when compared to depreciation. CIT got carried away by additional depreciation and rejected the same holding that assessee has not produced any article or thing nor is engaged in generation or distribution in power so as to fit into the ambit of section 32(iia) - The word used additional is not about additional depreciation but alternate claim of depreciation which was not claimed under the head House property income - CIT wrongly considered it as a claim of additional depreciation ignoring that assessee s claim of depreciation is under section 32(i) and not under section 32(iia), even as can be seen from the workings furnished - the claim of depreciation under the head Business is much more than the claims made under Income from House Property which results in not only working out higher losses / depreciation in the impugned years but also in later years as demonstrated before CIT by way of detailed working by assessee - the orders of AO are not prejudicial to the interests of Revenue Decided in favour of assessee.

Issues Involved:
1. Erroneous and Prejudicial Order
2. Business Income vs. Income from House Property
3. Depreciation on Assets
4. Limitation Period for Revision

Issue-Wise Detailed Analysis:

1. Erroneous and Prejudicial Order:
The assessee contested the CIT's decision that the assessment order dated December 30, 2011, was erroneous and prejudicial to the interest of the revenue. The CIT argued that the assessee was not entitled to a deduction under section 32(iia) of the Income Tax Act, 1961, despite the appellant not making such a claim in its return of income. The Tribunal found that the CIT's order was not justified as the assessment orders were neither erroneous nor prejudicial to the interests of the Revenue. The assessee had correctly offered income under the head "Income from House Property" and relied on various Supreme Court judgments to support this classification.

2. Business Income vs. Income from House Property:
The CIT held that rental income earned from letting out immovable property should be assessed as 'Business Income' rather than 'Income from House Property.' The assessee argued that the rental income was correctly classified under 'House Property' and cited several Supreme Court rulings, including United Commercial Bank Ltd. vs. CIT and East India Housing Land Development Trust Ltd. vs. CIT. The Tribunal noted that the assessee's income from rentals had been consistently accepted under 'House Property' in previous years and that the CIT's reliance on the ITAT Bangalore judgment in the case of Global Tech Park P. Ltd. was distinguishable. The Tribunal concluded that the CIT's order was based on a difference of opinion and not on any erroneous assessment by the AO.

3. Depreciation on Assets:
The assessee argued that if the income was classified as 'Business Income,' it should be allowed depreciation on its assets, including buildings, fittings, and machinery. The CIT had rejected this claim, stating that the assessee was eligible for only 10% depreciation compared to the 30% deduction claimed under 'House Property.' The Tribunal found that the CIT's reasoning was flawed as the basis for the deductions was different. The Tribunal agreed with the assessee that the depreciation claim under 'Business' would be higher than the deductions under 'House Property,' thus not prejudicial to the interests of the Revenue.

4. Limitation Period for Revision:
The assessee raised an additional ground that the CIT's order dated March 28, 2009, was beyond the period of limitation. The Tribunal agreed, noting that the original assessment orders for A.Y. 2006-07 and 2007-08 were concluded on October 31, 2008, and September 30, 2008, respectively. The Tribunal relied on the judgments of Punjab & Haryana High Court in CIT vs. Darshan Singh and Rajasthan High Court in CIT vs. Hemraj Udyog, which held that the CIT could not revise an order beyond the period of limitation. The Tribunal concluded that the CIT's orders were time-barred and lacked jurisdiction.

Conclusion:
The Tribunal set aside the CIT's orders under section 263 for all the impugned assessment years, restoring the AO's original assessments. The appeals of the assessee were allowed, and the Tribunal held that the orders were neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal emphasized that the rule of consistency and judicial precedents supported the assessee's classification of income and depreciation claims.

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