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TMI Blog2012 (8) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... llenged the said decision of the CIT(A) before the ITAT who dismissed the ground raised by the Revenue. All these discussions show that the issue of the taxability of income on sale of Grevillea trees has been considered and decided by the CIT(A) as well as the Tribunal. Hence as per specific provisions in Clause (c) of Explanation to sec. 263(1), the said issue falls outside the scope of revisionary proceedings u/s. 263. Disallowance of proportionate interest relatable to investments made in subsidiary companies - Held that:- It is not a case that the AO has completely failed to examine the issue of applicability of provisions of sec. 14A to the case of the assessee as he had considered the application of Sec. 14A in respect of re-plantation expenses, which means that the AO has examined the applicability of sec. 14A to the case of the assessee - It is a well settled proposition of law that if the AO has taken one plausible view, with which the CIT does not agree revisionary proceedings u/s. 263 shall not lie in respect of the same. Disallowance of share transfer expenses - Held that:- As the said expenses have been incurred in connection with the maintenance of share holder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uential order dated 13-03-2009 passed to give effect to the appellate order of the Ld CIT(A), are erroneous in so far as they are prejudicial to the interests of the Revenue. The Ld. CIT set aside the orders with the direction to the Assessing Officer to re-do the same afresh. Though the Ld CIT has given a general direction, apparently, the orders are set aside only to consider the four issues stated above. 4. We have heard the rival contentions and carefully perused the record. Before going into the merits of the issues, we would like to discuss about the legal position with regard to the power of Learned CIT to invoke revision proceedings under section 263 of the Act. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. v. CIT [2010] 321 ITR 92/188 Taxmann 327 by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 has discussed the judicial precedents in this regard. The relevant observations of the Hon'ble Delhi High Court are extracted below:- "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has applied his mind while passing the assessment order on the issues sought to be revised by the Ld CIT. If there was any enquiry, even inadequate would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. 7. Since the revision order has been passed by the Administrative commissioner after the receipt of order of first appellate authority, we have to keep in mind clause (c) of Explanation to sub sec. (1) of sec. 263, which reads as under:- "( c ) where any order referred to in this sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order being erroneous. Now the question that arises is whether the view of the AO that the sale of old rubber trees cannot be considered as Capital gain would fit in the category of "incorrect application of law" after the introduction of Rule 7A as presumed by Ld CIT(A). 10 . We have gone through Rule 7A of Income Tax Rules and for the sake of convenience, we extract the same below:- "Income from the manufacture of rubber 7A (1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax". On a careful perusal of Rule 7A, we notice that the said rule talks about computation of income derived from sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes etc. The said rule does not talk abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the scope of revisionary proceedings u/s. 263. Accordingly, the Ld CIT was not legally correct in assuming jurisdiction over this issue. 12. The next issue relates to the disallowance of proportionate interest relatable to investments made in subsidiary companies. The Ld. CIT noticed that the assessee invested in shares of other companies and since the dividend income is not taxable, the interest payment relatable to such investments is disallowable u/s. 14A of the Act. The Ld CIT took the view that the assessing officer has not made proper verification of full facts of the case with regard to the admissibility of interest expenses with reference to the provisions of sec. 14A of the Act. It is the contention of the assessee that the AO has considered and decided the issue of disallowance to be made u/s. 14A of the Act in respect of re-plantation expenses claimed by the assessee in the assessment proceedings. It was further submitted that when the assessing officer invoked sec. 14A for making disallowances and examines the accounts of the assessee, it has to be presumed that he has examined all the expenses vis-a-vis sec.14A of the Act. It was further submitted that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue of disallowance of interest relatable to dividend income also falls outside the scope of revisionary proceedings u/s. 263 of the Act. 14. The last issue relates to the issue of disallowance of share transfer expenses. The Ld. CIT has taken the view that the assessee has incurred a sum of Rs. 1,24,664/-in connection with the "transfer of shares" where as the fact remains that the said expenses have been incurred in connection with the maintenance of share holders register. The CBDT vide its Instruction No. F. No. 10/25/63-IT(A.a) dated 18-06-1964 clarified that the remuneration paid by the Company to its Registrar for performing duties in connection with the company's legal obligations to be discharged under the Company Law, should be regarded as revenue expenditure. Hence we are of the view that the Ld CIT has entertained the view in respect of share transfer expenses without properly appreciating the facts relating to the same. The wrong view taken by the Ld CIT on the facts of a particular expense, in our view, cannot be a ground to initiate revision proceedings. Accordingly find that decision of the Ld. CIT on this issue is not in accordance with law and hence f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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