2022 (5) TMI 541 - AT - Income Tax

Revision u/s 263 by CIT - non-examination of CSR expenses which according to the PCIT has wrongly been claimed as deduction unit-II, Byrnihat - HELD THAT - We note that the issue of CSR expenses has specifically been examined by the AO during the course of assessment proceedings by issuing notice u/s 142(1) dated 25.06.2015 which was replied by the assessee by submitting complete and comprehensive details of miscellaneous expenses which contained CSR expenses also. On the basis of this, we are of the view that the AO has examined the issue and has taken a plausible view and therefore the conclusion of PCIT that issue has not been examined by the AO at the time of scrutiny assessment is not tenable and accordingly cannot be sustained Interest earned by the assessee from late payment from the sundry debtors and VAT remission shown as miscellaneous income are not the part of the eligible profit u/s 80IE and therefore deduction u/s 80IE has been allowed in excess resulting into the mistake in the assessment order which has caused prejudice to the revenue - We find that the same is arising from business activity of the assessee and has been treated as part of the profit for the purpose of deduction u/s 80IE of the Act as the interest earned from the sundry debtors who has not made the payment during the credit period allowed them. Similarly the VAT remission is also part of and arising because the business activity of the assessee. The assessee has collected sales on the applicable rates on the sales made by it availed 99% of VAT remission under the scheme of Meghalaya State Government in pursuance of Meghalaya Industries (Tax Remission) Scheme, 2006 and paid only 1% to the tax to the Govt. In our view, the said remission has direct nexus with the business of the assessee and therefore has to form a part of eligible unit and deduction u/s 80IE of the Act has to be allowed. The case of the assessee is squarely covered by the decision of case of CIT vs. Meghalaya Steel Ltd. 2016 (3) TMI 375 - SUPREME COURT wherein the similar issue was laid down in the said case. The Hon ble Supreme Court held that the transport subsidy, interest subsidy, power subsidy and insurance subsidy has direct nexus with the business of assessee and therefore has to be treated as the part of the eligible profit for the business of deduction u/s 80IB read with Section 80IC of the Act. We therefore following the same, hold that the exercise of revisionary jurisdiction is not valid. In view of the above facts and circumstances we are inclined to quash the order passed u/s 263 of the Act. - Appeal of assessee allowed.

Summary

Issues:
1. Validity of the order passed u/s 263 of the Income Tax Act, 1961
2. Assessment order u/s 143(3) being erroneous and prejudicial to the interest of the revenue

Issue 1: Validity of the order passed u/s 263 of the Income Tax Act, 1961:
The appeal challenged the order passed by the Principal Commissioner of Income Tax-1, Kolkata under section 263 of the Income Tax Act, 1961. The appellant contended that the order was void ab-initio due to lack of application of mind by the PCIT. The appellant raised concerns regarding the initiation of proceedings based on audit objections without proper discretion. The appellant argued that the dates mentioned in the documents presented conflicted, indicating a lack of application of mind. The Tribunal examined the records and found the appellant's claims to be of clerical nature, dismissing grounds 1 and 2.

Issue 2: Assessment order u/s 143(3) being erroneous and prejudicial to the interest of the revenue:
The issue revolved around the PCIT setting aside the assessment order under section 143(3) for the assessment year 2013-14. The PCIT identified non-examination of CSR expenses and interest received from debtors as reasons for considering the assessment erroneous and prejudicial to revenue. The appellant argued that these issues were duly examined during the assessment proceedings, and a plausible view was taken by the Assessing Officer. The appellant provided detailed submissions and evidence to support the treatment of CSR expenses and interest income as eligible for deduction under section 80IE of the Act. The Tribunal noted that the AO had examined the issues raised by the PCIT and had taken a plausible view. The Tribunal agreed with the appellant's arguments, citing relevant case law, and held that the revisionary jurisdiction exercised by the PCIT was not valid. Consequently, the Tribunal allowed the appeal of the assessee, quashing the order passed under section 263 of the Act.

In conclusion, the appellate tribunal, comprising Shri Rajpal Yadav, Vice-President, and Shri Rajesh Kumar, Accountant Member, analyzed the issues raised by the appellant against the order passed by the PCIT under section 263 of the Income Tax Act, 1961. The Tribunal found the grounds raised by the appellant to be unsubstantiated and dismissed them. Additionally, the Tribunal examined the assessment order under section 143(3) and concluded that the PCIT's revisionary jurisdiction was not valid, ultimately allowing the appeal of the assessee. The detailed analysis of the issues and the application of relevant legal provisions and precedents led to the tribunal's decision to quash the order passed under section 263 of the Act.