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2022 (4) TMI 675 - AT - Income TaxRevision u/s 263 by CIT - assessee had not filed the relevant documents to come to an exact conclusion in respect of the claim of deduction under Section 80IA - contribution to guidance and the claim of deduction u/s.80IA of the Act allowed by AO in assessment year 2013-14, is to be withdrawn - HELD THAT - We noted that the AO during the course of assessment proceedings, in both the years has applied his mind to the facts of the case by issuing show cause notice and calling for the information and examining the same. The AO, in both the years, allowed the claim of deduction u/s.80IA of the Act, after going through all the details and formed an opinion on the basis of details filed by the assessee in regard to various incomes i.e., including interest income in assessment year 2013-14. As regards to assessment year 2014-15, the AO has subsequently disallowed the claim of deduction u/s.80IA of the Act, in respect to flat maintenance charges, water charges, rent, grant received from transfer to income, interest on water charges and maintenance charges and miscellaneous income and lease premium. As the AO has applied his mind to the facts of the case and reached to a conclusion that the assessee has claimed deduction based on some evidences that means, he has taken a possible view. It is to be noticed that the Hon ble Madras High Court in the case of Arul Mariammal Textiles Ltd., 2018 (8) TMI 1729 - MADRAS HIGH COURT has categorically held that interest on margin money by way of fixed deposits kept with the assessee s banker so as to enable bank to open a foreign letter of credit which was essential for purpose of import of critical components for carrying on business of the assessee, was eligible for claim of deduction u/s.80IA of the Act We noted that the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT as categorically held that once the AO after making due enquiries adopted one of the view and granted partial relief, CIT is not permitted to exercise power u/s.263 of the Act because when two views are possible and CIT does not agree with the view taken by the AO, the assessment order cannot be treated as erroneous as well as prejudicial to the interest of Revenue unless the view taken by the AO is unsustainable in law. Hence, keeping in mind entirety of facts, we are of the view that in both the years, the PCIT erred in revising the assessments u/s.263 of the Act without holding the assessments framed by the AO u/s.143(3) of the Act after due enquiry and investigation as erroneous as well as prejudicial to the interest of Revenue. In such circumstances, we set aside the revision orders passed by PCIT in both the assessment years and allow the appeals of assessee.
Issues Involved:
1. Assumption of jurisdiction by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. 2. Validity of the claim of deduction under Section 80IA of the Income Tax Act. 3. Allowability of contribution to guidance as a deduction. 4. Adequacy of the Assessing Officer’s (AO) enquiry and application of mind in the original assessment. Detailed Analysis: 1. Assumption of Jurisdiction by PCIT under Section 263 of the Income Tax Act, 1961: The primary issue in the appeals was whether the PCIT rightfully assumed jurisdiction under Section 263 of the Income Tax Act, 1961. The Tribunal noted that the PCIT issued a show-cause notice doubting the AO's allowance of certain deductions and contributions. The Tribunal observed that the AO had conducted proper enquiries and applied his mind before framing the assessment. The Tribunal referenced the Hon’ble Madras High Court's direction to decide on the jurisdiction of the PCIT under Section 263, emphasizing that the AO's order was not erroneous or prejudicial to the interests of the Revenue. The Tribunal concluded that the PCIT wrongly assumed jurisdiction under Section 263 as the AO had taken a possible view after due enquiry. 2. Validity of the Claim of Deduction under Section 80IA of the Income Tax Act: The Tribunal examined the AO’s allowance of the deduction under Section 80IA, which the PCIT had questioned. The AO had allowed the deduction on interest income, sundry income, and other operating revenues after detailed enquiries. The Tribunal referenced various High Court decisions, including the Hon’ble Madras High Court in AVM Cine Products vs. DCIT and Arul Mariammal Textiles Ltd. vs. ACIT, which supported the eligibility of such incomes for deduction under Section 80IA. The Tribunal noted that the AO had considered relevant details and documents before allowing the deduction, indicating that the AO's view was a possible one and not erroneous. 3. Allowability of Contribution to Guidance as a Deduction: The Tribunal also addressed the issue of the AO allowing the deduction of a ?5 lakh contribution to guidance, which the PCIT had contested. The Tribunal noted that this contribution was a statutory payment made to an autonomous society established by the State Government of Tamil Nadu and had been consistently allowed by the Revenue in previous assessments. The Tribunal held that the AO's decision to allow this deduction was justified and not erroneous. 4. Adequacy of the AO’s Enquiry and Application of Mind in the Original Assessment: The Tribunal emphasized that the AO had conducted comprehensive enquiries and obtained detailed information from the assessee regarding the claims under Section 80IA and the contribution to guidance. The Tribunal cited the Hon’ble Bombay High Court in CIT vs. Nirav Modi and the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT, which established that the CIT could not revise an assessment order under Section 263 merely because they disagreed with the AO's view if the AO had conducted adequate enquiries and taken a possible view. The Tribunal concluded that the AO had applied his mind and the assessments were neither erroneous nor prejudicial to the interests of the Revenue. Conclusion: The Tribunal set aside the revision orders passed by the PCIT for both assessment years, holding that the AO had conducted proper enquiries and taken a possible view. Consequently, the appeals of the assessee were allowed, and the orders of the lower authorities giving effect to the consequential order were also set aside.
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