2023 (8) TMI 1337 - AT - Income Tax

Revision u/s 263 - payment towards registration fees are not allowable as revenue expenses as per provision of section 37(1) of the Act - HELD THAT - Scope of revisionary jurisdiction u/s 263 is very specific, limited and also different from appellate jurisdiction. Law contained in section 263 does not allow ld. PCIT to impose his view over judicious view adopted by the ld. AO unless the view adopted by the ld. AO is established to be not at all sustainable in law. AO in the present case on appreciation of the facts and using his judicial wisdom allowed sum as borne by the assessee towards registration of lease deed by debiting in the profit and loss account u/s 37(1) - The view of the AO in present case is also supported by case of Cinecita Pvt. Ltd. 1982 (2) TMI 58 - BOMBAY HIGH COURT as held that the impugned expenditure did not involve any element of premium in the amount claimed as expenditure. It was incurred only to draw up and get registered an effective and proper lease deed and would have remained the same irrespective of the period of lease as long as it was more than one year. Further the period of lease itself could not be decisive of the question whether the asset was enduring nature. On these facts, the impugned expenditure was revenue in nature. In the present case of the assessee was selected for scrutiny on few issues it cannot be said that there was lack of enquiry on the part of AO on this issue. It is a settled law by now that where the AO has exercised the quasi judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be considered erroneous simply because the ld. PCIT does not feel satisfied with the conclusion - extent of enquiry cannot be stretched to any level by forcing the AO to go through the assessment process again and again. Thus the assessment order passed by the AO was after full enquiry and, therefore, the case does not fall within the clause (a) and (b) of Explanation 2 to Section 263 - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Error in the assessment order and its prejudicial impact on the revenue.
3. Consideration of the assessee's explanation and judicial pronouncements.
4. Allowability of expenses under Section 37(1) of the Income Tax Act, 1961.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act, 1961:
The assessee contested the jurisdiction assumed by the ld. PCIT, Kolkata-1 under Section 263 of the Income Tax Act, 1961. The Tribunal noted that the scope of revisionary jurisdiction under Section 263 is specific and limited. The law does not permit the ld. PCIT to impose his view over the judicious view adopted by the ld. AO unless the view adopted by the AO is unsustainable in law.

2. Error in the assessment order and its prejudicial impact on the revenue:
The ld. PCIT held that the assessment order dated 04.03.2021 was erroneous and prejudicial to the interest of the revenue due to the allowance of Rs. 1,28,95,729/- as revenue expenditure under Section 37(1). However, the Tribunal found that the AO had allowed the expenses after thorough examination of the facts and judicial wisdom, which was supported by the Hon'ble Bombay High Court in the case of Cinecita Pvt. Ltd. 137 ITR 652.

3. Consideration of the assessee's explanation and judicial pronouncements:
The Tribunal observed that the ld. PCIT did not properly consider the submissions and judicial pronouncements cited by the assessee. The assessee had relied on cases such as Cinecita Pvt. Ltd., Hoechst Pharmaceuticals Ltd., and Octavious Steel and Co. Ltd., where similar expenditures were allowed as revenue expenses under Section 37(1).

4. Allowability of expenses under Section 37(1) of the Income Tax Act, 1961:
The Tribunal upheld the AO's decision to allow the expenses under Section 37(1), noting that the expenditure was incurred to draw up and register a proper lease deed, which is revenue in nature. The Tribunal also highlighted that the assessment was carried out in a faceless manner by NFAC, involving multiple officers, thereby negating the possibility of lack of enquiry.

Conclusion:
The Tribunal concluded that the assessment order passed by the AO was after full enquiry and did not fall within the clauses (a) and (b) of Explanation 2 to Section 263. Hence, the ld. PCIT erred in assuming jurisdiction under Section 263, and the order passed by him was quashed. The appeal of the assessee was allowed.