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2015 (5) TMI 73 - AT - Income TaxRevision u/s 263 - Deduction in respect of profits and gains from Industrial undertaking or enterprises engaged in infrastructure development etc - AO finalised the assessment proceedings with a final conclusion that on the facts of the case, the assessee is eligible for deduction u/s 80IA(4) - Held that - The assessee company is in the business of developing, operating and maintaining infrastructure facility project since its incorporation w.e.f. 5.4.2007. We also observe that the development of the toll road with controlled access and exit points and right to collect toll from the users clearly put the Expressway within the ambit of road which is a toll road. We further hold that the development of the Expressway between Noida and Agra and development of Five land parcels adjacent to Expressway are inseparable and integral part of one project and the assessee is entitled and eligible for deduction u/s 80IA (4) of the Act on the income earned and derived from the business of development of Infrastructure facility for AY 2009-10 after commencement of its business w.e.f. 5.4.2007 at the option of the assessee which cannot be denied by wrongly putting the case of the assessee in clause (b) of Explanation to section 80IA(4)(i) of the Act. The view taken by the AO while granting deduction u/s 80IA(4) of the Act, in respect to income from sale/ sub lease of land for development, is reasonable, plausible and the same cannot be held as unsustainable and not in accordance with law and therefore, the assessment order cannot be alleged as erroneous and prejudicial to the interest of the Revenue. The revision of the assessment order on the issue of allowability of deduction u/s 80IA(4) of the Act in regard to the income of interest accrued to the assessee from the deposit of surplus funds in the fixed deposit banks accounts and allowability of depreciation is also not valid because these issues had not been raised or pointed out in the notice issued u/s 263 of the Act and thus, it is not open and permissible for the Ld. CIT to revise the assessment order on these grounds. Since assumption of jurisdiction u/s 263 of the Act was not valid on these two issues, the grounds raised by the assessee on merit become academic and infructuous. Ld. CIT has not conclusively decided the issue with a conclusion in one way or the other and has left it midway, which covers this case in favour of the assessee by the recent judgment of Hon'ble Delhi High Court in the case of Globus Infocum Ltd. vs. CIT (2014 (9) TMI 18 - DELHI HIGH COURT ). Thus the impugned order u/s 263 of the Act was not valid and the same was void ab initio. - Decided in favour of the assessee.
Issues Involved:
1. Whether the assessee's claim for deduction under section 80IA(4) falls under clause (a) or (b) of the Explanation to section 80IA(4)(i) of the Income Tax Act. 2. Whether the AO correctly treated the subject year as falling in the eligible period under section 80IA(2) of the Act. 3. Whether the AO took a plausible and sustainable view by allowing the assessee's claimed deduction under clause (a) of the Explanation to section 80IA(4)(i) of the Act. 4. Whether the assessment order was unsustainable and not in accordance with law and passed without application of mind. 5. Whether the CIT was in error by invoking provisions of section 263 of the Act without a decisive conclusion. 6. Whether the CIT exercised powers under section 263 of the Act validly on the issues of interest on FDs and depreciation which were not mentioned in the notice under section 263. Detailed Analysis: Issue 1: Applicability of Clause (a) or (b) of Explanation to Section 80IA(4)(i) The assessee claimed deduction under section 80IA(4) for developing an Expressway, which it argued falls under clause (a) as "road including toll road". The CIT contended it falls under clause (b) as a "highway project including housing or other activities". The Tribunal concluded that the assessee's activities indeed fall under clause (a) since the project was specifically for a toll road with controlled access and exit points, and the right to collect toll fees was granted. The development of land adjacent to the Expressway was an integral part of the project and not merely housing or other activities. Issue 2: Eligible Period Under Section 80IA(2) The CIT argued that the deduction is only available once the infrastructure facility begins to operate, which was in 2012. The assessee contended that the business operations started in 2007, and the income derived from the business of developing the infrastructure facility should be eligible for deduction from that point. The Tribunal agreed with the assessee, stating that the development of infrastructure is a continuous process and the deduction should be available from the commencement of business operations. Issue 3: Plausibility and Sustainability of AO's View The AO's view that the assessee's claim falls under clause (a) was considered reasonable and sustainable. The Tribunal held that the AO took a plausible view supported by the facts and the law, and the CIT's differing opinion did not make the AO's order erroneous or prejudicial to the interest of the revenue. Issue 4: Application of Mind by AO The Tribunal noted that the AO made detailed inquiries and adjudicated the issue with a detailed note sheet entry. The AO's decision was based on a thorough examination of the facts and the law, and thus, it could not be said that the AO failed to apply his mind. Issue 5: Validity of CIT's Invocation of Section 263 The CIT's order was found to be lacking a decisive conclusion. The CIT did not conclusively determine whether the assessee's claim fell under clause (a) or (b) and left the matter open-ended. The Tribunal held that the CIT must reach a final decision and not merely set aside the assessment for fresh examination. Issue 6: Revision on Issues Not Mentioned in Notice The CIT revised the assessment on the issues of interest on FDs and depreciation, which were not mentioned in the notice under section 263. The Tribunal held that it is not permissible for the CIT to revise the assessment on grounds not mentioned in the notice, citing judicial precedents. Thus, the revision on these issues was invalid. Conclusion: The Tribunal quashed the CIT's order under section 263, holding that the AO's view was reasonable and sustainable, and the CIT did not validly assume jurisdiction to revise the assessment. The assessee's appeal was allowed.
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