2018 (4) TMI 1286 - HC - Income Tax

Revision u/s 263 - claim for deduction under Sections 80 HHC (4B) and 80 IB - mandate exclusion of the deduction allowed under Section 80 IB of the Act while quantifying the deduction under Section 80 HHC of the Act - Held that - Where two views are possible and the income tax officer has taken one view with which the Commissioner of Income Tax does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the income tax officer is unsustainable in law. Admittedly, the order of assessment was passed on 29.12.2002, much prior to the decision in SCM Creations 2008 (3) TMI 223 - MADRAS HIGH COURT which was rendered in the year 2008, and the decision in the case of General Optics (Asia) Ltd. (2008 (12) TMI 191 - MADRAS HIGH COURT), which was rendered in the year 2009. The assessing officer interpreted the provisions and passed the order of assessment. The view taken by the assessing officer is clearly supported by the decision of the High Court of Madhya Pradesh in the case of J.P.Tobacco Products (P) Ltd., vs. Commissioner of Income Tax 1996 (8) TMI 29 - MADHYA PRADESH High Court and Commissioner of Income Tax vs. Nima Specific Family Trust (2000 (12) TMI 87 - BOMBAY High Court). In J.P.Tobacco Products (P) Ltd. (supra) it was held that for the purpose of computing relief, relief granted under Section 80 HH cannot be deducted from the gross total income. In Nima Specific Family Trust (supra), it was held that Section 80HH(9), only talks about priority and does not refer to quantum of deduction as was the case under Section 80J(1); where assessee is entitled to deduction under Section 80HH as well as Section 80-I, deduction of 20 per cent of same profits has to be allowed first under Section 80HH and then a further deduction of 20 percent of same profits has to be allowed under Section 80-I subject to overall limit under Section 80A(2). The view taken by the assessing officer was a plausible view. If it results in loss of Revenue, it cannot be treated as prejudicial to the interest of Revenue for the purpose of invoking the power under Section 263 of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of the Tribunal in confirming the order passed under Section 263 of the Income Tax Act.
2. Exclusion of deduction under Section 80 IB while quantifying deduction under Section 80 HHC.
3. Applicability of previous decisions on the present case regarding Sections 80 IB and 80 HHC.

Analysis:

Issue 1:
The High Court considered whether the Tribunal was correct in confirming the order passed by the Commissioner of Income-tax under Section 263 without considering the challenge to the assumption of jurisdiction. The Court referred to the requirement for exercising such power as explained by the Supreme Court in CIT vs. Max India Ltd., emphasizing that an order must be both erroneous and prejudicial to the Revenue for Section 263 to apply. The Court highlighted that loss of revenue alone does not constitute prejudice, especially when the assessing officer's decision is based on a permissible legal course or when two reasonable views exist. In this case, the assessing officer's interpretation was supported by previous court decisions, making it a plausible view and not prejudicial to the Revenue.

Issue 2:
Regarding the exclusion of deduction under Section 80 IB while quantifying deduction under Section 80 HHC, the Court decided to await the decision of the Supreme Court due to conflicting judgments and an appeal pending before the Apex Court. The Court noted that the Full Bench adjourned the reference to await the outcome of the pending appeal, indicating the need for clarity on this issue.

Issue 3:
The Court addressed the applicability of previous decisions on the present case concerning Sections 80 IB and 80 HHC. It was observed that the assessing officer's view was in line with past judgments, such as the Madhya Pradesh High Court's decision in J.P.Tobacco Products and the Bombay High Court's decision in Commissioner of Income Tax vs. Nima Specific Family Trust. These decisions supported the assessing officer's interpretation, making it a valid and non-prejudicial approach. Consequently, the Court ruled in favor of the assessee on this issue.

In conclusion, the High Court ruled in favor of the assessee on the jurisdictional issue, emphasizing the importance of considering the correctness and prejudice of an order under Section 263. The Court also highlighted the need for clarity on the interaction between deductions under Sections 80 IB and 80 HHC, pending the outcome of the appeal before the Supreme Court. The judgment underscored the significance of past legal interpretations in determining the validity of an assessing officer's decision.