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2016 (10) TMI 161 - AT - Income TaxRevision u/s 263 - section 14A disallowance - Held that - This assessee had declared exempt income from dividends amounting to ₹ 1,77,47,783/-. The AO invoked rule 8D to disallow proportionate interest and administrative expense of ₹ 16,49,33,648/- and ₹ 3,78,60,000/- aggregating to ₹ 20,27,93,648/- in question. There is no dispute that the CIT(A) confirmed the same in principle in his order dated 10.10.2014 falling much before section 263 show cause notice issued on 20.07.2015. Section 263 explanation (C) makes it very clear that this revision jurisdiction extends to such matters as had not been considered and decided in an appeal. It has come on record that the CIT(A) order dated 10.10.2014 considered as well as decided the issue in question. The Revenue at this stage supports CIT s order that the impugned disallowance ought to have been computed by adopting net instead of actual disallowable sum of ₹ 32,84,78,040/- in the nature of interest. We notice that hon ble jurisdictional high court in Nirma Industries vs. DCIT (2006 (2) TMI 92 - GUJARAT High Court ) rejects such a contention to invoke merger principle by holding that an assessment order does not have any independent existence after the same is subjected to appeal and it stands adjudicated. Our view in this backdrop of facts is that the assessment order in question sought to be revised does not have any independent existence. Even the issue on merit is rendered academic in view of CIT s order directing the Assessing Officer to compute sec 80IAB deduction. The Revenue fails to point any distinction on facts or law. We accept assessee s first argument in challenging the CIT s order in question. Depreciation claim - Held that - As far as the claim of depreciation on office equipments @ 15% is concerned, it is Assessee s submission that the claim of depreciation at 15% on the office equipment which comprises of similar items as are in the present year, has been allowed by the A.O in earlier years in the assessment order passed u/s. 143(3) and those orders have attained finality. Claim of deduction u/s. 35D - Held that - As far as the claim of deduction u/s. 35D is concerned it is not the case of the Revenue that the expenses have been incurred in the year under consideration but on the contrary it is assessee s submission that the same have been incurred in earlier years and the deduction u/s. 35D has also been allowed in earlier years. It is also not a case of the Revenue that on the issue of deduction under 35D, deduction for earlier years has been withdrawn by Revenue. In such a situation, without disturbing the earlier years, it cannot be said that the claim of deduction u/s. 35D was not allowable to the Assessee. The aforesaid submissions of ld. A.R has also not been controverted by Revenue. Further, before us Revenue has not brought any material on record to demonstrate that the view taken by the A.O was impermissible view and was contrary to law or was upon erroneous application of legal principles initiating the exercising of revisionary powers u/s. 263. In view of the aforesaid facts, we are of the view that ld.CIT was not justified in resorting to revisionary powers u/s. 263 of the Act Assessee appeal allowed.
Issues Involved:
1. Correctness of the Principal CIT's order under section 263 of the Income Tax Act, 1961. 2. Disallowance under section 14A of the Act. 3. Depreciation rate on office equipment. 4. Deduction under section 35D. Issue 1: Correctness of the Principal CIT's order under section 263: The appeal concerns the correctness of the Principal CIT's order under section 263 of the Income Tax Act, 1961, directing a fresh assessment. The CIT issued a show cause notice citing various discrepancies in the original assessment, leading to the conclusion that the assessment was erroneous and prejudicial to the Revenue's interests. The CIT rejected the assessee's contention that the Assessing Officer had considered all issues correctly. The CIT found that the AO had incorrectly applied specific provisions of the law, necessitating a revision. This issue was extensively debated, ultimately resulting in the reversal of the CIT's order under section 263. Issue 2: Disallowance under section 14A of the Act: The dispute centered around the disallowance under section 14A of the Act, which was confirmed by the CIT(A) in an earlier order. The CIT sought to revise this disallowance, arguing that the Assessing Officer had not correctly computed the disallowable sum. However, the Tribunal noted that the issue had already been considered and decided by the CIT(A) before the section 263 notice was issued. Citing legal principles, the Tribunal held that the assessment order lacked independent existence post-appeal, rendering the revision redundant. The Tribunal sided with the assessee on this issue. Issue 3: Depreciation rate on office equipment: The CIT invoked section 263 to challenge the depreciation rate claimed by the assessee on office equipment. The CIT argued that the depreciation should have been at 10% instead of 15%, resulting in an excess claim. The Tribunal analyzed the relevant provisions and determined that the depreciation schedule applied by the assessee was correct. Consequently, the Tribunal rejected the CIT's stance on this matter. Issue 4: Deduction under section 35D: The final issue revolved around the deduction claimed under section 35D by the assessee. The CIT contended that the deduction was not allowable as the expenses were incurred before a specified date. However, the Tribunal referred to a previous decision in the assessee's favor and concluded that the deduction was permissible. The Tribunal found no grounds for the CIT's revision under section 263 concerning this deduction. As a result, the Tribunal upheld the assessee's arguments on both the depreciation rate and the deduction under section 35D, leading to the reversal of the CIT's order.
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