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2022 (8) TMI 143 - HC - Income TaxRevision u/s 263 - when deduction under Section 35(2)(iv) is allowed in respect of capital expenditure on assets used for scientific research, no depreciation is allowable under Section 32 on the same assets - HELD THAT - The order passed by the Tribunal rightly reflects the legal position and when two views are possible and the assessing officer had accepted the assessee s claim for depreciation by placing reliance on the decision of this Court, the order cannot be reversed by the CIT branding the same as being erroneous in so far as it is prejudicial to the interest of revenue. Therefore, we find that there is no error committed by the Tribunal in holding that the exercise of jurisdiction under Section 263 was not proper and justified. In the light of the above substantial question of law is answered against the revenue.
Issues:
1. Interpretation of depreciation allowance for depreciable assets acquired for charitable purposes. 2. Consideration of relevant legal precedents in assessing depreciation claims. 3. Validity of jurisdiction exercised under Section 263 of the Income Tax Act. Issue 1 - Interpretation of Depreciation Allowance: The appeal involved a dispute regarding the permissibility of claiming depreciation on a depreciable asset for which a deduction under section 35(2)(iv) of the Income Tax Act had already been claimed for charitable purposes. The Revenue contended that allowing depreciation would result in double deduction. The Court analyzed the legislative intent and relevant case laws cited by the assessee to support their claim. The Commissioner of Income Tax (Exemption) invoked Section 263, arguing that the allowance of depreciation was erroneous and prejudicial to revenue interests. However, the Tribunal upheld the assessee's claim, considering the possibility of two views on the matter and the reliance on jurisdictional High Court decisions. Ultimately, the Court found in favor of the assessee, emphasizing that when two views are possible, and the assessing officer had accepted the claim based on relevant legal precedents, the CIT's intervention under Section 263 was unjustified. Issue 2 - Consideration of Legal Precedents: The second substantial question of law raised in the appeal pertained to the Tribunal's failure to consider the decision in Escorts Limited & Anr. v. Union of India, which the Revenue argued applied to the case. The Tribunal, however, relied on various High Court decisions, including those of the jurisdictional High Court, to support the assessee's position. The Court endorsed the Tribunal's approach, emphasizing that the assessing officer's acceptance of the claim based on relevant legal precedents precluded the CIT from deeming the assessment order prejudicial to revenue interests. The Court's analysis highlighted the importance of considering multiple legal perspectives and the weight given to decisions from the jurisdictional High Court. Issue 3 - Validity of Jurisdiction under Section 263: The final issue revolved around the validity of the CIT's exercise of jurisdiction under Section 263 of the Income Tax Act. The CIT contended that the assessment order allowing the depreciation claim was erroneous and prejudicial to revenue interests due to the legislative intent against double deductions. The Tribunal, however, noted the existence of divergent views on the matter and upheld the assessing officer's decision based on jurisdictional High Court rulings. The Court concurred with the Tribunal's reasoning, emphasizing that the CIT's intervention was unwarranted when the assessing officer had considered and granted relief based on relevant legal precedents. Consequently, the Court dismissed the appeal, affirming the Tribunal's decision and rejecting the CIT's exercise of jurisdiction under Section 263. In conclusion, the High Court of Calcutta upheld the Tribunal's decision, ruling in favor of the assessee on all substantial questions of law raised by the Revenue. The judgment underscored the significance of legal precedents, the possibility of differing interpretations, and the assessing officer's discretion in accepting claims based on established legal principles.
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